Coinbase Tries To Ease The Tides, Rumors Of Genesis And DCG Disaster Intensify
Crypto lending firm Genesis and its parent company, Digital Currency Group (DCG), are under pressure, and there are growing concerns about their potential default. Last week, the crypto lender halted new withdrawal requests from its customers, swelling the cloud of mistrust in the industry started by the collapse of FTX.
Genesis added fuel to the fire by initially denying exposure to FTX’s native token, FTT, or “any other tokens issued by centralized exchanges.” On November 9th, the company claimed their lending and trading operations were running “normally, and our balance sheet remains strong.”
A week later, the crypto lending firm owned by DCG halted withdrawals. The parent company is allegedly trying to raise money to cover the hole in Genesis’ books and avoid filing for bankruptcy protection. According to the rumors, the company might have lost billions in the FTX collapse.
These efforts have been unsuccessful, according to speculation from different actors. Estimations claim that DCG will liquidate its most successful products, the Grayscale Bitcoin Trust (GBTC) and the Grayscale Ethereum Trust (GETH), to save Genesis and its entire company.
Absolutely zero bids for Genesis and DCG raise.**Genesis creditors are preparing for an ‘imminent’ bankruptcy filing.— Andrew (@AP_ArchPublic) November 20, 2022
Coinbase Comes To The Rescue
The Digital Currency Group, Genesis, and Grayscale adopted a low profile amid these rumors. This approach contributed to speculations from crypto users. The dissolution of the GBTC alone could contribute to a rise in selling pressure.
In this context, Coinbase Custody sent a letter to Grayscale investors. The company reassured investors and confirmed that funds are secure in cold storage. The company stated:
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 company is under the regulation of the New York State Department of Finance Services, a regulator that oversees prominent banking institutions in the United States. In that sense, the company claims it is forbidden by law and its terms of services with Grayscale from lending its clients funds. The company said:
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.
Crypto Experiences Hellish Week, Is The SEC To Blame?
Despite Coinbase Custody’s statements, users expressed concerns across social media platforms. The radio silence from DCG is a warning sign for many. However, many experts pointed out the difference between the FTX case and Grayscale, a company regulated in the United States.
Coinbase going to the mat on Greyscale asset, shouldn’t be dismissed with the usuals “don’t trust, verify”.It’s just not the same situation. It’s a public company with a board that would be indicted if any of this is false. — Maya Parody Parody (@mayazi) November 21, 2022
Ryan Selkis, the founder of analytics firm Messari, classified the news around DCG and Genesis as worrisome but asked his followers to separate facts from speculations.
Fiction:+ Grayscale trust assets aren’t accounted for+ DC is working to ban crypto+ Contagion is just getting startedFact:+ Most crypto lenders have been wiped out+ SEC won’t approve a spot ETF under Gensler (sorry GBTC holders)+ Scrutiny will turn to Binance & Tether— Ryan Selkis 🥷 (@twobitidiot) November 21, 2022