BlockFi, a major crypto lending firm based in New Jersey, has reversed its earlier decision, and now stop accepting shares in the Grayscale Bitcoin Trust (GBTC) as collateral for loans.
In a statement, a BlockFi representative said: “While we don’t currently hold any positions in GBTC and are winding down a couple of loans where GBTC is part of the collateral package, we are not saying that we won’t support GBTC as collateral moving forward. Like any collateral, we constantly evaluate appropriate collateral haircut ratios and aim to accept as many types of collateral that our clients hold as possible.”
The move by these firms, including BlockFi, came as a response to the controversy facing Three Arrows Capital, which had a huge stake in GBTC and was offering arbitrage opportunities around the Grayscale fund.
Grayscale’s GBTC is a widely traded Bitcoin fund. Recently, Grayscale filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) for rejecting its application to convert its GBTC into a spot Bitcoin ETF (Exchange-Traded Fund). Among the reasons why the SEC rejected Grayscale’s application was the possibility of manipulation of Bitcoin trades — an argument apparently boosted by Three Arrows’ botched arbitrage trading plan.