The intriguing saga of BlockFi’s return of user funds moves into a new chapter. The defunct crypto lending company decides to march on the path of user fund redemption by asking the court for authorization. The permission in question would allow BlockFi to convert ‘trade only’ assets into stablecoins like Gemini Dollar, or others, for easier withdrawal by its users. Algorand, Bitcoin Cash, and Dogecoin are classified as ‘trade only’ assets, accounting for less than 0.5% of all US wallet assets of BlockFi users.
However, this potent move is not without its scepticism and concern. As these assets cannot be withdrawn easily, BlockFi’s proposal of a one-time exchange could enable easy redemption. But it’s interesting to see the line drawn between such assets and other stablecoins like Cardano, Solana, Avalanche, which are independently held by BlockFi International.
The firm’s proposal bears strong backing from the Committee of BlockFi creditors, endorsed by the Court. This gives more weight to the request, which is part of the firm’s effort to claw back user funds through entities like Alameda Research, FTX, Three Arrows Capital, Emergent, and Core Scientific. The mission remains uphill, considering the debt owed by BlockFi as of April 2023, $10 billion to an estimated 100,000 creditors.
In a similar vein, the tale of the Patricia crypto exchange in the Nigerian market takes an intriguing turn as withdrawals and deposits were halted due to a breach. Patricia released the Patricia Token (PTK), a debt token intended to manage user debts. Still, the move was met with understandable scepticism, with users questioning the backing and the forced conversion into PTK.
According to Patricia, PTK was not a stablecoin but a debt token, echoing Patricia’s promise to pay holders $1 for each Patricia Token in the future. However, the lack of a specific timeline to access the funds kindles a fire of concern amongst users. Engendering further trust issues is the failed attempt to turn BTC and Naira balances into redeemable PTK.
While the intentions remain noble on paper, and though the Chapter 11 bankruptcy protection provides some semblance of order, the lack of definite plans fuels the fire of uncertainty for BlockFi and Patricia users. As the crypto world watches these events unfold, the palpable tension between trust, regulation, and innovation is becoming all too apparent. Meanwhile, important questions about the regulatory future of digital assets and the security of users’ investment in technology remain.