The crypto lending platform DCG is in trouble due to the collapse of FTX. Many trading platforms use DCG for so-called off chain strike to provide services to customers. Bitvavo is one of the exchanges that has stored crypto at this platform. Could this cause problems for the Dutch crypto exchange? The short answer is “no,” Bitvavo said in an update. You can read the long answer here.
Bitvavo has money in battered DCG
That FTX has collapsed is not an isolated thing. Due to the size of FTX, the FTX tentacles were almost everywhere in the crypto world. DCG fell victim to this as it had nearly $200 million in an FTX account. This was one of the reasons that DCG is now in dire straits.
Earlier it was read in the crypto news that this has also caused other parties to run into problems. For example, crypto exchange Gemini claims that it will receive another $900 million from DCG. It wants to see this money back as soon as possible.
And closer to home, it has recently become clear that Bitvavo is in the same boat. In a update today the Dutch crypto exchange reports that Bitvavo:
“used services from Digital Currency Group, Inc. and its subsidiaries (DCG) [waaronder DCG, red.] for providing off-chain staking services. A liquidity problem has arisen at DCG due to the recent turbulence in the crypto market. As a result, DCG has suspended repayments until this liquidity issue is resolved.”
Bitvavo has €280 million of €1.6 billion in credit balances with DCG
Bitvavo further reports that it manages €1.6 billion in balances and digital assets. €280 million of this is currently at DCG. Together with other business customers of DCG, the Dutch crypto exchange is now trying to get this money back. This is reportedly in collaboration with crypto exchange Gemini.
Bitvavo emphasizes that it expects most of the outstanding balances to be repaid by DCG. It adds to the update that should reassure customers that:
“Bitvavo has been making a profit since its inception and is in a financially sound position. If necessary, Bitvavo will step in to protect our customers. DCG’s debt to Bitvavo is no obstacle to this.”
In short, despite the situation, customers can continue to withdraw their credits. It reportedly holds all its clients’ assets on a 1:1 basis and will never lend them without explicit permission.
Want to read more about Bitvavo? Read the Bitvavo review on Crypto Insiders here.