Tech

Crypto-creditor Celsius suspends withdrawals; bitcoin slides

Celsius CEO Alexei Maszynski.

Piaras Ó Mídheach – Sportsfile for Web Summit Getty Images

Celsius’ controversial cryptocurrency lending platform said Monday that it is suspending all withdrawals, causing more pain in the fragile crypto market.

Celsius is one of the largest players in the nascent crypto-lending space, with more than $ 8 billion issued to customers and nearly $ 12 billion in assets under management as of May. The group offers users higher than average interest rates on their deposits.

“Due to extreme market conditions today, we announce that Celsius is suspending all withdrawals, swaps and transfers between accounts,” the company said in a statement to customers on Monday.

The move has raised concerns about Celsius’ solvency. The firm’s asset value has more than halved since October, when it handled $ 26 billion in customers. The Celsius cel token also erased 97% of its value over the same time period. Celsius is the largest owner of cel.

“Acting for our community is our top priority,” Celsius said in a note.

“Through these commitments and adhering to our risk management structure, we have activated an item 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 commitments.”

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

In the news, bitcoin and other cryptocurrencies have been hit by the news. According to Coin Metrics, the world’s largest digital asset has fallen 8% to $ 25,287, falling to an unprecedented low since December 2020. Airtime fell 8% to $ 1,329, and the Celsius token crashed more than 50%.

This comes after the collapse of the untwisted stemcoin terraUSD for $ 60 billion. The collapse has heightened regulators’ fears about cryptocurrencies that offer investors unusually high returns. Anchor, a lending service, once promised users interest rates of up to 20% on their terraUSD stocks, a coin that was always supposed to cost $ 1.

Market participants have suggested that Celsius has been exposed to terraUSD, which has now collapsed. Celsius denied it.

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

In April, Celsius CEO Alex Maszynski 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 loans with insufficient collateral.

“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 freeze on withdrawals, Maszynski attacked a crypto-investor who expressed concern for Celsius.

“Do you know at least one person who has trouble moving away from Celsius?” Maszynski asked before accusing the investor of spreading “misinformation”.

Crypto-lending is still a very normative gray area. U.S. market regulators believe that many of the products should be treated as securities that are subject to strict rules to ensure investor protection.

In February, the Securities and Exchange Commission and 32 states accused her of violating securities laws, rival Celsius, BlockFi. Celsius himself was sent letters of termination from four US states.

Vijay Ayar, head of Luno’s international cryptocurrency division, said Celsius ’decision to suspend withdrawals has exacerbated the sale of cryptocurrencies, which have already come under pressure due to fears about rising inflation and higher interest rates.

“Defeat Luna / Terra potentially has a lot of hidden skeletons in the closet that we now potentially see coming out,” Ayar told CNBC.

“Confidence in these crop products has certainly suffered, and we are likely to see widespread regulation of such products soon.”

Nexo, another crypto lending company, said it sent a letter to Celsius on Sunday offering to buy its loan portfolio with collateral, but the company declined.

“As a token 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 CNBC’s Anthony Trenchau, CEO of Nexo.

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

Crypto-creditor Celsius suspends withdrawals; bitcoin slides

Source link Crypto-creditor Celsius suspends withdrawals; bitcoin slides

Back to top button