Crypto lender Celsius pauses withdrawals; bitcoin slides

Alex Mashinsky, CEO of Celsius.

Piaras Ó Mídheach | Sportsfile for Web Summit | Getty Images

Celsius, a controversial cryptocurrency lending platform, said on Monday it was pausing at all withdrawals, causing more pain in the fragile cryptocurrency market.

Celsius is one of the largest players in the nascent cryptocurrency lending space, with more than $ 8 billion lent to customers and nearly $ 12 billion in assets managed as of May. The group, which offers users higher-than-average interest rates on their deposits, is essentially the cryptographic equivalent of a bank, but without the strict insurance requirements faced by traditional lenders.

“Due to extreme market conditions, today we announced that Celsius is on hold on all withdrawals, exchanges and transfers between accounts,” the company said in a note to customers on Monday.

The move has raised concerns about Celsius’ solvency. The company has seen the value of its assets more than half since October, when it handled $ 26 billion in customer funds. The Celsius token cell also cleared 97% of its value in the same time period. Celsius is the largest cell holder, a symbol that encourages people to buy to earn rewards and get discounts on loan rates.

“Acting in the interest of our community is our top priority,” Celsius said in the note. “In the service of that commitment and to adhere to our risk management framework, we have activated a clause in our Terms of Use that will allow this process to take place. Celsius has valuable assets and we are working diligently to meet our obligations.”

Celsius was not immediately available for further comment on the situation when he contacted CNBC.

Bitcoin and other cryptocurrencies have suffered a blow in the news. According to Coin Metrics, the world’s largest digital asset fell 15% to $ 23,325, falling to an all-time low since December 2020. Ether fell 17% to $ 1,225, while the Celsius token fell more than 38%.

It comes at the expense of the $ 60 billion collapse of the exalted USD land of the stable currency. The collapse has heightened regulators’ fears about cryptocurrencies that offer investors unusually high returns. Anchor, a loan service, has promised users interest rates of up to 20% on their land holdings USD, a currency that has always been intended to be worth $ 1.

Market participants suggested that Celsius had exposure to the now collapsed land stablecoinUSD. Celsius denied this.

Last week, the company said it had no problem meeting withdrawal requests. Celsius said he had the reserves and “more than enough” of the cryptographic ether to meet the obligations.

In April, Celsius chief Alex Mashinsky told CNBC that his company has an average of 300% collateral for every loan it offers to retail investors, while for institutional investors it issues unsecured loans.

“We’ve been doing this for five years, more than anyone,” he said at the time. “Business is going very well.”

Hours before announcing the freeze on account withdrawals, Mashinsky lashed out at a cryptocurrency investor who was raising concerns about Celsius.

“Do you even know someone who has trouble retiring from Celsius?” Mashinsky asked, before accusing the investor of spreading “misinformation.”

Cryptographic lending remains a regulatory gray area. U.S. market regulators believe many of the products should be treated as values ​​subject to strict rules to ensure that investors are protected.

In February, BlockFi, a Celsius competitor, received a $ 100 million fine from the Securities and Exchange Commission and 32 states, which accused it of violating securities laws. Celsius himself received letters of cessation and withdrawal from four states in the United States.

Vijay Ayyar, head of international services at the Luno cryptocurrency exchange, said Celsius’ decision to pause withdrawals has exacerbated the sale of cryptocurrencies, which have already come under pressure due to concerns about rising inflation and higher interest rates.

“The Moon / Earth debacle potentially has a lot of skeletons hidden in the closet, which we’re now watching come out,” Ayyar told CNBC.

“Confidence in these performance products is definitely affected and we will probably see widespread regulation on these products in the short term.”

Nexus, another cryptocurrency lending firm, said it sent a letter to Celsius on Sunday offering to acquire its loan portfolio with collateral, but the company declined.

“As a sign of goodwill and in an attempt to support the digital asset ecosystem in these difficult times, yesterday we contacted the Celsius team to offer our support, but our help was turned down,” Antoni Trenchev, CEO of CNBC, told CNBC. Nexus.

“We firmly believe that much can be done to help Celsius customers in a number of different ways.”

Celsius’ problems have rekindled concerns about the risk of a wider market contagion for cryptocurrencies. Tether, the world’s largest stable currency, was below its $ 1 mark on Monday in several major stock markets as investors fled the token. Celsius borrowed $ 500 million in tokens, issuing bitcoins as collateral.

Tether, who made a capital investment in Celsius, said he would not face any consequences from his stake in stablecoin reserves.

“Tether’s lending activity with Celsius (as with any other borrower) has always been over-collateralized and has no impact on our reserves,” the company said in a statement on Monday.

The manager of Canada’s second pension fund, the Caisse de dépôt et placement du Québec, and Westcap, a growing investor with more than $ 8 billion in assets under management, also made investments in Celsius. Neither company returned a request for feedback.

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