There are mounting worries regarding the impending default of the cryptocurrency loan service Genesis and its parent company, Digital Currency Group (DCG).
The crypto lender stopped approving new withdrawals from its clients last week, adding to the industry’s growing sense of unease that had been sparked by the FTX fiasco. By originally forbidding exposure to the native token of FTX, FTT, or really any coins produced by centralized exchanges, Genesis provoked the situation considerably. The company stated on November 9 that its lending and trade activities were proceeding as usual and that they have a solid balance sheet.
Withdrawals were stopped by the DCG-owned cryptocurrency lending company after a week. According to reports, the parent company is looking to secure funds to close the gap in Genesis’ financial statements without declaring bankruptcy. The FTX crash may have cost the corporation billions of dollars, as per speculations.
Per the conjecture from many actors, such measures have been ineffective. According to estimates, DCG will sell off its two most profitable offerings, the Grayscale Ethereum Trust (GETH) as well as Grayscale Bitcoin Trust (GBTC), in order to salvage Genesis and the whole business.
In the midst of these speculations, The Digital Currency Group, Genesis, and Grayscale kept quiet. The usage of this strategy led to the suggestion from cryptocurrency investors. A spike in selling pressure may result from the GBTC’s breakup only. As such, Grayscale investors received a letter from Coinbase Custody. Investors were comforted by the company, which also said cold storage will keep the money safe. The company asserted: “We trust this letter will provide added confidence that the digital assets, as reflected and reported in Grayscale’s various public and private filings, are fully accounted for, safe, and secure. Coinbase Custody will always fulfill our obligations to safekeep our clients’ digital assets.”
The organization is regulated by the New York State Department of Finance Services, a body that is in charge of important American banks. As a result, the business contends that it is prohibited from lending money to its users by both the law and the terms of its agreement with Grayscale. The firm stated: “This means that the digital assets underlying each Grayscale product will never be commingled with or confused for the digital assets of any other client. This also means that the digital assets of each Grayscale product can be confirmed on-chain.”
Notwithstanding the extensive assurances of Coinbase Custody, consumers voiced their worries via social media. Several people interpret the quietness of DCG as a signal. But other analysts emphasized the distinction among the case of FTX and that of Grayscale, an enterprise subject to American regulation.