Crypto lender BlockFi claims to have significant exposure to the defunct cryptocurrency exchange FTX.
The crash exposed BlockFi's assets housed at FTX.com, a loan owing by Alameda Research, and undrawn amounts from the $250 million credit line with FTX.
BlockFi is reportedly preparing for bankruptcy after suspending user withdrawals.
Funds and cannot account for billions of dollars in assets, is imploding like a dying sun.
The meltdown's wave of financial destruction is now threatening to swallow other companies that did business with it, and the next victim is BlockFi, one of the most well-known decentralized lenders in the crypto space.
According to the Wall Street Journal, BlockFi is preparing for bankruptcy following the greatest blowup in the crypto sector. BlockFi notified investors that while not all of its funds were locked in custody at FTX, there was significant exposure and the lender should consider all alternatives.
As per reports, the company which was previously valued at more than $3 billion has been working with Kenric Kattner, a bankruptcy partner at the legal firm Haynes & Boone.
However, users are more concerned about BlockFi's bankruptcy since BlockFi Wallet holds 92% of all stablecoins, as per reports. So, the obvious question is, what happens to those stablecoins holdings if BlocFi declares bankruptcy?
Will BlockFi’s bankruptcy filing affect its stablecoin holdings?
In the United States, cryptocurrency and related business entities are not regulated in the same way that banks and credit unions are. Many consumers' checking and savings accounts are backed by the Federal Deposit Insurance Corporation (FDIC), which guarantees to step in and reimburse customers in full if a bank fails.
If BlockFi fails, BlockFi wallet may spell disaster for individual investors, the venture capital community, backers, and potentially other cryptocurrency businesses.
And it's possible that BlockFi will declare bankruptcy shortly, making it difficult for users to withdraw their funds from the BlockFi Wallet. We recommend you to transfer your holdings to a more secure wallet, a non-custodial wallet.
What’s next for BlockFi/BlockFi Wallet?
The web3 industry has been shaken by FTX's meltdown, which began in earnest last week. It is uncertain how much damage this will inflict on the broader crypto ecosystem.
Earlier, Binance's CEO compares the FTX fallout to the “2008 Financial Crisis.” Some believe that it will be the industry's equivalent of Lehman Brothers, bringing down a wave of other companies as a result.
However, if BlockFi declares bankruptcy, it will have an impact on the broader crypto sector as well as the holdings of customers on the BlockFi wallet.
What do you think about the future of the BlockFi wallet? Share your views in the comment section below.
