Cryptocurrency lending platform DCG is going through the collapse of FTP extension in trouble. Many trading platforms use DCG for so called off chain staking out to provide customer services. Bitvavo is one of the exchanges that has stored cryptocurrencies on this platform. Could this cause problems for the Dutch cryptocurrency 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 collapsed is not an isolated thing. Due to the size of FTX, FTX tentacles were almost everywhere in the cryptocurrency world. DCG fell victim to this as she had nearly $200 million in an FTX account. This was one of the reasons DCG now it is in bad weather.
It was in there before cryptocurrency news read that this has caused problems for other parties as well. For example, cryptocurrency exchange Gemini says it will receive an additional $900 million from DCG. This money wants it review 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:
“Services used by Digital Currency Group, Inc. and its subsidiaries (DCG) [waaronder DCG, red.] for the provision of off-chain staking services. A liquidity problem has arisen at DCG due to the recent turmoil in the cryptocurrency market. As a result, DCG has suspended redemptions until this liquidity issue is resolved.
Bitvavo has 280 million euros out of 1.6 billion euros of credit balances with DCG
Battle it goes on to report that it manages $1.6 billion in balances and digital assets. Of these, 280 million euros are currently in DCG. Together with other commercial clients of DCG, the Dutch cryptocurrency exchange is now trying to recover this money. This is reportedly in partnership with cryptocurrency exchange Gemini.
Bitvavo points out that it expects most outstanding balances to be refunded by DCG. It is added to the update which should reassure customers that:
“Bitvavo has been profitable since its inception and is in a strong financial position. If necessary, Bitvavo will take action to protect our customers. DCG’s debt to Bitvavo is not an obstacle to this.”
In short, despite the situation, customers can continue to withdraw their credits. It reportedly holds all of its clients’ assets on a 1:1 basis and will never lend them out without explicit permission.
Do you want to know more about Bitvavo? Read here Bitvavo review op Crypto Insider.