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Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

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Re: Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

#161

Post by jmalicki »

lxgr wrote: post #109
marticode wrote: post #38

Earlier quoted context omitted.

In developed countries, banks are rarely left to completely fail nowadays, the small ones are usually taken over by the big ones, and the big ones are bailed by governments/regulators.

Rarely isn't never: https://www.fdic.gov/resources/resolutions/bank-failures/fai... That list seems to include buyouts, though, i.e. cases in which the FDIC didn't actually have to directly disburse funds. In Europe, there were two bank failures that I know of in the last few years that required tapping into the regional FDIC equivalents. In at least one of them, quite a few depositors actually lost money (due to hav…

In quite a few buyout cases, the buyer only buys what's left after the FDIC pays out any losses. The FDIC prefers to do it this way since having an intact set of customers is valuable to the acquiring bank and helps defer the cost and especially administrative overhead of disbursing insured funds.

"Purchase and Assumption Transaction. This is the preferred and most common method, under which a healthy bank assumes the insured deposits of the failed bank. Insured depositors of the failed bank immediately become depositors of the assuming bank and have access to their insured funds. The assuming bank may also purchase loans and other assets of the failed bank."

https://www.fdic.gov/consumers/banking/facts/payment.html

Re: Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

#162

Post by Animats »

dvt wrote: post #24

Maybe someone can explain this to me (not an expert in traditional finance), but how in the world are lending instruments not categorized as securities? Let's say I lend you 10 bucks (and I earn some interest on the money over time T), you give me a receipt/contract, and then I sell that receipt to someone else before T expires (the price I sell at is some complicated equation based on your chance to default, inflati…

It's not a security, it's a bank. Sort of.

Genesis seems to have been acting as what's called a "non-bank bank" or "non-depository institution". They took deposits and lent them out. Whether this is legal in the US is open to question. "Non-bank banks", until now, were for qualified institutional clients, like other banks, brokerages, and such. They did not take retail deposits. They could make loans, from their own money. Anybody can make a loan. It's taking deposits that's regulated. Because, 1929.

I'd thought nonbank banks taking deposits was illegal. It may turn out to be. The Consumer Finance Protection Board is asking some questions.[1]

[1] https://www.consumerfinance.gov/about-us/blog/the-cfpb-final...

Re: Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

#164

Post by aww_dang »

boeingUH60 wrote: post #132
notch656a wrote: post #120

Earlier quoted context omitted.

Obviously if I haven't personally done it, it isn't possible. I could also get rich knocking people in the head with bats and taking their wallets. For a little while. It's telling some people who let their true colors show, espousing ideas like "hey if I can make good money hurting others I'll do it, and why haven't you!" Crime is not hard, most houses are easily broken into, many people can be tricked, the human bo…

I think you're missing the point, which is that even in the world of crime, most intending criminals don't succeed. For every successful rug pull, there were probably 100 others that didn't gain any friction.

No post body was provided.

Re: Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

#166

Post by pa7x1 »

dvt wrote: post #122
rmbyrro wrote: post #112

Earlier quoted context omitted.

Has it been done by you? If it's so easy with such high rewards, why don't you try an MVP the next weekend and see how it goes?

DeFi rug pulls were extremely common in the bull market, here's a list[1]. Obviously doing it "next weekend" is going to be much harder given that FTX just collapsed and all of crypto is going to hell in a hand basket. [1] https://coinscreed.com/defi-top-10-list-of-crypto-rug-pulls....

This list is absolute rubbish.

1. OneCoin: Not even a cryptocurrency, a centralized currency. https://en.wikipedia.org/wiki/OneCoin

2. Thodex: A centralized cryptocurrency exchange. https://en.wikipedia.org/wiki/Thodex

Actual DeFi cannot be rug-pulled, by design. Not even the US can taken down something like Tornado Cash. What a smart contract can or cannot do is written in open source code. How are you going to rug-pull it, if it's not coded there?

Re: Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

#167

Post by stickfigure »

dvt wrote: post #24

Maybe someone can explain this to me (not an expert in traditional finance), but how in the world are lending instruments not categorized as securities? Let's say I lend you 10 bucks (and I earn some interest on the money over time T), you give me a receipt/contract, and then I sell that receipt to someone else before T expires (the price I sell at is some complicated equation based on your chance to default, inflati…

> how in the world are lending instruments not categorized as securities?

I suppose that the answer to this question generally, which applies to banks, is: I don't think anyone wants a world where you have to be an accredited investor just to open a savings account. The definition of a security is complicated enough that the US Supreme Court weighed in.

https://www.kramerlevin.com/en/perspectives-search/when-migh...

So, complex subject with lots of ambiguous legal precedent, grey zones, inconsistent enforcement. And new technology that doesn't perfectly fit into the previous system of rules. Yeah, it's a mess, and it will probably be decades before it all gets sorted out.

Re: Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

#168

Post by pa7x1 »

camgunz wrote: post #151
jcranmer wrote: post #138

Earlier quoted context omitted.

At the bottom of the proof-of-reserves page: > The procedure cannot identify any hidden encumbrances or prove that funds had not been borrowed for purposes of passing the audit. In other words, this is a fancier version of the kind of attestation that Tether makes, the ones that leave loopholes you can drive dump trucks through.

> In other words, this is a fancier version of the kind of attestation that Tether makes, the ones that leave loopholes you can drive dump trucks through. 100% and this just drives me bonkers. I'm not entirely unsympathetic to wanting to avoid financial regulation, like while I disagree it's a good idea, I can understand wanting to build a system that is built on math and not people. Fine. But isn't the whole point o…

You are absolutely right, but this highlights that what you are seeing these days with the failure of FTX and its associated fall-out is not a failure of cryptocurrencies or blockchain or any statement of its merits or demerits. It's a failure of traditional finance in an unregulated industry. This highlights how traditional finance is incredibly brittle and requires very strict regulation to have any semblance of resilience, when not failing anyway à la 2008.

Re: Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

#169

Post by jcpham2 »

matthewdgreen wrote: post #153
polygamous_bat wrote: post #36

To the crypto-inclined people commenting on every thread about how failing centralized exchanges don't effect you and are actually good for Bitcoin, how are you planning to convert your hard earned crypto into US dollars that you can spend at a grocery store? If your answer is "P2P exchanges," how do you plan to secure your cold wallet against the infamous rubber hose cryptanalysis?

Ugh, please kill me for answering this question because I don't want to join the "everything is awesome" crowd. But from a technical perspective, you are describing two very different functions that are currently provided by "centralized exchanges", but don't need to be: 1. Interfacing with the traditional (fiat) banking system: today this can be done with regulated fiat-backed stablecoins like Paxos USD, Gemini USD…

For whatever it's worth I think you've done a great job answering the question in it's entirety. The moment lending/repayment and interest rates enter the equation with crypto currencies (whose value _completely_ floats) and deflates its issuance in a lot of scenarios - all bets are off as far as repayment goes.

Their is no business plan to account for such swings. The thing we've been saying for ten years on IRC is Bitcoin loans are gifts, because that's what they are. I've had enough loans defaulted on to definitely tell you and agree with this premise: once lending enters the picture, your money is just another row in a database.

Re: Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

#170

Post by lxgr »

mirzap wrote: post #104
boc wrote: post #89

Earlier quoted context omitted.

Because economic activity is fundamentally incompatible with a deflationary currency like Bitcoin? If I can passively generate wealth by doing nothing but waiting, so can everyone else. Only suckers would work. This is basic macroeconomics but for some reason crypto believers just choose to live in an alternative reality.

I disagree. Wealth today is preserved thanks to "deflationary" instruments, whose value rises over time - like gold, silver or even stocks. Rich people take a loans of inflationary $$$ against their deflationary assets to generate economic activity. With that they not only preserve their fortune, but generate a lot more thanks to that economic activity they initiated. Bitcoin will allow that to everyone, not just the…

What incentivizes people to spend their Bitcoin today (whether as a business expense or for their cost of living) rather than holding on to them until tomorrow, getting richer passively?

Would lending be allowed in your model? If so, what makes it different from the status quo (fractional reserve banking and ultimately debt becoming money itself)? If not, how do I start a business or purchase a home without the lump sump required to do so under my pillow?

How do you adapt the monetary base to increased or decreased production capacity in a world based on the Bitcoin standard?

Not every fundamentally broken economic model is an innovation, and just because everybody tells its proponents so does not make this idea some kind of underdog stroke of genius.

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