Crypto Lending Platform, Celsius, Suspends Operations
Popular crypto lending platform Celsius Networks LLC has effectively paused withdrawals, swaps, and transfers, between accounts. In an official statement, the company cited “extreme market conditions” as the reason for its decision. This may not be good news for the 1.7 million faithful who call Celsius their “home for crypto.”
The New Jersey company expects this move will enable it to honor its withdrawal obligations more efficiently.
Celsius is one of the world’s leading crypto lending companies. It allows users to deposit their Bitcoin, Ethereum, and Tether coins in return for weekly interest payments. The platform offers up to 18 percent annual interest relative to the time horizon and token.
At one point, Celsius claimed to have more than $20 billion in assets. After extending its “oversubscribed” Series B financing to $750 million in November, the company scored a valuation of $3.25 billion. High sell-off have dogged the company in recent months, with only $3.8 billion in assets after its $24 billion disclosure in late December.
Celsius vs. the Feds
However, it has not been all smooth-sailing. Regulatory problems and users claiming the service has cost them financial gains are two cases in point. In the latter situation, the company had encouraged them to hold its CEL digital tokens as collateral for loans. Sadly, the token slid 48 percent late Sunday, losing more than 75 percent of its value over the past month and 97 percent over the past year.
Everyone is witnessing the current cryptocurrency plunge unfold, and the entire crypto market is at a pathetic 60 percent value of what it was only two months ago. Digital currency king, Bitcoin, hit an unenviable 18-month low on Sunday, losing 45 percent of its value year to date. After hitting its all-time high last November, it is now only worth about 60 percent.
The Celsius team has, however, done well to put the shoe on the other foot. Therefore, they “are working with a singular focus: to protect and preserve assets to meet” obligations with customers. It’s always good news to know you’re not hung out to dry.
The company will continue to operate, despite having “a lot of work ahead” while considering various options. It is only acting in such a way that the community interest remains the top priority.
What’s Up with Celsius Networks and the Crypto Lending Industry?
Crypto lenders have come under the microscope following the collapse of Terraform Labs’ Luna and its twin token, UST a month ago. The crypto Ponzi scheme, Bitconnect, still draws a sour taste from investors’ taste buds.
Celsius’ CEO, Alex Machinsky has been doing a terrific PR job over the last few weeks, dousing customers’ fears concerning withdrawals and pushing everyone to doubt skeptics. In the latest recurring promotion, the company offered customers rewards for transferring assets into Celsius accounts and holding positions for at least 180 days.
The Celsius Development and Battles that Lie Ahead
Celsius Networks LLC launched in 2017, offering customers high-yield crypto deposits, while lending the crypto to other firms. The company’s business model is similar to BlockFi and Nexo’s.
However, high-yield crypto lending has struggled to win the full blessings of regulators who view such products as unregistered securities offerings. Four states – Alabama, Kentucky, New Jersey, and Texas – had sent cease-and-desist letters by September 2021. This forced Coinbase to shelve plans for Lend product after the SEC threatened legal proceedings if it launched.
BlockFi also paid $100 million to settle with the SEC and 32 states, accepting to properly register its investment products for SEC approval. However, Celsius has not announced any plans or settlements.
If you’re wondering how others have taken the Celsius situation, BlockFi’s Zac Prince tweeted late Sunday that all BlockFi services “continue to operate normally.” As everyone in crypto knows too well, only time tells well enough.
Barry Pene is a stern blockchain research/copywriter. Barry has been trading cryptos since 2017 and has been invested in issues that would put the blockchain industry on the right pedestal. Barry's research expertise cuts across blockchain as a disruptive technology, DeFis, NFTs, Web3, and reduction of energy consumption levels of cryptocurrency mining.
