The liquidity crisis among large cryptocurrency players continued Wednesday, as the Gemini exchange informed customers that they might not be able to withdraw assets from a program which pays rewards for deposited cryptocurrency.
Only Gemini Earn customers will be affected by the new development. Customers who lend certain cryptocurrencies earn rewards up to 8%. Customers can request assets in the program within five business days.
The program requires users to opt in. If you are a Gemini customer and have not moved your crypto into Gemini earn, you may still be able to access your crypto. Gemini was founded by twins Tyler Winklevoss and Cameron Winklevoss. It emphasizes that any assets on the platform can still be withdrawn.
Gemini Earn: What’s the deal?
The Gemini Earn is with Genesis Global Capital, a third-party lending partner. Genesis Global Capital halted withdrawals this week citing “abnormal” volumes of redemption requests following the collapse on the FTX exchange .
FTX, and its U.S. subsidiary, FTX.US announced Friday that they have filed for Chapter 11 bankruptcy. This follows a spike of withdrawals, amid reports that the company used customer funds to make risky investments that left them in a deep financial hole.
Gemini’s announcement highlights how widespread the FTX crisis has spread. Gemini, a U.S.-based company, has presented itself in the cryptocurrency world as a trustworthy, well-regulated alternative.
The Winklevoss twins sent a letter to customers on Friday arguing that they did not have direct exposure to FTX. They also stated that their company had a 1-to-1 reserve backing deposits from customers.
Gemini has always prioritized security for customers’ assets from day one. The letter stated that Gemini has never compromised on this point and will continue to do so.
However, the pause for withdrawals is an example how recent chaos is challenging Gemini’s preparedness.
The homepage for Gemini’s Earn product states that its rewards are generated by partnerships with “accredited third-party borrowers like Genesis”, which are reviewed through a risk management framework. This review also reviews the collateralization management process of our partners.
Genesis admitted Wednesday that it had been working for months to improve its financial position and is now “working tirelessly to figure out how customers assets can be preserved, including sourcing liquidity.”
Next?
The situation is not clear if your funds are on GeminiEarn. Genesis and Gemini have not provided detailed descriptions of the future process.
“We are working closely with the Genesis team to assist customers in reclaiming their Earn program funds as soon as possible. The company stated that they will be providing more information over the next few days.
Customers can keep track of exactly how much cryptocurrency they have, its value and where it is being kept. This information is useful for settling potential disputes.