Genesis Discontinues Crypto Lending
The lending business of crypto asset management Genesis has halted new loan originations and client redemptions, a move that is already impacting crypto services throughout the ecosystem.
The decision was influenced by the aftermath of FTX’s bankruptcy. The onset of reverberations was precipitated by a rush of institutional investors to withdraw their digital assets from exchanges and store them in cold storage.
Now, according to industry participants who spoke with Blockworks, the FTX pandemic is expanding to crypto credit markets and has impacted one of their main operators, Genesis.
Wednesday morning, Genesis officials called institutional customers to explain the issue, according to a person with knowledge of the subject. Another source informed Blockworks last week that Genesis was “functionally bankrupt.” Sources were offered anonymity in order to discuss sensitive business transactions.
A spokesman for Genesis said in a statement to Blockworks, “Genesis has three core business lines: spot and derivatives trading, loan and borrowing, and custody. Our spot, derivatives, and custody operations continue to operate normally.”
Regarding its loan activities, they noted that the New York-based company’s first objective is to “service our customers and protect their investments.”
“So, we’ve made the tough decision to halt new loan originations and redemptions in the lending industry for the time being. We are carefully striving to provide sufficient liquidity to satisfy our lending clients’ commitments.”
The company’s primary investor, venture capital firm Digital Currency Group (DCG), tweeted Wednesday morning that the custody and trading arms of Genesis had not been impacted.
CoinDesk was the first to report on the crypto company’s credit facilities being halted. A source said that Genesis looks to be “trying at all costs to avoid [bankruptcy],” which is “admirable but expensive.”
But stopping credit operations has repercussions for the remainder of the crypto sector. Genesis supplied backend lending operations for a variety of yield-paying exchange products, including Gemini Earn, which promises up to 8.05 percent interest on crypto deposits.
Following Genesis’s statement, Gemini Earn said that it will no longer Earn redemptions in the future, with no indication of when they might be revived. Gemini said that standard cryptocurrency withdrawals are unaffected.