Cryptocurrency lending startup BlockFi has launched a crypto deposit account that provides compound interest.
Announcing the news on Tuesday, the firm said that the BlockFi Interest Account (BIA) is now live and offers customers an annual interest rate of 6 percent, paid on a monthly basis in cryptocurrency. That monthly interest is then compounded to produce a 6.2 percent annual percentage yield or APY.
“It helps crypto investors grow their wealth with one of the most powerful tools in finance – compound interest,” Brad Michelson, director of marketing at BlockFi told CoinDesk.
Users from across the globe can deposit either bitcoin (BTC) or ether (ETH) to earn interest from the offering and can withdraw their funds at any time, BlockFi said.
Account holdings are custodied at the Gemini Trust Company, co-founded by Cameron and Tyler Winklevoss, according to the announcement. Gemini Trust is regulated by the New York Department of Financial Services and also offers insurance coverage for the digital assets it holds in custody.
While the BIA looks rather like the crypto version of a traditional savings account, Michelson told CoinDesk that the product "doesn’t come with the backing of the federal government like a savings account at a bank does.”
The executive further said that, as BlockFi's business also includes providing crypto loans to institutions, it can still afford the interest paid out, even if the prices of bitcoin and ether fall. "We charge more to the institutions borrowing the crypto from BlockFi then we pay to depositors," Michelson explained.
The BIA was first launched in beta version at the start of this year and already holds over $10 million in assets from retail and institutional investors, according to the firm's figures.
Back in December, BlockFi raised $4 million in a round that was led by Akuna Capital, with participation from Mike Novogratz’s Galaxy Digital Ventures and Anthony Pompliano’s Morgan Creek Digital, among others.
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