Digital Currency Group (DCG) is a leading cryptocurrency conglomerate. DCG however has been in the spotlight recently due to issues surrounding its subsidiaries- Genesis Global Capital, Silvergate Capital and CoinDesk. This article looks at the recent troubles surrounding the Digital Currency Group (DCG) and whether it will file for bankruptcy.
Who is Digital Currency Group (DCG)?
Digital Currency Group (DCG) is a venture capital company with a specific focus on cryptocurrencies. They are a conglomerate whose subsidiaries include trading desks (Genesis Global Capital), crypto banks (Silvergate Capital), crypto media (CoinDesk) and asset managers (Grayscale).
What is happening at Digital Currency Group (DCG)?
DCG has been struggling financially due to the recent market downturn and has been unable to raise additional capital. In a tweet from its CEO, Barry Silbert, the Company talks about how “bad actors and blow-ups” have negatively affected the industry, to which DCG is not immune.
DCG halts dividends until further notice
Furthermore, on 17th January 2023, DCG wrote to its shareholders indicating that it has plans to halt quarterly dividends until further notice. DCG states that the reason for this is to reduce operating expenses and preserve liquidity.
Genesis Global Capital planning to file for bankruptcy
The halt in declaring dividends stems from the fact that its subsidiary, Genesis Global Capital, is in serious trouble. Genesis Global Capital is said to owe its creditors over US$3 billlion, and has US$175 million locked up in FTX exchange after its collapse.
Genesis has halted customer withdrawals since 16th November 2022, and there is no news as to when it will reopen.
Learn more about the troubles surrounding Genesis and the potential implications of it going bankrupt: Genesis Trading insolvency could trigger a Bitcoin collapse
Silvergate Capital loses deposits, fires 40% of staff
However, there is the suggestion that simply halting dividends may not be enough to save DCG. This is especially since one of DCG’s subsidiaries, Silvergate Capital, had announced that total crypto deposits from its customers fell almost 68% to US$3.8 billion on 31st December 2022, from US$11.9 billion mere months ago in September 2022. In response, Silvergate laid off about 40% of its workforce and sold around US$5.2 million in debt securities. This is to ensure that the Company would be able to maintain a cash position that exceeds its deposits.
CoinDesk exploring a full or partial business sale
Rumours of potential trouble at DCG were further deepened by the news that its subsidiary, CoinDesk Inc, has hired investment bank Lazard Ltd to look into a sale of its business. According to CoinDesk CEO Kevin Worth, CoinDesk is exploring a full or partial sale of its business as a way to attract growth capital.
Disputes between DCG’s CEO and Gemini exchange
Gemini is a major cryptocurrency exchange and one of DCG’s partners. The two companies had partnered together on Earn, a crypto lending product. However, not all is going well with this partnership resulting in a public spat between Gemini exchange Co-Founder Cameron Winklevoss and DCG CEO Barry Silbert.
On 10th January 2023, Cameron Winklevoss wrote an open letter to the Board of DCG calling for them to remove Barry Silbert as CEO. In the letter, Winklevoss accused Genesis, DCG, Silbert and other key personnel of defrauding Gemini and its over 340,000 Earn customers. The letter claims that Genesis owes Gemini US$900 million which Silbert has been unable to satisfactorily resolve.
Conclusion: Will Digital Currency Group (DCG) file for bankruptcy?
Digital Currency Group is fighting a battle from multiple directions. There is news of trouble coming from several of DCG’s subsidiaries including Genesis, Silvergate, and CoinDesk. Digital Currency Group’s CEO, Barry Silbert, is also facing accusations as to his running of DCG. With subsidiary Genesis Global Capital reportedly filing for bankruptcy this week, there are fears that DCG will also go bankrupt. Especially as DCG owes US$575 million to Genesis’ crypto lending arm, which is to be repaid in May 2023.
With these factors in mind, it appears that Digital Currency Group (DCG) is in a precarious financial situation and there are fears that it may file for bankruptcy. It remains to be seen if DCG will be able to overcome these troubles surrounding it and its subsidiaries. However, as we’ve seen from the collapse of other crypto industry giants in the past, the contagion effect when a crypto company collapses can be huge and wide.