Cryptocurrency lending platform BlockFi today announced the launch of a new trading service for its customers.

The service supports trading in Bitcoin, Ethereum, and Gemini USD upon launch and will add Circle’s USDC in early 2020. BlockFi customers across 38 states will be able to trade the coins “at some capacity,” meaning either crypto pairs or stablecoin pairs are available for trading, starting today.  

BlockFi CEO Zac Prince told Decrypt that the company plans to expand to other states as and when they are approved for money transmission licenses. The platform will also add another three to five cryptoassets next year. “We are looking very closely at Tether and are generally bullish on stablecoins,” he said. 

There are no trading fees on the platform, and BlockFi did not disclose names of market markers for its trading services. In the past, it has announced equity investments from firms such as Galaxy Digital and Susquehanna. 

Why did BlockFi introduce crypto trading?

Prince provided two reasons for the introduction of the crypto trading service. The first one is feedback from existing customers. In surveys conducted by the startup, clients cited trading as the number one reason for withdrawing funds from their interest-bearing accounts already available on BlockFi.

The second reason for introduction of the service was to attract new investors to the crypto ecosystem. For better or worse, cryptocurrencies have attracted attention as instruments of speculation and trading, and BlockFi intends to capitalize on it.

According to Prince, today’s move is an evolution of the company’s strategy. Phase one, he said, introduced basic products for people who already own cryptocurrencies. Now, phase two represents an expansion of its product suite to entice customers who don’t already own crypto.

Prince said the strategy of implementing growth in phases was inspired by Tesla CEO Elon Musk’s widely-publicized Masterplan, which was unveiled when the company purchased SolarCity. In BlockFi’s vision, there are three phases of evolution, and the last stage consists of an international expansion beyond U.S. borders.

A different breed of crypto trader

The introduction of a new trading service is also accompanied with the opportunity to tap into a new customer base. “We have the ability to create net new crypto investors,” said Prince. Those new investors, however, are different from your usual run-of-the-mill retail traders interested in making quick profits from the crypto ecosystem.

“We don’t envision our clients for the trading product as the same person who wants to trade on BitMEX and time the market [for profits],” said Prince. In other words, trading activity on BlockFi’s platform will not be as frequent as that on prominent exchanges. Instead, the new service is aimed at the buy-and-hold investor. 

Depending on their asset-allocation strategy, such investors can increase or decrease their holdings by setting up periodic auto-recurring purchase or sale of their cryptoassets. Prince said this will help customers generate a passive income stream in US dollars.

To that end, the user experience is more akin to that of a robo-advisory firm and solutions targeted at wealth management professionals as opposed to crypto exchanges aimed at retail investors. This approach translates to less emphasis on typical options available at crypto exchanges, such as different order types, and more on automation of trading tasks. 

While there are no fees for the trading service in its current iteration, that might change in the future. “Over time, we’ll evaluate options, such as small markups to the price that we are able to source liquidity at and monetizing the order flow data as it scales,” said Prince.

The new trading product is part of a network of services that “feed off each other,” said BlockFi’s CEO. For example, customers can siphon funds from their interest-bearing accounts to their trading accounts and vice versa. That ecosystem is good for BlockFi’s business. “As products gain traction, institutional liquidity [in BlockFi’s ecosystem] will grow,” he said.

Editor's note: This article was updated to clarify that BlockFi does not plan to add Circle’s USDC to its trading platform until early 2020.