Bitcoin retreated on Monday after cryptocurrency bank Celsius Network froze withdrawals and transfers citing “extreme” conditions, in the latest sign of how financial market turmoil is causing problems in the digital asset sphere.
Celsius’ move sparked a slump in cryptocurrencies, with their value dropping below $1 trillion on Monday for the first time since January last year, dragged by an 11% drop in value. bitcoin.
After Celsius’ announcement, bitcoin fell to its lowest level in 18 months at $23,476. Ether fell as much as 16% to $1,177, the lowest since January 2021.
Celsius Network offers interest-bearing products to customers who deposit cryptocurrencies on their platform and then borrow the digital assets for a return.
The fintech said it has frozen withdrawals and transfers between accounts, “to stabilize liquidity and operations while we take steps to preserve and protect assets.”
“We are taking this action today to put Celsius in a better position to honor its withdrawal obligations over time,” the company said.
“GRAY AREA”
Rising interest in cryptocurrency lending has led to concerns from regulators, especially in the United States, who are concerned about investor protections and the systemic risks of unregulated lending products.
Cryptocurrency companies like Celsius, which offer bank-like services, are in a “grey area” of regulation, said Matthew Nyman of the law firm CMS. “They are not subject to any clear regulation that requires disclosure” about their assets.
Celsius Chief Executive Alex Mashinsky and Celsius did not immediately respond to Reuters requests for comment outside of U.S. business hours.
Celsius raised $750 million in funding at the end of November from investors including Canada’s second-largest pension fund, Caisse de Dépôt et Placement du Québec. Celsius was valued at the time at 3.25 billion (R$ 16.1 billion).
As of May 17, Celsius had US$11.8 billion in assets, according to information on the company’s website, a drop of more than half from October, and it processed a total of US$. 8.2 billion (R$ 40.8 billion) in loans.
Mashinsky was quoted in October last year as saying that Celsius had more than $25 billion in assets.
The company’s website, which encourages customers to “earn high. Borrow low,” said it offers interest rates of up to 18.6%.
Rival cryptocurrency bank Nexo said on Monday that it has offered to buy Celsius’ outstanding assets.
“We reached out to Celsius on Sunday morning to discuss the acquisition of their secured loan portfolio.
Until now, Celsius has chosen not to get involved,” said Nexo co-founder Antoni Trenchev.
Celsius did not immediately respond to a request for comment on Nexo’s offer.
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