The Celsius Network, a decentralized finance (DeFi) platform and one of the largest crypto lenders, announced Sunday night that it was “pausing all withdrawals, Swap, and transfers between accounts.” It has 1.7 million customers.
The company’s token, CEL, is trading at 23 cents as of this writing, according to CoinMarketCap. That’s a 92 percent decrease from April 8th, when CEL was worth $3. The token was worth nearly $7 a year ago.
In a June 7th blog post entitled “Damn the torpedoes,” the company said, “Celsius has the reserves (and more than enough ETH) to meet obligations, as dictated by our comprehensive liquidity risk management framework.”
That was then. On June 12th, an email to all customers started off like this:
Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, Swap, and transfers between accounts. We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations.
In theory, Celsius works in much the same way an ordinary bank does, except in cryptocurrency. It collects deposits and then loans them out. An advertisement on Celsius’s site as of this writing offered an 18.63 annual percentage yield on crypto deposits. Unlike a bank, Celsius doesn’t have FDIC government insurance that protects people in case of a bank failure.
Even investors who aren’t directly involved in cryptocurrency have exposure to Celsius. Canada’s second-largest pension fund, Caisse de Dépôt et Placement du Québec (CDPQ), invested as part of a $400 million equity round for the company.
Regulators have expressed interest in Celsius Network’s operations. On September 17th, 2021 alone, New Jersey issued a cease-and-desist order to Celsius Network, Texas scheduled a hearing to determine if it should issue a cease-and-desist, and Alabama inquired of Celsius why it shouldn’t be banned within a month. In October 2021, New York Attorney General Letitia James included the company as one of the platforms requested to provide information on its activities and products, and Celsius said it was working with regulators in the state.
In its note to its customers, Celsius said that the company’s “ultimate objective is stabilizing liquidity.” It did not give a date for when customers might expect to be able to withdraw again, warning that “this process will take time, and there may be delays.”