Genesis shuts down spot crypto trading services in U.S.

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Digital Currency Group’s (DCG) trading branch, Genesis Global Trading (GGT), is discontinuing its spot cryptocurrency trading services in the United States. The decision was made voluntarily for undisclosed business reasons and is set to take effect on September 18.

Genesis announced this decision to its customers on Tuesday, allowing users to settle their trades by September 21 before closing all accounts on September 30.

The move follows a decline in liquidity within the spot market, as highlighted in Genesis’ latest quarterly report. This development highlights a shift toward exchange-cleared venues from over-the-counter activities in the crypto community.

Exchange-cleared venues are managed by companies such as Genesis to allow transactions through standardized contracts, while over-the-counter markets are decentralized and involve direct trading between parties. Although over-the-counter markets offer less standardized financial products, they allow for more freedom due to less regulatory oversight.

Genesis has collaborated with pertinent regulatory authorities such as the New York Department of Financial Services (NYDFS) and the U.S. Securities and Exchange Commission (SEC) for closing operations. The company holds multiple licenses, including a virtual currency BitLicense from NYDFS and broker-dealer registration with SEC and FINRA.

Despite the closure of its spot trading services, Genesis will still facilitate spot and derivatives trading through GGC International Limited. The British Virgin Islands firm is owned by affiliate company Genesis Bermuda Holdco Limited and is unaffected by its U.S. activities.

Bankruptcy controversy

In addition to the shutdown of its U.S.-based spot trading desk, Genesis also faced other obstacles this year.

These include the bankruptcy filing of Genesis Global Holdco following the downfalls of FTX and Three Arrows Capital. Genesis Global Holdco owed over $3.5 billion to its top 50 creditors and laid off 30 percent of its staff in January. Aside from that, DCG also engaged in a dispute with crypto exchange and custodian Gemini, which stemmed from a $630 million debt payment that was missed in May.

Gemini filed its lawsuit in New York state court, suing DCG for fraud. The legal action alleged that DCG and CEO Barry Silbert had “engaged in a fraudulent scheme to induce a variety of depositors, including Gemini users,” in order to “lend huge amounts of cryptocurrency and U.S. Dollars to DCG’s subsidiary Genesis Global Capital.”

DCG responded by claiming the lawsuit was a publicity stunt. It then filed a motion to dismiss the allegations. Since then, Gemini co-founder Cameron Winklevoss and Silbert have been engaged in a public feud. Winklevoss wrote an open letter requesting the DCG board to remove Silbert, citing his inability to find a fair resolution.

Posting on X (formerly Twitter), Winklevoss claimed that Gemini acted on behalf of 340,000 Earn users who were harmed by Genesis’ actions.

The changing digital currency landscape in the U.S.

Genesis’ decision was taken amid heightened scrutiny from authorities such as the SEC. The current regulatory environment is forcing digital currency businesses to alter their models, with other trading firms having had to make quick adjustments.

Some firms, like Nexo and Bittrex, took extreme measures and gradually pulled out of the U.S. market. Meanwhile, exchange platform Coinbase has moved to make up for the institutional borrowing hole brought about by Genesis and BlockFi by providing new services.