Digital Currency Group’s official statement read that the company is currently taking the ‘difficult decision’ to temporarily postpone new loan originations, redemptions, and clarified that the decision is caused by troubles in FTX
Genesis Global Capital, the subsidiary of Digital Currency Group (DCG), suspended its customer redemptions on Wednesday citing the recent fallout of FTX. FTX filed for bankruptcy protection on Friday in the United States following the largest crypto blowout to date. The suspended withdrawals by the lending arm are increasingly discussed as the Digital Currency Group (DCG)’s, valuation reached $10 billion after the company sold $700 million of stock in a sale led by SoftBank Group Corp.
DCG’s official statement read that the company is currently taking the ‘difficult decision’ to temporarily postpone new loan originations and redemptions and clarified that the decision is caused by troubles in FTX. “This decision was made in response to the extreme market dislocation and loss of industry confidence caused by the FTX implosion”, says the statement. Digital Currency Group at the beginning of November employs almost 60 people and holds more than 200 companies in its portfolio.
FTX lost around $6 billion in a span of just 3 days as traders began pulling out from the platform and its downward spiral began when the rival firm Binance backed off from the bailout deal, which was FTX’s last resort. The collapse of FTX has caused the whole of the crypto industry to wobble, stumbling liquidity at firms along with triggering investigations by authorities in many countries. The US authorities have mentioned that the hearings on FTX will take place before the end of 2022.
The New York Department of Financial Services has informed that they are keeping a close look at the situation at Genesis. Seeing the widening hubbub in the crypto market, Treasury Secretary Janet Yellen on Wednesday stated that an effective oversight is required on crypto markets to address the risks of the market. Genesis offered customary services and crypto trading through a partner that is not affected and at the end of the third quarter it had $2.8 billion in active loans and $8.4 billion in loan originations according to the company website.
Digital Currency Group is well recognized in the crypto space and the firm’s portfolio has included everything including Coinbase, a crypto-focused bank known as the Silvergate, and hardware maker Ledger. With the halt in redemptions at Nashville lending arm, the future of DCG is uncertain and the company currently is one of the largest and most well-known brokerage firms that let market-makers and funds borrow digital currency to augment their trades.
The halting of business by DCG on Wednesday does not affect the custody business or the firm’s trading according to the statement given by the company. “The impact lies with the lending business at Genesis and does not affect Genesis’s trading or custody businesses. Importantly, this temporary action has no impact on the business operations of DCG and our other wholly owned subsidiaries” states Digital Currency Group. However, DCB’s subsidiary, Grayscale Bitcoin, which is one of the world’s largest bitcoin funds, fell by 2.5% reaching $16,400 and down around 20% in the month of November.
The exchanges associated with the lending arm will also have to combat the consequences of its recent decisions. Gemini, a crypto exchange that uses Genesis as its lending partner will not be able to meet its client redemptions. However, Genesis is not the only crypto giant that faces challenges in the present period, and crypto lenders like BlockFi plan to lay off workers as the company had a significant fallout due to FTX and is presently preparing to file for bankruptcy.
