Cryptocurrency lender BlockFi has filed a proposed court order seeking approval to convert certain client assets into withdrawable funds as part of its ongoing bankruptcy proceedings.
The company applied to bankruptcy court on Aug. 30, requesting authorization to exchange limited cryptocurrency holdings known as “trade only” assets into stablecoins. According to the filing, the trade-only assets comprise less than half a percent of all client funds BlockFi holds, including Algorand, Bitcoin Cash, and Dogecoin.
BlockFi states that technical limitations prevent clients from withdrawing the trade-only assets in their original form. If approved, the proposed order would allow a one-time conversion of the assets into Gemini Dollar or other stablecoins of BlockFi’s choosing. Clients could then withdraw the stablecoin funds through BlockFi’s platform.
The company says the move is necessary to facilitate a comprehensive withdrawal process for all client assets held in custody. Earlier court orders reopened the BlockFi platform to client withdrawals last week.
A hearing date has not been set. The proposed order requires advance notice to affected clients holding trade-only assets.
BlockFi and related entities filed for Chapter 11 bankruptcy protection in late November. The cryptocurrency lender cited exposure to failed hedge fund Three Arrows Capital and volatility in crypto markets as reasons for the filing.
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