- With its latest crypto lending offering, BCB hopes to capitalize on a low-yielding interest rate environment.
- BCB Group, a cryptocurrency payments company, has launched a yield product aimed at professional investors.
- Clients can lock up either crypto or fiat for a 2% return when denominated in euros.
BCB Group, a crypto payments and trading firm, launched its dual fiat and crypto yield product in the EU on Monday, a day after BlockFi was forced to pay a $100 million fine to regulators over its lending product in the US.
According to a press release issued on Monday, the company’s BCB Yield product provides clients with “multiple options” to earn a return on their balance through its BCB Securities Fund. According to BCB, the fund is a “first of its kind” investment vehicle that offers investment options in a variety of currencies for up to a 2% annual percentage yield when denominated in euros.
Lending products in crypto are attempting to fill the void left by traditional finance’s low interest rate returns, which have been pushed below or near zero by centralized institutions seeking to bolster excessive inflation. As an alternative, crypto lending is attempting to entice investors looking for higher returns.
“Corporate treasuries in cash or cash equivalents are getting a raw deal in most currencies,” said Oliver Landsberg-Sadie in an interview. “Crypto market dislocations between spot and futures continue to offer profit opportunities that only sophisticated traders can capitalize on.”
He claims his company’s product provides a “market risk-neutral return” by leveraging arbitrage strategies executed by sophisticated traders while also attempting to address counterparty credit risk, which, while well established in traditional finance, is not widely understood or applied in crypto.
“This is the only risk-neutral trade that can outperform true inflation in most currencies, and it is attracting a lot of attention from those who are stuck in negative interest rate territory.”
Clients of the fund can choose to lend in either fiat or cryptocurrency over a 30, 60, or 90-day period, with corresponding notes resembling bonds, according to the company. When denominated in US dollars, returns can increase by up to 8%.
According to the company’s product page, the investment vehicle offers multiple strategies for EUR, GBP, USD, CHF, and crypto. In a press release, BCB stated that its latest product is the “first step” in a broader range of yield options that will be launched this year, with a focus on solutions that leverage decentralized finance protocols and products.
In the EU and North America, retail lending outnumbers institutional lending.
The launch of BCB’s lending product comes at a time when US regulators are pushing for greater oversight of both cryptocurrency and the lending products that accompany it.
BlockFi paid $50 million to the Securities and Exchange Commission earlier this week, as well as another $50 million to state regulators, in response to allegations that it failed to register its high-interest securities offered to retail clients.
Decisions on how to regulate crypto lending across the border in Canada fare marginally better because they fall under the purview of the country’s provinces, though the regulatory prerequisites for such products, according to one local exchange, can only be achieved through patience and time.
However, when it comes to the EU, BCB’s Chief Product Officer Chris Aruliah stated that the company’s product differs significantly from BlockFi’s offering and employs an Open-Ended Investment Scheme governed by Luxembourg securitization law.
“This law governs how the fund operates and is structured,” Aruliah explained. “Under the terms of the fund, the fund manager may employ any of a number of agreed-upon [legal] strategies to generate a return for investors.”
“The fund does not participate in the retail lending market, as BlockFi does… the nature of this product differs significantly from BlockFi and cannot really be compared,” he explained.
According to Aruliah, the BCB fund’s strategy is based on allocations lent to “recognized” institutional firms in the crypto industry.
Investors and companies must qualify for professional status and be able to post a minimum of €125,000 (US$142,000) while passing the necessary KYC and onboarding processes, according to the fund’s terms. The fund is only available to a limited number of European customers and is not available to customers in the United States.