Crypto Lender Celsius Suspends Withdrawals; bitcoin slideshow – Up News Info

Crypto moves have tracked the performance of equities, which have been highly volatile in 2022 amid fears of rising rates, soaring inflation and downside risks.

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Celsius, a controversial cryptocurrency lending platform, said on Monday it was suspending all withdrawals, causing more pain in the fragile crypto market.

Celsius is one of the biggest players in the nascent crypto lending space, with over $8 billion in client loans and nearly $12 billion in assets under management as of May. The group offers users above-average interest rates on their deposits.

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

The move raised concerns about Celsius’ solvency. The company has seen the value of its assets more than halve since October, when it managed $26 billion in client funds. Celsius’ cel token also erased 97% of its value in the same time frame. Celsius is the largest holder of cel.

“Acting in the interest of our community is our top priority,” Celsius said in the memo.

“In service of this commitment and to adhere to our risk management framework, we have activated a clause in our Terms of Service that will allow this process to take place. Celsius has valuable assets and we work diligently to meet our obligations. »

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

Bitcoin and other cryptocurrencies have taken a beating in the news. The world’s largest digital asset fell 8% to $25,287, according to data from Coin Metrics, falling to levels not seen since December 2020. Ether fell 8% to $1,329, while the Celsius’ cel token plunged more than 50%.

This followed the $60 billion collapse of stablecoin terraUSD. The collapse has piled on regulators’ fears of cryptos offering investors abnormally high yields. 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 proposed that Celsius had exposure to the now-collapsed stablecoin terraUSD. Celsius denied this.

As recently as last week, the company said it had had no problems responding to withdrawal requests. Celsius said it had the reserves, and “more than enough” cryptocurrency ether, to meet the obligations.

In April, Celsius boss Alex Mashinsky told CNBC that his company held an average of 300% collateral for the loan it offered to retail investors, while it issued under-collateralized loans to investors. institutional.

“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 lashed out at a crypto investor who was worried about Celsius.

“Do you even know anyone who has trouble withdrawing from Celsius? Mashinsky asked, before accusing the broadcaster investor of “misinformation.”

Crypto lending is still a 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 BlockFi, a competitor of Celsius, was hit with a $100 million fine by the Securities and Exchange Commission and 32 states, which accused it of violating securities laws movables. Celsius himself has received cease and desist letters from four US states.

Vijay Ayyar, international head of crypto exchange Luno, said Celsius’s decision to suspend withdrawals has exacerbated selling of cryptocurrencies, which have already come under pressure due to concerns over rising inflation. and rising interest rates.

“The Luna/Terra debacle potentially has a lot of skeletons lurking in the closet, which we’re now seeing maybe coming out,” Ayyar told CNBC.

“The confidence in these performance products is definitely attributed and we are likely to see widespread regulation of these products in the near term. »

Nexo, another crypto credit company, said it sent Celsius a letter on Sunday offering to acquire its collateralized loan portfolio, but the company declined.

“As a sign of goodwill and to try to support the digital ecosystem in these difficult times, we contacted the Celsius team yesterday for our offer of support, but our help was refused,” Antoni Trenchev, told CNBC. CEO of Nexo.

“We believe a lot can be done to help Celsius customers in a number of ways. »

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