Major cryptocurrency companies Circle, Gemini, and Luno are exposed to digital currency prime broker Genesis, which has stopped user withdrawals and deposits inside its lending division while the ramifications of FTX’s meltdown endure.
In August 2020, Genesis announced a partnership with Luno, which will allow interest-bearing products dedicated to the Luno community. According to a representative, Luno has already taken precautions to ensure users could keep access to Savings Wallet if Genesis withdrawals were unavailable. “All customers will retain full access to their cryptocurrency held in all Luno wallets, including the Savings Wallet.”
On Wednesday, Genesis announced a temporary suspension of withdrawals and new loan originations. The company stated, “This decision was made in response to the extreme market dislocation and loss of industry confidence caused by the FTX implosion”. Bitcoin (BTC) slumped 3.5% to $16,456 during US morning trading hours on Wednesday after Genesis withdrawal was halted.
Today Genesis Global Capital, @GenesisTrading's lending business, made the difficult decision to temporarily suspend redemptions and new loan originations.
— Digital Currency Group (@DCGco) November 16, 2022
In order to accelerate the adoption of USDC in traditional finance worldwide, Circle and Genesis’s parent company Digital Currency Group agreed to a $25 million deal in 2020. Genesis will assist Circle to provide additional USDC yield and lending services as part of the strategic partnership.
In a blog post, Circle claimed that Genesis will help companies and merchants that rely on USDC for treasury operations and business payments gain access to USDC-based credit. Circle’s Bermuda-based subsidiary had secured lending agreements with “one or more” institutional borrowers, including Genesis, and the services were scheduled to go live in late 2020. According to an online archive, Circle posted a 0.25% annual percentage yield (APY) on its yield product on Tuesday. That number has now been decreased to 0%.
Gemini Earn withdrawals have been Halted
Another key industry player, cryptocurrency exchange- Gemini, has announced challenges as the Genesis contagion spreads. Gemini Earn product has suspended withdrawals, and the exchange issued a statement saying, “We are aware that Genesis Global Capital, LLC (Genesis) — the lending partner of the Earn program — has paused withdrawals and will not be able to meet customer redemptions within the service-level agreement (SLA) of 5 working days.”
As the crypto industry faces direct exposures, dropping token prices, and even newfound suspicions of long-established players, the impacts of FTX’s collapse don’t appear to be fading away anytime soon.
After admitting last week that its derivatives company had $175 million locked in an FTX trading account, digital-asset brokerage Genesis announced it will cease lending redemptions less than a week after Sam Bankman-empire Fried’s filed for Chapter 11 bankruptcy. Given Genesis’s involvement as a key partner in the programme, Gemini announced that user withdrawals from its yield-generating product may be delayed. That’s only one example of the interconnections in an industry where FTX was pervasive.
The realm of cryptocurrency has long been clouded by hacks, scandals, and scams. However, the collapse of one of the most well-known companies in the industry conveys a loud and clear message: Nobody is safe.
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