With about $12 billion in assets under management as of May and more than $8 billion in loans to clients, Celsius is one of the biggest players in the emerging crypto lending market. In a memo to clients, the company recently stated that it is stopping all transfers between accounts, Swap and withdrawals due to extraordinary market conditions. As the company announced it was halting all withdrawals, the volatile cryptocurrency market was hurt further.
A contentious platform, Celsius is effectively the cryptocurrency version of a bank, offering consumers above-average interest rates on their accounts while forgoing the stringent insurance regulations that regular lenders must meet. Celsius stated in the memo that its number one goal is to serve its community. The agency has activated a provision in our Terms of Use that will permit this procedure to occur in support of that promise and to follow our risk management methodology.
What was the Impact of the News?
Upon the announcement, Bitcoin and other cryptocurrencies suffered losses. According to data from Coin Metrics, the largest digital asset in the world fell 15% to $23, 325, reaching lows not seen since December 2020. Ether token fell 17% to $1,225, while Celsius’ cel token tumbled over 38 percent.
The action has sparked doubts about Celsius’ financial stability. Since its handling of $26 billion in customer funds in October, the firm’s asset value has more than halved. Likewise, in the same time frame, the value of Celsius’ cel token has been completely erased. The largest holder of cel is Celsius, which promotes the use of the token as a means of earning prizes and receiving discounts on lending rates.
When reached by CNBC, Celsius was unavailable to provide more comment on the circumstance right away. The fact that Celsius halted withdrawals for its clients raised concerns about market contagion. This occurs shortly after the $60 billion collapse of the highly anticipated stablecoin terraUSD. Regulators’ concerns about cryptocurrency products that promised investors extraordinarily large returns were heightened by the collapse.
Regulation of crypto loans is currently very hazy. Many of the crypto items, in the opinion of U.S. market regulators, should be recognized as securities and be governed by tight regulations – in order to safeguard investors.
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