Crypto Lender Celsius Temporarily Pausing Withdrawals; Bitcoin chips

Celsius, a controversial cryptocurrency lending platform, said Monday that it has paused all withdrawals, causing more pain in the fragile cryptocurrency market.

Celsius is one of the biggest players in the fledgling crypto lending space, lending more than $8 billion to clients and nearly $12 billion in assets under management as of May. The group offers users above average interest rates on their deposits.

“Due to severe market conditions, we are announcing today that Celsius is temporarily halting all withdrawals, swaps and transfers between accounts,” the company said in a statement. note to customers on Monday.

The move raised concerns about the solvency of Celsius Corporation. The company has seen its assets fall in value by more than half since October, when it handled $26 billion in client money. The Cel Celsius token also wiped out 97% of its value in the same time frame. Celsius is the largest carrier of the scion.

“Working for the good of our community is our highest priority,” Celsius said in the memo.

“In service of this commitment and adherence to our risk management framework, we have activated a clause in our Terms of Use that will allow this process to occur. Celsius has valuable assets and we are working hard to meet our commitments.”

Celsius was not immediately available for additional comment about the situation when contacted by CNBC.

Bitcoin And other cryptocurrencies took a hit on the news. The world’s largest digital asset fell 8% to $25,287, according to Coin Metrics data, and fell to Lowest level since December 2020. ether It fell 8% to $1,329, while the Celsius token was down more than 50%.

This comes on the heels of the $60 billion crash in the stablecoin terraUSD. The crash has heightened regulators’ concerns about crypto products offering investors extraordinarily high returns. Anchor, a lending service, once promised users interest rates of up to 20% on their holdings of TerraUSD, a coin that was always supposed to be worth $1.

Market participants have suggested that Celsius has been hit by the now-stablecoin terraUSD crash. Celsius denied this.

Just last week, the company said it had no problems fulfilling withdrawal requests. Celsius said it has reserves, and “more than enough” crypto-ether, to meet the commitments.

In April, Celsius President Alex Mashinsky told CNBC that his company holds an average of 300% guarantee on every loan it makes to retail investors, while it issues institutional investors loans with collateral.

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

Hours before announcing a freeze on account withdrawals, Mashinsky criticized a cryptocurrency investor who raised concerns about a degree Celsius.

“Do you even know one person who has a problem with percentage withdrawal?” asked Mashinsky before accusing the investor of spreading “disinformation.”

Cryptocurrency lending remains largely a regulatory gray area. Market regulators in the US believe that many products should be treated as securities subject to strict rules to ensure investor protection.

In February, BlockFi, a rival to Celsius of the Securities and Exchange Commission and 32 states, was fined $100 million, which it accused of violating securities laws. Celsius letters themselves were sent to stop and stop letters from four US states.

Vijay May, head of international services at Luno cryptocurrency exchange, said Celsius’ decision to pause withdrawals exacerbated the sell-off in cryptocurrencies, which was already under pressure due to concerns about rising inflation and higher interest rates.

“It’s possible that the Luna/Terra disaster contained a lot of skeletons hidden in the closet, which we are likely to see now,” May told CNBC.

“Confidence in these yield products has certainly been affected and we will likely see widespread regulation of such products in the near term.”

Nexo, another cryptocurrency lender, said it sent Celsius a letter on Sunday offering to take out its secured loan portfolio, but the company refused.

“As a sign of goodwill and in an effort to support the digital asset ecosystem in these challenging times, we reached out yesterday to the Celsius team to offer our support, but our assistance was refused,” Anthony Trenchev, CEO of Nexo, told CNBC.

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