Crypto lender Celsius pauses withdrawals; bitcoin slides

Celsius, a controversial crypto lending platform, said it suspended all withdrawals on Monday, adding to the fragile crypto market.

Celsius was one of the largest players in the early crypto lending space, with over $ 8 billion loaned to clients and approximately $ 12 billion in assets under management as of May. This group, which offers users higher than average interest rates on deposits, is essentially a bank-like cryptocurrency, but without the strict insurance requirements faced by traditional lenders.

“We announced today that Celsius has suspended all withdrawals, exchanges and remittances between accounts due to extreme market conditions,” the company said. Memo To the client on Monday.

This move has raised concerns about the solvency of Celsius. The company has seen more than half the value of its assets since October, when it processed $ 26 billion in client funds. Celsius cell tokens also erased 97% of their value in the same time frame. Celsius is the largest holder of the cell and is a token that encourages people to buy to earn rewards and receive discounts on lending rates.

“Acting for the benefit of our community is our number one priority,” Celsius said in a memo. “In response to that commitment, in order to comply with the risk management framework, we have enabled provisions in our Terms of Service that allow us to carry out this process. Celsius has valuable assets and is eager to fulfill his obligations. It is working.”

Celsius did not immediately get additional comments on the situation when he was contacted by CNBC.

Bitcoin And other cryptocurrencies have hit the news. The world’s largest digital asset fell 15% to $ 23,325, according to Coin Metrics data. Lows not seen since December 2020.. ether Celsius cell tokens plummeted by more than 38%, while they fell 17% to $ 1,225.

It gets hot following the $ 60 billion meltdown of the hyped stablecointerra USD. The collapse has heightened regulatory concerns about crypto products that offer unusually high returns to investors. Anchor, a lending service, has promised interest rates of up to 20% on holdings of terra USD, a coin that users were once always valued at $ 1.

Market participants suggest that Celsius is exposed to the currently collapsing terraUSD stablecoin. Celsius denied this.

Last week, the company said it had no problems responding to the withdrawal request. Celsius said he had a reserve of cryptocurrency ether and “more than enough” to fulfill his obligations.

In April, Mr. Seth’s boss, Alex Mashinsky, told CNBC that he would hold an average of 300% collateral for each loan offered to individual investors and issue unsecured loans to institutional investors.

“We’ve been doing this for five years longer than anyone else,” he said at the time. “The business is doing very well.”

Hours before announcing the freeze on account withdrawals, Machineski blamed crypto investors who expressed concern to Mr. Seth.

“Do you know any one who is having trouble withdrawing from Celsius?” Machineski asked before accusing investors of disseminating “wrong information.”

Cryptographic lending is still a very regulatory gray area. US market regulators believe that many products should be treated as securities subject to strict rules to ensure investor protection.

In February, Celsius competitor BlockFi $ 100 million penalty From 32 states charged with the Securities and Exchange Commission and violations of the Securities Act. Celsius himself was sent a cease and desist letter from four states in the United States.

Vijay Ayyar, International Head of Cryptocurrency Exchange Luno, said his decision to suspend the withdrawal exacerbated the sale of cryptocurrencies, which was already under pressure due to concerns over rising inflation and rising interest rates. Said that.

“The Luna / Terra blunder could have a lot of hidden skeletons in the closet, which could come out now,” Ayar told CNBC.

“Trust in these yield products is undoubtedly affected and there will be widespread restrictions on these products in the near future.”

Another crypto lending company, Nexo, said it had sent a letter to Celsius on Sunday offering to acquire a mortgage loan portfolio, but the company declined.

Nexo CEO Antonio Trenchev contacted CNBC yesterday to provide support to the Celsius team as a sign of goodwill and to support the digital asset ecosystem during these difficult times. Assistance was refused. “

“We firmly believe that we can do a lot to help our clients in Celsius in different ways.”

The Celsius issue has rekindled concerns about the risks of widespread market transmission from cryptocurrencies. Tether, the world’s largest stablecoin, fell below the $ 1 peg on several major exchanges on Monday as investors escaped tokens.Celsius Borrowed $ 500 million Post Bitcoin as collateral with tether tokens.

Tether, which invested in Celsius, said it would not face the impact of its involvement in Stablecoin’s reserves.

“The tether lending activity with Celsius (like any other borrower) has always been over-collateralized and has not affected our reserves,” the company said in a statement on Monday.

Caisse de détre Bank, Canada’s second-largest pension fund manager, and Westcap, a growing investor with over $ 8 billion in assets under management, are also investing in Seth. Neither company returned a request for comment.