Editor’s note (Oct. 20, 2023, 21:08 UTC): On Oct. 19, 2023, the New York Attorney General sued Digital Currency Group, Genesis (a subsidiary of DCG) and Gemini, accusing the companies of defrauding investors through Gemini’s Earn program. The complaint alleges that Gemini knew Genesis’ loans were undersecured but did not reveal this information to investors. It cited the Feb. 2, 2021 CoinDesk article below, which quoted a Gemini executive.

CoinDesk, which is a subsidiary of DCG, is not named as a party to the case, and strictly follows its ethics policy:: “We operate independently of our parent company. DCG has no involvement in editorial or content decisions, and our journalists cover DCG and its portfolio companies and investments as they would any other subjects, without fear or favor.”

-- Marc Hochstein, Executive Editor

Gemini, the crypto exchange and custodian, is allowing its customers to earn up to 7.4% annual percentage yield (APY) on their holdings through a partnership with crypto lender Genesis.

“We have a lot of customers who look at the interest rate in traditional finance, which is pretty anemic,” said Noah Perlman, Gemini’s chief operating officer. The company hopes to give customers a reason to keep their crypto on the Gemini platform. The product is in line with other traditional-looking crypto products such as the Gemini credit card launched earlier this year.

The APY is consistent with what’s typically seen among centralized crypto lenders, but pales in comparison to yield farming interest rates in decentralized finance (DeFi), which are much higher but more erratic. (Genesis is a subsidiary of Digital Currency Group, which also owns CoinDesk.)

The product is offered in all 50 states, including New York where Gemini has its trust license. Users can get yield on any cryptocurrency available on the Gemini platform now and on Gemini’s GUSD stablecoin at some point in the future. The product is open to active Gemini customers currently and will be rolled out to all Gemini customers later this month.

Gemini collects part of the spread between interest paid on the crypto and interest Genesis charges on its loans to institutions. As part of the partnership, Gemini reviewed Genesis’ financial statements and verified that the lender’s loans are overcollateralized, said Yusuf Hussain, Gemini’s head of risk.

This is the third partnership of its kind for Genesis. It also powers interest-bearing accounts at crypto lender Ledn and crypto exchange Luno, which is also owned by Digital Currency Group.

“As far as percentages of loans coming from partnerships, it’s still relatively a small part right now, largely because they are relatively new,” Genesis CEO Michael Moro said. “But we expect the numbers to become more significant over time as a sign of the success of these partnerships.”