B2C2 Offers to Bailout Genesis from Crypto Lending Liquidity Crisis
News of Genesis freezing customer withdrawals conveyed early Wednesday prompted B2C2 – a leading cryptocurrency marker – to lend a hand to the struggling lender.
In the early morning Tweet, Genesis Trading admitted experiencing a liquidity crunch that began with the initial bankruptcy wave from Three Arrows Capital (3AC) and Terra/LUNA collapse. Genesis announced the temporary suspension of loan origination and redemptions. It cited eroded liquidity owing to recent market turmoil caused by the FTX crypto exchange and Alameda Research’s downfall.
Liquidity Shortall Compels Suspension
While Genesis Trading promised to scout for new liquidity sourcing, it assured that derivatives, spot, and custody services were fully operational. The Twitter thread assured Genesis Global Trading, currently holding BitLicense, has autonomous operations and capitalization from Genesis affiliates.
Genesis’s decision was supported separately by its parent entity, Digital Currency Group (DCG), in a tweet suggesting the suspended redemptions arose from the market dislocation following eroded crypto confidence since FTX’s downfall.
Genesis announcement is a shocker after withstanding the trend where other lenders, including BlockFi and SALT, froze withdrawals. Further, Genesis had dismissed $175 million in bankrupted FTX were immaterial to the business and could hardly impede the trading franchise functions. The Wednesday tweet portrays the unmasked uncertainty from FTX-caused turmoil since DCG announced extending a $140 million infusion to improve the Genesis brokerage balance sheet.
FTX Insolvency Impeding Genesis and Counterparties
B2C2 Group sympathizes with the liquidity shortfall as its founder Max Boonen emphasized the need for financial institutions support peers to ensure subsidiaries attain long-term credibility. The gesture by the UK-regulated financial service provider promised to support counterparties in novating the current loans at Genesis Global Capital. Boonen noted the need to initiate rigorous risk management as applied B2C2 leading to over-collateralized crypto loans book by 115%.
B2C2 acknowledges the contagious fallout from FTX insolvency prompted the suspended loan originations that will have consequences in the lending platform. By press time, the suspension compelled Gemini Earn to limit redemptions since Genesis is the primary lending partner. Similar exposure to defunct exchange forced Ikigai to confess a significant stake in the crypto hedge fund to FTX.
Besides, Sino admitted losing mid-seven figures to FTX while BlockFi is mulling bankruptcy filling despite freezing customer withdrawals. Genesis twist indicates the contagious fallout from FTX insolvency is bound to have multiple casualties beyond custodial wallet exchanges. However, it remains uncertain if Boonen will extend crypto liquidity support to other victims.
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