💸 "It sounded really safe"

Plus: Ugh, the debt ceiling | Tuesday, January 17, 2023

Open in app View in browser   Presented By Circle   Axios Markets By Emily Peck and Matt Phillips · Jan 17, 2023 🌅 Welcome back! It's a short workweek for us in the U.S. But a long networking week for the CEOs and leaders in Davos, Switzerland at the World Economic Forum — the first full-fledged gathering of the "world's greatest hotel lobby," in three years, per Axios' Dave Lawler and Courtenay Brown. And they're schmoozing. Today's newsletter is 1,130 words, 4.5 minutes.     1 big thing: They thought their money was safe Photo Illustration: Natalie Peeples/Axios. Photo: Astrid Stawiarz/Getty Images   Customers who put their cash and cryptocurrency into Gemini Earn thought it was secure, akin to a savings account at a bank, Emily writes. "It sounded really safe," Peter Chen, a data scientist in San Diego, who started putting money in Earn in late 2021, told Axios. Why it matters: Chen said he was especially reassured when Gemini customer service sent him an email and mentioned FDIC insurance — the protection that keeps bank deposits safe in the U.S. But his money, since converted to cryptocurrency, wasn't safe. Chen put $17,995 into Earn, according to statements he shared — and he can't get it out. He is one of 340,000 customers who have $900 million locked up at Earn, according to the Securities and Exchange Commission. How it worked: Launched by the famed twins Cameron and Tyler Winklevoss, Earn promised to pay interest rates of as much as 8% to depositors. "Lovin' the 8.05%," Chen messaged Axios back in February 2022 via Twitter. He used dollars to buy Gemini's stablecoins, called GUSD; the company paid interest on those holdings. What happened: In June, Chen watched the collapse of another stablecoin — called luna — and got nervous. He sent an email to Gemini customer service, viewed by Axios, and asked: "Will something like this happen to GUSD? Is my money safe?" A representative responded: "All fiat currency held by Gemini to redeem your GUSD is held by our partner financial institutions in a secure account and is eligible for FDIC insurance." On Nov. 16, in the wake of the collapse of FTX, Earn froze withdrawals. Worth noting: The FDIC in August warned five companies about making misleading statements about deposit insurance — that's the protection that keeps your money safe in the bank — though Gemini wasn't included. Driving the news: Last week, the SEC filed a complaint against Gemini and its partner, Digital Currency Group's Genesis Global Capital, claiming that Earn violated the law by offering unregistered securities. For the record: The company declined to comment to Axios. But in response to a lawsuit filed by Earn customers, Gemini argues that they knew about the risks. "In enrolling in the Gemini Earn program, Plaintiffs acknowledged that their assets were leaving Gemini's custody and that they faced the risk of "'TOTAL LOSS,'" the filing says. (Chen said he wasn't aware. "They gave me the vague impression that it was FDIC-insured.") More publicly, Gemini has blamed its partner Genesis for the situation. Zoom out: There's a perception that crypto investors were wild, risk-taking, Lambo owners — or aspiring owners. Types who understood the wild ride they were on. But many who put their money into Earn were of a different mindset. Not angling to become the next crypto millionaire — rather, just trying to earn high-single digits on savings. What they're saying: "You are seeing normal 'middle-class' folks, putting in life savings. Sometimes this is it. All of it," said Hee-Jean Kim, a lawyer at Kim & Serritella LLP, which filed a class action against Gemini at the end of December. Go deeper     2. "Super lame"       3. Catch up quick ⬇️ China's population falls for first time in over 60 years; its GDP growth slows. (Axios) 😬 CEOs and economists brace for recession as Davos begins. (Bloomberg) 🌎 Polarization eats the developed world. (Axios)     A message from Circle The year of rebuilding trust     In 2022, some people lost their trust in cryptocurrency. The new year is an opportunity to rebuild it. Circle leadership is speaking with Deloitte and other market-leading organizations in Davos about the path forward, and how to steward responsible innovation. Learn more.     4. Ugh, the debt limit. Again. Data: U.S. Treasury Department, FactSet; Chart: Thomas Oide/Axios We're in the first inning of another seemingly inevitable debt limit fight, Matt writes. Driving the news: Treasury Secretary Janet Yellen informed Congressional leaders Friday that the federal government would likely hit the debt limit on Thursday. As a result, Treasury will have to take "extraordinary measures" to keep paying creditors who own the U.S. government's bonds. These measures are things like running down Treasury's cash balances and delaying making payments to certain government pension funds, to make sure there's enough money to pay bondholders. The big picture: Votes to raise the debt ceiling — once a bipartisan chip shot — have become increasingly fraught in recent years, typically when Republicans are in control of the House of Representatives and Democrats hold the White House, as is currently the case. In 2011, a chaotic fight over raising the debt limit pushed the federal government near default, caused a sharp stock market downturn, and ultimately prompted credit rating agencies to downgrade the national credit rating. Some analysts think hardline members on the extreme right of the Republican House conference could be willing to create a similar situation this time around. State of play: While Yellen's statement may sound alarming, it doesn't mean that Uncle Sam is actually on the brink of running out of money and stiffing creditors. In her letter, she notes that the extraordinary measures should be enough to ensure the government can continue to meet obligations to bondholders until June. Between the lines: Wall Street analysts think, if push comes to shove, the government can continue to pay bondholders until sometime in August or September. But after that, Uncle Sam might actually be forced to default on its debt, which could seriously shake the foundations of the global market and financial systems. Worth noting: So far, there's little sign that the market is worrying too much about the threat of a serious crisis. (Though if you squint hard at Treasury futures you can see some indication traders see trouble brewing in the late summer and early fall.) What they're saying: "Any resolution will go down to the wire," analysts with Bank of America wrote in a client note Friday. Go deeper: The Bipartisan Policy Center has a great explainer on the debt limit and how we got here.   Share Axios and earn rewards If you like this newsletter, your friends may, too! Refer your friends and get free Axios swag when they sign up. Be a good friend and share   5. Don't pack up your home office just yet Data: Indeed Hiring Lab; Chart: Axios Visuals Starbucks and Disney are the latest corporate giants to try to get employees back to the office a few days a week. Last week both behemoths issued new directives on in-office attendance, Emily writes. Why it matters: Executives struggled all last year to get their workers back in the office, and they struggle still. Last week's order from Starbucks interim CEO Howard Schultz followed a similar directive in September 2022, CNBC reports. "Remote work is set to endure," writes Indeed's Nick Bunker in the job site's 2023 U.S. Labor Market Outlook. Zoom out: Few CEOs plan to change course on remote work this year, according to a Conference Board survey out last week. Only 4% of chief executives in the U.S. and Europe said they plan to reduce remote work, and 5% said they want to expand it. Close to 40% of software development job listings advertise remote work, per Indeed data. And that number has stayed relatively flat in recent months. The same is happening in job listings for marketing and human resources. The share of job postings offering remote hasn't changed much — hovering around 27%, per Indeed. The bottom line: It's probably safe to buy that nice desk chair you've been eyeing.     A message from Circle The year of rebuilding trust     In 2022, some people lost their trust in cryptocurrency. The new year is an opportunity to rebuild it. Circle leadership is speaking with Deloitte and other market-leading organizations in Davos about the path forward, and how to steward responsible innovation. Learn more.   Was this email forwarded to you? Sign up here to get Axios Markets in your inbox. Today's newsletter was edited by Kate Marino and copy edited by Mickey Meece. Why stop here? Let's go Pro. Join the thousands of professionals using Axios Pro to keep up with the companies, deals and trends changing their industries.   Axios thanks our partners for supporting our newsletters. Sponsorship has no influence on editorial content. Axios, 3100 Clarendon B‌lvd, Arlington VA 22201   You received this email because you signed up for newsletters from Axios. To stop receiving this newsletter, unsubscribe or manage your email preferences.   Was this email forwarded to you? Sign up now to get Axios in your inbox.   Follow Axios on social media: