Celsius lending platform suspends withdrawals and transfers


  • Celsius said the move was necessary to stabilize liquidity and operations
  • The network warned that there could be several delays in the coming days

Crypto lending platform Celsius announced on Sunday, June 12 at 10:10 p.m. ET that it would suspend withdrawals, trades, and transfers between accounts on its platform due to “extreme market conditions.”

“We are taking this action today to put Celsius in a better position to meet, over time, its withdrawal obligations,” the company said in a blog post.

Celsius said its decision to suspend withdrawals was made to “stabilize liquidity and operations”.

The company refers to its terms of service, which states that depositors agree to grant Celsius the right “to use or invest in these digital assets in Celsius’ sole discretion”, acknowledging that depositors “may not not exercise their ownership rights” and, if Celsius is unable to meet its obligations, the deposited assets “may not be recoverable”.

On-chain data from wallets linked to the company shows that they have been busy withdrawing hundreds of millions of dollars worth of assets from Aave markets and transferring them to FTX, including thousands of BTC and tens of thousands of ETH.

Celsius generates revenue by re-mortgaging funds deposited by clients. When the demand for redemptions – for example during a general market downturn – exceeds the liquid reserves, the firm may be forced to unwind its positions. Celsius usually promises to process customer withdrawals within three days, and suspending withdrawals is a significant sign of stress.

“There is a lot of work to do as we review various options, this process will take time and there may be delays,” the company noted in its blog post.

The announcement follows a drop in cryptocurrency prices over the weekend and complaints on social networks that the network is facing a liquidity crisis. It remains to be seen if other lending platforms will face similar challenges.

Rival borrowing and lending platform Nexo has offered to buy some of the struggling company’s assets, “after what appears to be the insolvency of [Celsius]”, according to a post on Twitter, citing “Nexo’s sustainable business for over 4 years, based on strong fundamentals and careful risk management”.

However, there is currently no confirmation that Celsius is insolvent and Nexo’s offer can be seen as an attempt to inspire confidence in its own customers.

An address associated with Celsius has an outstanding $278 million DAI loan — using MakerDAO’s protocol with approximately 21,900 wrapped bitcoins (wBTC) as collateral (worth $511 million as of 9:50 a.m. ET) — that risks to be liquidated if the BTC price drops further to around $18,400. The vault was topped up with over 4,000 bitcoins on Monday morning, to lower the liquidation threshold.

Celsius’ native CEL token plunged in value as fears over the platform’s solvency grew. The token fell more than 60% from $0.36 to under $0.10 between 10 p.m. and 11:30 p.m. ET on Sunday, June 12, before bouncing back to $0.21 on Monday at 9:50 a.m. ET , according to data from Blockworks Research. It is now down over 98% from its all-time high of over $8.00 just over a year ago.

This is a developing story.
This story was last updated on June 13, 2022 at 4:45 a.m. ET
, 5:40 a.m. and 9:50 a.m. ET.


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  • Shalini Nagarajan

    blockages

    Journalist

    Shalini is a crypto journalist from Bangalore, India who covers market developments, regulation, market structure, and advice from institutional experts. Prior to Blockworks, she worked as a markets reporter at Insider and a correspondent at Reuters News. She holds bitcoin and ether. Join her at [email protected]
  • Macauley Peterson

    Macauley was an editor and content creator in the professional chess world for 14 years, before joining Blockworks. At Bucerius Law School (Masters in Law and Commerce, 2020), he researched stablecoins, decentralized finance, and central bank digital currencies. He also holds a master’s degree in film studies; the film’s credits include associate producer of the 2016 Netflix feature-length documentary, “Magnus” about world chess champion Magnus Carlsen. He is based in Germany. Contact Macauley by email at [email protected] or on Twitter @yeluacaM

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