Dutch Bitcoin Exchange Bitvavo Claims Digital Currency Group Has ‘Liquidity Problems’

Dutch cryptocurrency exchange Bitvavo says it has 280 million euros ($297 million USD) committed with Digital Currency Group (DCG), or 17.5% of the 1.6 billion euros Bitvavo says it manages in deposits and other assets. Bitvavo assured customers that the situation “has no impact on the Bitvavo platform.”

Bitvavo claims in a blog posts that DCG is “experiencing liquidity issues due to the current turbulence in the crypto market” and that DCG “has suspended repayments until this liquidity issue is resolved.”

But a spokesperson for DCG told Reuters that the funds are held by its “independent subsidiary” Genesis, not DCG. Decrypt has contacted DCG for further comment.

Bitvavo replied to Reuters that it “held DCG responsible for the unavailable funds.”

DCG, led by SecondMarket founder Barry Silbert, is one of the crypto world’s largest and best-known crypto firms. It owns Genesis, Grayscale, CoinDesk, Foundry and Luno.

The five weeks since FTX’s collapse and filing for bankruptcy has not been good for DCG.

Genesis frozen outlet on the lending arm a month ago and have not frozen them. Gemini, the exchange owned by the Winklevoss brothers (not a DCG subsidiary), in turn had to break redemptions on its Earn product because the partner on Gemini Earn is Genesis. Genesis allegedly owe Gemini Earn users 900 million dollars.

The problems at Genesis have put DCG’s finances in doubt.

On Nov. 22, Silbert told shareholders that DCG owes Genesis $575 million, but that “We’ve been through previous crypto winters, and while this one may feel more severe, we will collectively come out of it stronger.” Nevertheless, December 3rd Financial Times reported that DCG owes Genesis $1.7 billion.

Grayscale Capital also faces significant headwinds, with New York hedge fund Fir Tree Capital Management file a lawsuit against the company alleging that their Grayscale Bitcoin Trust (GBTC) had “potential mismanagement and conflicts of interest.”

Grayscale Bitcoin Trust is a fund that enables investors to gain exposure to Bitcoin without buying Bitcoin themselves. It is currently trading at a -48.7% discount to the market value of the underlying asset, per data from CoinGlass.

On Friday, cryptoanalyst Will Clemente, co-founder of Reflexivity Research, noted on Twitter an aggressive sell-off over the past 48 hours in many cryptocurrencies linked to DCG, and speculated that it could be DCG looking for liquidity.

Filecoin and Flowboth of which Clemente claimed DCG has exposure to, have fallen around 20% and 10% in the past 24 hours according to CoinGecko data.