​Circle suspends payments on Yield deposits due to Genesis liquidity problems

What’s new? Circle, the issuer of the second most capitalized centralized stablecoin, USD Coin (USDC), has suspended payments on an investment product for institutional investors called Circle Yield. This was pointed out by Ed Zitron, CEO at EZPR, on Twitter. He linked it to problems at Genesis, jointly with which Circle launched this program.

Circle, the company that runs USDC, has dropped yield to 0%. Circle's Yield product was powered by Genesis, who also invested $25m *in* Circle. There are major players tied up in Genesis lending! Why is nobody else screaming! https://t.co/b7RRHueQwi pic.twitter.com/tLiNtxTgED — Ed Zitron (@edzitron) November 16, 2022

How are the companies connected? According to Zitron, Circle’s Yield product was created by Genesis, which also invested $25 million in Circle in 2020. The funding was aimed at accelerating the global adoption of USDC in the financial industry.

Zitron emphasizes that Circle Yield operates on Genesis’ credit operations, which is currently experiencing liquidity problems. He also noted that in July, Genesis provided a $2,3 billion loan to the bankrupt hedge fund Three Arrows Capital (3AC).

Circle’s regulations themselves indicate that Circle’s Bermuda subsidiary has loan agreements with one or more institutional borrowers, including Genesis, which is consistent with Zitron’s statements.

Regulations on Circle’s website

The company stressed that Circle’s Yield product is overcollateralized, with $2,6 million in outstanding loans on the product as of November 16.

1/ Circle Yield is an overcollateralized fixed-term yield product. Genesis is a counterparty to Circle in this product. Total Circle Yield customer loans outstanding are $2.6 million as of 11/16/22 and are protected by robust collateral agreements. — Circle (@circle) November 16, 2022

The reduction of the annual yield to 0% came amid the emergence of serious problems at crypto broker Genesis Global Trading. Its credit division suspended customer withdrawals after the collapse of the FTX trading platform. Following the announcement, the Gemini crypto exchange also suspended payments under its Earn program, whose credit partner is Genesis Global Capital.

Earlier, two crypto exchanges announced the implementation of restrictions on USDC and USDT on the Solana blockchain. Binance suspended accepting deposits starting November 17, and OKX announced the delisting of both stablecoins.