![]() Which now Genesis can pass on the higher rates to Gemini who can (hypothetically) pass on some portion of these higher rates to their Earn customers who may be willing to accept the higher risk for higher APY on their crypto. Is it possible that they would need to raise the rates of borrowing offered to institutions to reduce demand thus less clients looking to borrow crypto to trade, but those that can afford to will still borrow, at the higher rates? What does Genesis Trading do in this case? So they turn to Gemini, one of their sources for crypto liquidity, provided by Gemini customers willing to take the risk of Earn.īut the supply has drastically dwindled due to customers pulling out of CEX Earn/lending products. So Genesis Trading is biz as usual which means they need crypto to loan to their clients (institutional I assume). ![]() A hit to their balance sheet but nothing they can't ride out. Let's say that Genesis Trading mitigated their risks successfully and aren't in any real danger of being insolvent. TL:DR-not your keys, not your crypto-> NOT IN YOUR NAME, NOT YOUR USD. The poor souls at Voyager learned this the hard way this week. So bottom line is, beware of ANY crypto firm that promises you that your money is "FDIC insured". So it's business as usual for you-you call up the bank and transfer the money to whatever bank account you designate. Your only loss is whatever interest accrued during that day that hasn't been swept yet. This is the "real" FDIC insurance because even if SoFi goes under, your money has already been swept into the FDIC-insured account in your name-they can't touch it. Essentially SoFi opens account for you in these banks, so the FDIC insurance works for you as if you opened the account yourself. In SoFi's case, your money/earnings are "swept" every day into a FDIC-insured bank account IN YOUR NAME. You might have to go through lengthy bankruptcy process to get the money back, if that's even possible.Ĭompare this with the "real" FDIC insurance used by fintech neobanks, say, SoFi, Wealthfront, etc. ![]() If Gemini goes tits up, they are NOT obligated to give the money back to you since it's, technically, their money. You are relying on Gemini's good graces to "pass through" that insurance to you, which they are legally not required to do. So, technically Gemini has the FDIC insurance not you. This means that, although your USD assets are held in FDIC-insured banks, they are NOT held in your name, but held in an OMNIBUS account in Gemini's name. ![]() Gemini (and Coinbase & Voyager for that matter), uses a much more limited case of FDIC insurance called "pass-through" insurance. ![]()
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