The year 2022 has quickly become a year to forget for the cryptocurrency industry. The misery began in May with the implosion of the Terra Protocol, in which more than $40 billion in assets went up in smoke. Eventually, this caused a chain reaction and several large companies ran into problems, including the Digital Currency Group, with which Dutch cryptocurrency exchange Bitvavo is closely connected.
What happened?
The Dutch Bitvavo uses the Digital Currency Group to offer staking services. This means that Bitvavo forwards its clients’ funds they want to strike directly to the Digital Currency Group, which then starts doing risky things with them so that clients can get a return. In total it is 280 million euros, of which it remains to be seen whether they will be returned in full to Bitvavo. For Bitvavo customers, there seems to be nothing wrong for now.
On December 15th, Bitvavo realized familiar assume the entire debt and then indemnify their customers. “As a result, our clients are not affected by the problems that have arisen and can withdraw their funds at any time. Bitvavo now considers this a matter between Bitvavo and DCG,” the trading platform said in a statement official answer on the website.
Following the issues, Bitvavo clearly has doubts about the future of staking on the exchange platform. “In the first quarter of 2023, we will review our strike service. We will choose to discontinue offering off-chain staking services entirely or to offer them again, but we will call them “loan earnings”, separate from on-chain staking services and place more emphasis on transparency and ease of use.” writes the title trading platform.
Sufficient reserves
Further writes the stock exchange platform that there are sufficient reserves to absorb the DCG blow of 280 million euros. “Bitvavo is financially sound, with no long-term loans. Significant gains have been made in recent years; €173 million in 2021 and around €250 million in total to date […] this capital can also be used to protect our clients from the consequences of problems that arise outside of Bitvavo,” writes Bitvavo.
Battle expects DCG’s first repayment in the first quarter of next year. “The timeline now calls for the plan to be fully finalized by mid-January and the first repayment to occur in the first quarter […] We expect a second repayment in the second half of next year and the last one in the first or second quarter of 2024,” Bitvavo CEO Mark Nuvelstijn told Newsbit.
All in all Bitvavo seems to have the situation under control, but 280 million euros remains a lot of money. For now, however, we have to wait for more clarity and for the first DCG payments to arrive on the Dutch exchange platform.
