BlockFi’s valuation drops 80% as crypto winter bites
Cryptocurrency lender BlockFi is reportedly in late-stage talks with new and existing investors to close a down round at a lower valuation of about $1 billion.
In 2021, the New Jersey-based company was valued at $5 billion, a few months after it completed a $350 million series D funding round that gave it a valuation of $3 billion. Venture investment funds Bain Capital Ventures, DST Global, Valar ventures and others are leading the new financing round.
BlockFi, founded in 2017, provides traditional financial services to cryptocurrency holders.
A down round is a funding round where a company is financed at a lower valuation than it had during a previous rounds, so equity stakes are being sold for a lower price. Typically, startups raise down rounds if their initial valuation was inflated due to an overly-optimistic approach or as changes in the industry had a knock-on effect on its profitability.
BlockFi’s lower valuation reflects the present issues in the cryptocurrency industry where billions of dollars of value have been wiped off driven by a sell-off in major coins and the collapse of Luna alongside its affiliated stablecoin terraUSD.
Crypto lenders are navigating regulatory hurdles
Nevertheless, the upcoming down round also reflects BlockFi’s own woes after the company paid roughly $100 million to settle charges of offering unlicensed interest-bearing accounts for retail investors.
The crypto lending platform, backed by billionaire Mike Novogratz’s Galaxy Capital, also agreed to cease selling its Interest Accounts, which let users earn returns on cryptocurrencies.
Several state regulators in the US have already issued cease and desist notices to BlockFi. This coordinated regulatory scrutiny hinged on the firm’s crypto savings and loans product, dubbed BlockFi Interest Accounts (BIAs).
BlockFi launched its service earlier in March 2019, offering loans to those who are interested in borrowing crypto, starting from $2,000, and go as high as $100 million, against bitcoin, ethereum, and stablecoins.
The SEC is reportedly investigating other platforms as a part of a broader scrutiny against cryptocurrency lending platforms.
SEC’s probe into DeFi products comes amid heightened regulatory interest into cryptocurrencies and the digital asset market. Chair Gary Gensler called on Congress to give the agency more authority to better police crypto trading and lending platforms, which pay customers rates higher than most bank savings accounts.