Genesis Halts Crypto Lending, Blames ‘FTX Implosion’
The move by Genesis does not affect its other business lines, including crypto trading
Blockworks exclusive art by axel rangel
The lending division of cryptoasset manager Genesis has put a halt to customer redemptions and new loan originations, a move that’s already disrupting crypto services across the ecosystem.
The decision stemmed from the building fallout of FTX’s collapse. Reverberations started with broader exchange liquidity issues triggered by a rush by big-money traders taking their digital assets off of exchanges in favor of safer cold-storage solutions.
Now, industry participants told Blockworks, the FTX contagion is spreading to crypto credit markets and hit one of their largest operators — Genesis.
Genesis executives explained the situation to institutional clients on a call Wednesday morning, according to a source familiar with the matter. Another source last week told Blockworks that Genesis was “functionally insolvent.” Sources were granted anonymity to discuss sensitive business dealings.
In a statement to Blockworks, a spokesperson said: “Genesis has three primary business lines: spot and derivatives trading, lending and borrowing, and custody. Our spot and derivatives trading and custody businesses remain fully operational.”
They added that with regards to its lending operations, the New York-based firm’s No. 1 priority is to “serve our clients and preserve their assets.”
“Therefore, we have taken the difficult decision to temporarily suspend redemptions and new loan originations in the lending business. We are working diligently to shore up the necessary liquidity to meet our lending client obligations.”
Venture capital firm Digital Currency Group (DCG), the company’s main backer, wrote in a series of tweets Wednesday morning that the custody and trading arms of Genesis have not been affected.
CoinDesk first the news of the halt to the crypto firm’s credit facilities.
Genesis appears to be “trying at all costs to avoid [bankruptcy],” a source said, which is “admirable, but costly.”
But suspending credit operations is not without consequence for the rest of the crypto space. Genesis provided backend lending operations for many exchange products that offer yield, including Gemini Earn, which advertises up to 8.05% interest paid on crypto deposits.
Directly following Genesis’ announcement, Gemini Earn said it would cease processing Earn redemptions moving forward, with no timeline for when they’d be reactivated. Gemini said regular crypto withdrawals are unaffected.
Get the news in your inbox. Explore Blockworks newsletters:
- The Breakdown: Decoding crypto and the markets. Daily.
- Empire: Crypto news and analysis to start your day.
- Forward Guidance: The intersection of crypto, macro and policy.
- 0xResearch: Alpha directly in your inbox.
- Lightspeed: All things Solana.
- The Drop: Apps, games, memes and more.
- Supply Shock: Bitcoin, bitcoin, bitcoin.
