Why ConsenSys Ventures invested in a crypto-backed lending startup

New York-based crypto startup BlockFi announced Thursday a $1.5 million seed round of funding, led by Brooklyn’s own ConsenSys Ventures.

The funding round indicates a further maturation of the cryptocurrency world, as BlockFi’s product is essentially margin lending backed by crypto assets.

“We were drawn to BlockFi’s compelling use case and the gap they are filling in the ecosystem,” ConsenSys Ventures Founding Managing Partner Kavita Gupta explained in an email. “Despite what you see sometimes in the news, crypto assets possess real, tangible value and should have the ability to be lent against like any other asset.”

Excited to announce our seed round of funding and share more about what we're up to at BlockFi! https://t.co/08TvlsQ1mB

— Zac Prince (@CostSegZac) February 13, 2018

In the same way that a brokerage would offer its clients margin loans backed by the stocks they own, BlockFi will offer loans collateralized by a person’s crypto holdings, charging a 12 percent interest rate on the loan.

“We see people who are overexposed to cryptocurrency (20%+ of their net worth) as the most obvious early users,” Gupta explained. “BlockFi allows these customers to continue holding their crypto while getting short-term fiat liquidity.”

BlockFi is lead by Zac Prince, who’s spent his career in sales and business development, and by Flori Marquez, whose background is in portfolio management.

BlockFi is ConsenSys Ventures’ fifth investment since its founding last year.