BCB is seeking to take advantage of the low-yield situation with its newest crypto loan product.
BCB Group, cryptocurrency payments and trading business, launched its dual fiat and crypto yield product in the EU on Monday, a day after BlockFi was ordered to pay $100 million in penalties to authorities in the US for its lending programme.
According to a news statement issued Monday, the company’s BCB Yield programme provides customers with “several alternatives” for earning a return on their balance via its BCB Securities Fund. BCB states that the fund is a “first of its type” investment instrument that offers investment possibilities in a variety of currencies with an annual percentage yield of up to 2% when denominated in euros.
Lending products inside crypto are attempting to fill the hole created by conventional finance’s low interest rates, which have been driven below or near zero by centralised institutions seeking to bolster runaway inflation. As an alternative, crypto financing aims to attract investors seeking higher rates.
“In most currencies, corporate treasuries held in cash or cash equivalents are receiving a terrible deal,” Oliver Landsberg-Sadie told Blockworks in an interview on Thursday. “Dislocations in the cryptocurrency market between spot and futures continue to provide profit possibilities that only educated traders can capitalise on.”
He said that his company’s offering provides a “market risk-neutral return” by using expert traders’ arbitrage tactics while also addressing counterparty credit risk, which, although well recognised in conventional finance, was not well understood or utilised in crypto.
“This is the only risk-neutral trade that can exceed genuine inflation in the majority of currencies, and it is drawing considerable attention from countries with negative interest rates.”
The fund’s clients may opt to lend in either fiat or cryptocurrency over a 30-, 60-, or 90-day term, the business claimed. The loans are accompanied by equivalent notes resembling bonds. When denominated in US dollars, returns may increase by up to 8%.
According to the company’s product website, the investment vehicle offers several strategies in EUR, GBP, USD, CHF, and crypto. BCB said in its statement that its newest offering is the “initial step” toward a larger variety of yield alternatives that will come later this year, with a particular emphasis on solutions that harness decentralised finance protocols and products.
The debut of BCB’s lending product coincides with a drive by US authorities for more control of both cryptocurrency and associated lending products.
BlockFi paid a $50 million fine to the Instruments and Exchange Commission and another $50 million to state regulators earlier this week in response to charges that it neglected to register high-interest securities sold to ordinary consumers.
Decisions on how to govern crypto loans across the border in Canada fare somewhat better since they come within the jurisdiction of the country’s provinces, however the legal criteria for such products, according to one local exchange, can only be reached via patience and time.
However, when it comes to the EU, BCB’s Chief Product Officer Chris Aruliah informed Blockworks that the company’s product is considerably different from BlockFi’s and is structured as an Open-Ended Investment Scheme, which is controlled by Luxembourg securitization legislation.
“This legislation regulates how the fund runs and is constituted,” Aruliah said. “Under the fund’s conditions, the fund manager may use a variety of agreed-upon [legal] tactics in order to make a profit for investors.”
“Unlike BlockFi, the fund does not engage in the retail loan sector… “The nature of this product is very different from BlockFi and cannot be really compared,” he said.
BCB’s fund invests in “known” institutional enterprises in the cryptocurrency market, Aruliah stated. According to the fund’s conditions, investors and firms must qualify for professional status and be able to deposit a minimum of €125,000 (US$142,000), as well as complete the required KYC and onboarding requirements. The fund is only offered to a limited number of European consumers and is not eligible to residents of the United States.
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