DeFi DeBrief #15: The FTX effect 💣

TL;DR:

• Genesis on the brink of bankruptcy
• U.S. banks launch digital dollar pilot
• USDC adds Apple Pay integration

Onwards 👇

$1bn shortfall puts leading prime broker at risk 🤕

The fallout from FTX’s recent collapse has come to light. Genesis Global Capital, the firm that powered ‘Earn’ programs from the likes of Celsius, recently suspended all redemptions, alongside pausing new loans.

Doing so means that users can’t redeem assets from the ‘Earn’ program of leading crypto exchange Gemini, unnerving the industry as a whole. And it’s become apparent that Genesis may now be facing insolvency.

The company has called in restructuring experts in a bid to avoid filing for Chapter 11. However, it still needs between $500 million to $1 billion to cover a shortfall that stemmed from the collapse of FTX.

Investors have yet to step forward to plug the gap, leaving Genesis on the brink.

Why should you care?

Genesis is a poster child of crypto. 

The firm has enabled a flow of capital throughout the ecosystem since 2013, marking it down as one of the longest-standing firms in the industry.

The company is also owned by Digital Currency Group (DCG), the VC fund behind media company Coindesk and crypto asset manager Grayscale, the latter being another point of concern.

Genesis’ troubles have highlighted the level of outstanding debt at DCG, with some commentators suggesting the Grayscale Trusts may be the next domino to fall. That would not be good news.

But as with everything that’s happened this year, there are more questions than answers, so we can only sit and wait.

Finance heavyweights band together to test digital dollar 💵

A collection of finance giants, including HBSC, Mastercard, and Wells Fargo, have partnered with the Federal Reserve Bank of New York to launch a proof-of-concept digital money platform called the Regulated Liability Network (RLN).

The RLN aims to use the blockchain to improve financial settlements, drawing participation from central banks, commercial banks, and “regulated non-banks,” including BNY Mellon, Citi, PNC Bank, Swift, TD Bank, Truist, and U.S. Bank.

There are still mixed feelings about central bank digital currencies (CBDCs), but this step proves there’s no stopping them.

IN THE HEADLINES

USDC lands on your smartphone 🤳

Circle, the company in charge of the world’s second-largest stablecoin, has announced the launch of USD Coin (USDC) on Apple Pay. The integration will let customers pay with cryptocurrency using their iPhone, iPad and iWatch.

And it will give investors another way to buy cryptocurrencies on exchanges. Circle has also promised to add more crypto payment options, making it easier than ever for stablecoins to reach mass adoption.

Five short reads catching our eye this week:

1. 5 key learnings from the FTX collapse
2. A thread about what’s happened at Genesis
3. Decentralised exchange Uniswap overtakes Coinbase
4. Investors are shorting ether and bitcoin in record numbers
5. What might happen if DCG can’t repay its debt?

TEMPERATURE CHECK 🔥

• BTC: $16,527.79 (1.44%, 7 days)
• ETH: $1,163.63 (6.10%, 7 days)
• TVL in DeFi: $41.46bn (4.53%, 7 days)
• Fear & Greed: 22 (extreme fear)

*Data last updated at 08:00 on 23rd November.

TWEET CHECK 🐦

Some (including me) say this will “set the industry back a few years.” But thinking about it, this is natural. There will be failures with progress. Happened in regulated TradFi in 2008, after 70+ years of development. The industry will recover quickly, and become stronger.

— CZ 🔶 Binance (@cz_binance) November 23, 2022

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