The bear market has left many companies in the crypto world financially unstable. Due to the problems at FTX, the huge lender Genesis also had problems. Genesis’ parent company is Digital Currency Group (DCG), which may also be in trouble as a result. Now it has stopped paying dividends to investors.
DCG continues to cut
That writes Bloomberg, who has seen a letter to DCG investors dated Jan. 17. The company says it wants to strengthen its balance sheet by reducing operational costs and by saving as much cash as possible. This also includes stopping paying dividends to investors.
This refers to dividends that Digital Currency Group paid to its own investors, not to the investors in Grayscale’s trust funds such as GBTC. Grayscale is again a subsidiary of DCG. It is not known how high this dividend is, as DCG is not a public company and those figures are therefore not public. In any case, it was paid quarterly.
DCG is a gigantic company. In addition to Genesis, there was also an independent asset manager under the umbrella of DCG. At least until recently, because this branch has also been closed.
The company would also consider selling some of the assets in DCG’s portfolio. It is not known which assets these would be and whether these assets would be sold in their entirety. Last month the news was that DCG subsidiary Grayscale is taking into account that the GBTC fund may have to be closed.
Crypto industry infections in full swing
The problems did not start with DCG, on the contrary. The problems started when the Terra ecosystem (LUNA) for stablecoins went to zero. This led to crypto fund Three Arrows Capital (3AC) and crypto bank Celsius also going bankrupt.
Digital Currency Group had indirectly exposure to Terra. DCG subsidiary Genesis had lent money to Three Arrows Capital. This fund also used Grayscale’s GBTC as collateral. Genesis says it has no plans for bankruptcy, but it needs extra time to become financially stable again.
For Bitvavo users, the situation at DCG is of particular concern, as Bitvavo has yet to receive $280 million from DCG. According to the Dutch exchange, they will not run into problems in any conceivable scenario, but the issue still causes a lot of uncertainty among users.