Alex Mashinsky, CEO of Celsius.
Piaras Ó Mídheach Sportsfile for Web Summit | Getty Images
Celsius, a controversial cryptocurrency lending platform, said Monday it was pausing 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 in May. The group offers users higher than average interest rates on their deposits.
“Due to extreme market conditions, today we announce that Celsius is pausing all withdrawals, changes 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 managed $ 26 billion in customer funds. Celsius’ sky witness has also erased 97% of its value in the same period of time. Celsius is the greatest holder of heaven.
“Acting in the best interests of our community is our highest priority,” Celsius said in a statement.
“In service of this 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 comply with our obligations “.
Celsius was not immediately available for further comment on the situation when contacted by CNBC.
Bitcoin and other cryptocurrencies were beaten in the news. The world’s largest digital asset fell 8% to $ 25,287, according to Coin Metrics, falling to an all-time low since December 2020. Ether fell 8% to $ 1,329. while the Celsius sky token fell more than 50%.
It is approaching after the fall of $ 60 billion from the exalted stablecoin terraUSD. The collapse has heightened regulators’ fears about cryptocurrencies offering investors unusually high returns. Anchor, a loan service, promised users interest rates of up to 20% on their holdings of terraUSD, a currency that should always be worth $ 1.
Market participants have suggested that Celsius was exposed to the now collapsed stable USUS currency. Celsius has denied it.
Last week, the company said it had no problem meeting withdrawal requests. Celsius said he had the reserves and “more than enough” of the cryptocurrency 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 attacked a cryptocurrency investor who raised concerns with 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 gray regulatory area. U.S. market regulators believe many of the products should be treated as securities subject to strict rules to ensure investor protection.
In February, BlockFi, a Celsius competitor, was fined $ 100 million by the Securities and Exchange Commission and 32 states, which have accused it of violating securities laws. Celsius himself received letters of cessation and withdrawal from four US states.
Vijay Ayyar, head of international currency exchange Luno, said Celsius’ decision to stop withdrawals had aggravated the sale of cryptocurrencies, which have already come under pressure due to concerns over rising interest rates. inflation and higher interest rates.
“The Moon / Earth debacle potentially has a lot of skeletons hidden in the closet, which we are now seeing coming 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.”
Nexo, another cryptocurrency lending company, 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 to try 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 Nexo, told CNBC.
“We strongly believe that much can be done to help Celsius customers in different ways.”