Celsius CEO Alex Maszynski.
Piaras Ó Mídheach – Sportsfile for Web Summit Getty Images
Celsius, a controversial cryptocurrency lending platform, said on Monday it was pausing all withdrawals, causing more pain in the fragile cryptocurrency market.
Celsius is one of the largest players in the nascent crypto lending space, with more than $ 8 billion lent to customers and nearly $ 12 billion in assets under management as of May. The Group offers consumers higher than average interest rates on their deposits.
“Due to extreme market conditions, today we announce that Celsius is pausing all withdrawals, swaps and transfers between accounts,” the company said in a note to customers on Monday.
The move 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. The Celsius token also deleted 97% of its value over the same period. Celsius is the largest holder of cel.
“Action in the interest of our community is our top priority,” Celsius said in a note.
“In the 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 hard to meet our obligations. you are. “
Celsius was not immediately available for further comment on the situation when he contacted CNBC.
Bitcoin and other cryptocurrencies have hit the news. The world’s largest digital asset fell 8% to $ 25,287, according to Coin Metrics, falling to unprecedented lows since December 2020. Ether fell 8% to $ 1,329, while the whole Celsius token fell more than 50%.
This comes hotly after the $ 60 billion collapse of widespread terraUSD stablecoins. The collapse has heightened regulators’ fears about crypto products offering investors unusually high returns. Anchor, a lending service, once promised consumers interest rates of up to 20% on their holdings of terraUSD, a coin that has always been intended to cost $ 1.
Market participants suggest that Celsius was exposed to the now collapsed stable terraUSD coin. Celsius denied this.
Just last week, the company said it had no problems with withdrawal requests. Celsius said it had reserves and “more than enough” of cryptocurrency ether to meet its obligations.
In April, Celsius chief Alex Maszynski told CNBC that his company held an average of 300% collateral for every loan it offered to retail investors, while issuing unsecured loans to institutional investors.
“We’ve been doing this for five years, longer than anyone else,” he said at the time. “Business is going very well.”
Hours before announcing the freezing of account withdrawals, Machinsky attacked a crypto investor who expressed concern about Celsius.
“Do you even know a person who has trouble retiring from Celsius?” Machinski asked before accusing the investor of spreading misinformation.
Crypto loans are still a very regulatory gray area. US market regulators believe that many products should be treated as securities subject to strict rules to ensure that investors are protected.
In February, BlockFi, a competitor of Celsius, was fined $ 100 million by the Securities and Exchange Commission and 32 states for accusing it of violating securities laws. Celsius himself was sent letters of resignation and resignation from four American states.
Vijay Ayyar, head of the international department at the Luno cryptocurrency exchange, said Celsius’ decision to suspend withdrawals had worsened cryptocurrency sales, which were already under pressure due to fears of rising inflation and higher interest rates.
“The Luna / Terra failure potentially has a lot of hidden skeletons in the closet that we are now potentially seeing coming out,” Aiyar told CNBC.
“Confidence in these extractive products is definitely affected and we are likely to see widespread regulation of such products in the near future.”
Nexo, another cryptocurrency company, said it sent a letter to Celsius on Sunday offering to acquire its secured loan portfolio, but the company declined.
“As a sign of goodwill and in an attempt to support the digital asset ecosystem in these difficult times, we turned to the Celsius team yesterday to offer our support, but our help was denied,” said Antoni Trenchev, CEO of Nexo. , before CNBC.
“We firmly believe that much can be done to help Celsius customers in a variety of ways.”
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