BCB Group Launches Yield Product in EU Amid Regulatory Scrutiny in US

Crypto payments and trading firm BCB Group debuted its dual fiat and crypto yield product Monday in the EU, a day after BlockFi was forced to pay $100 million in fines to regulators over its lending product in the US.

The company said its BCB Yield product offers clients “multiple options” to earn a return on their balance via its BCB Securities Fund, according to a press release on Monday. The fund, BCB claims, is a “first of its kind” investment vehicle providing investment options on a range of currencies for up to 2% annual percentage yield when denominating in euros.

Lending products within crypto are hoping to fill the void left by low interest rate returns in traditional finance which have been pushed below or to near zero by centralized institutions aiming to buoy excessive inflation. As an alternative, crypto lending is seeking to lure investors in search of greater yields.

“Corporate treasuries parked in cash or cash equivalents are getting a raw deal in most currencies,” Oliver Landsberg-Sadie told Blockworks in an interview on Thursday. “Crypto market dislocations between spot and futures continue to provide profit opportunities that only sophisticated traders are able to monetize.”

He said his company’s product offers a “market risk-neutral return” that draws upon arbitrage strategies executed by sophisticated traders in a way that also seeks to address counterparty credit risk that, while well established in traditional finance, was not widely understood or applied in crypto.

“This is the only risk-neutral trade that can outperform true inflation in most currencies and is attracting great interest from those stuck in negative interest rate territory.”

Clients of the fund may choose to lend out in either fiat or crypto over a 30, 60 or 90 day period which are accompanied by corresponding notes resembling bonds, the company said. Returns can jump up to 8% when denominated in US dollars.

The investment vehicle provides multiple strategies for EUR, GBP, USD, CHF and crypto, according to the company’s product page. BCB said in its release its latest product marked the “first step” in a broader range of yield options that will be launching this year with a focus on solutions that leverage decentralized finance protocols and products.

Retail versus institutional lending in EU, North America

The launch of BCB’s lending product comes at a time when US regulators have been pushing for greater oversight of both crypto and accompanying lending products.

Earlier this week, BlockFi paid $50 million to the Securities and Exchange Commission in addition to a further $50 million to state regulators over allegations it failed to register its high-interest securities offered to retail clients.

Decisions over how to regulate crypto lending across the border in Canada fair marginally better as they fall under the purview of the country’s provinces, though the regulatory prerequisites for such products can only be achieved via patience and time, according to one local exchange.

But when it comes to the EU, BCB’s Chief Product Officer Chris Aruliah told Blockworks the company’s product differs significantly from BlockFi’s offering and uses a structure known as an Open-Ended Investment Scheme governed by Luxembourg securitization law.

“This law governs how the fund operates and how the fund is structured,” said Aruliah. “Under the terms of the fund, the fund manager can use a number of agreed [legal] strategies to generate a return for investors.”

“The fund does not participate in the retail lending market like BlockFi…the nature of this product differs considerably to BlockFi and cannot really be compared,” he said.

The strategy utilized by BCB’s fund is based on allocations lent to “recognized” institutional firms within the crypto industry, Aruliah added.

Under the fund’s terms, investors and companies need to qualify for professional status and be able to post a minimum of 125,000 euros ($142,000), while passing necessary KYC and onboarding processes. The fund is only available to select European customers and is not available to US customers.

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