Bitcoin-Based Lender Raises $25 Million as Loan Growth Soars
Unchained Capital Inc., a Bitcoin-based custody-service provider and lender, has raised $25 million in funding, valuing the company at $125 million.
The funding round was led by New York Digital Investment Group LLC, a provider of Bitcoin-related financial services. NYDIG’s investment increases its minority stake in the business and includes an additional $100 million commitment to back loans issued by Unchained. NYDIG initially invested in the Austin, Texas-based firm in February, when it agreed to provide $50 million of lending capital, according to a statement from Unchained.
“Our existing partnership with NYDIG has unlocked significant value and the expanded investment to lead our Series A will help further transform our company as a leading financial institution for long-term Bitcoin holders,” Joe Kelly, chief executive officer and co-founder of Unchained, said in the statement Friday.
Unchained, which was founded in 2016, provides custody solutions and lends dollars to Bitcoin holders who are looking to tap into gains they’ve made on the digital currency without having to sell their coins.
As Bitcoin’s price has surged to about $37,000 from less than $10,000 a year ago, Unchained has seen demand for its loan product grow.
The firm’s annual run rate, a measure of loans outstanding, has climbed to about $250 million, five times higher than six months ago, while assets across its lending and custody platforms now exceed $1 billion, Parker Lewis, head of business development, said in an interview. Lewis also provided the $125 million valuation for the firm.
“Historically, there has been a lack of investment in Bitcoin-dedicated infrastructure, often in favor of platforms supporting many digital currencies, but Unchained Capital expects this raise to be the first of a growing trend of Bitcoin-only businesses attracting capital investment at the scale which has long been deserved,” Lewis said separately in the announcement Friday.
Unlike other lenders in the cryptocurrency space, Unchained doesn’t take the Bitcoin pledged as collateral and loan it out for profit, eliminating counterparty risk to the borrower.
Also, when Bitcoin is used to secure a loan, Unchained stores the cryptocurrency in a so-called multi-signature account in which the borrower, lender and a neutral third party are each given a set of private keys. Two of the three keys are then needed to move the funds, but the borrower is able to verify that their Bitcoin hasn’t been lent out.
Unchained caps loans at a maximum of 40% of the value of a client’s Bitcoin posted as collateral, and charges 11% for a term of one year, with part of that fee going to pay for the multi-signature service. The average loan size is $100,000.
“This latest investment round brings our total lending commitment with Unchained to $150MM,” NYDIG co-founder and Chief Executive Officer Robert Gutmann said in a statement. “We have the utmost confidence in Unchained’s leadership, vision, and ability to execute with a sense of urgency, and we are excited to help them unlock this next growth phase.”
NYDIG is a subsidiary of Stone Ridge Asset Management LLC, an alternative asset manager that oversees $10 billion, according to NYDIG’S website.
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