Celsius Network, a partner of Caisse de depot et placement du Quebec (CDPQ), abruptly stopped allowing its customers to withdraw cryptocurrencies they placed on its platform on Sunday night, as the company was shaken by the new turmoil in the crypto market.
The announcement came eight months to the day after CDPQ invested US $ 150 million in Celsius, a company offering crypto lending services.
Due to extreme market conditions, we announce today that Celsius will pause all withdrawals, trades, and transfers between accounts.the company wrote in a statement. (New window) shipped to its customers before 11 pm Sunday.
We understand this is difficult news, but we believe it is our decision […] is the most responsible action we can take to protect our communitythe press release continues.
As Radio-Canada reported in late May, Celsius was hit hard by the fall in cryptoasset prices that occurred in the week of May 9. Some customers of the platform complained that they lost everything after acquiring of cryptocurrency loans from Celsius.
Since then, Celsius has struggled to recover. According to company statistics, Celsius has lost nearly US $ 2 billion in customer deposits in the past month. Celsius claimed in October that it manages $ 27 billion in cryptoassets on behalf of its clients. This number dropped to $ 12 billion in May. Since then, Celsius no longer publishes on its site the total assets managed by the company.
The value of CEL, the cryptocurrency the company creates and encourages its customers to use, has fallen from approximately US $ 3 in April to US $ 0.20 today. During the investment CDPQthe price of CEL is at US $ 5.60.
Cryptocurrency price collapse
Current crypto market conditions suggest that Celsius is likely out of the woods. Most major cryptocurrencies nosedived over the weekend as a wave of panic tore the market, driven in part by concerned economic indicators that hit the global economy.
On Monday morning, the S&P 500 lost more than 3% of its value, while the Dow Jones lost just over 2.5%. These two indices have had difficult years: they have fallen 21.4% and 16.3% since the start of 2022.
The price of Bitcoin, the most popular cryptocurrency, fell nearly 16% in 24 hours on Monday morning. From a high of over US $ 67,000 in November 2021, the price of Bitcoin, which was very volatile in normal times, is now at over US $ 23,000.
For Hilary J. Allen, a law professor at Washington College of Law and an expert in crypto regulation, it’s not surprising to see the crypto market crash in current economic conditions.
Not surprisingly, in an environment of rising interest rates, easy money is leaving the system. There is less money to invest in cryptoassetshe judged.
Ms. said. Allen said investors who put cryptoassets in Celsius could be hit hard if the company collapses.
For people who don’t have many ways to invest in it, it’s potentially disastrous. We saw along [l’effondrement des cryptomonnaies Terra et Luna en mi-mai] that there was even a suicide. People are posting suicide prevention lines to groups on Reddit and so on. I suspect we’ll see the same in Celsius because a lot of people have invested so much money that they can’t afford to lose.added Ms. Allen.
A criticized business model
When investing in Celsius, the CDPQ Proud of the company’s business model. Blockchain technology has the potential to be disruptive for some sectors of the traditional economysaid Alexandre Synnett, Senior Vice President and Chief Technology Officer at CDPQin a press release.
The Radio-Canada investigation documented concerns raised by crypto experts, who pointed out that Celsius was using financial practices similar to those that led to the collapse of the financial system in 2008. Several states The US said elsewhere that the company was selling unregistered securities and forced the company to limit its activities to the United States.
The federal Department of Finance, which did not offer specific comment on Celsius, has ruled that companies acting unregulated (as Celsius does) are illegally doing business in Canada.
The report also revealed that Celsius has several individuals in its orbit who have found themselves at the center of controversies in the crypto world, including someone linked to sites monitored by financial authorities of Canada.
In response to questions arising from our investigation, which raised concerns about Celsius activity, the CDPQ reiterated its support to the company. All Caisse investments is subject to a rigorous review process to make informed decisions in the interest of our depositorsanswer of a speaker.
Disappointment with customers
Sunday night’s announcement caused anxiety among Celsius customers. In response to the company’s tweet about freezing the transaction, many customers criticized the decision. The radio silence of the company’s CEO Alex Mashinsky also reacted.
Alex continues to tweet, he is proud that Celsius is an awesome company, he criticizes other platforms. And now, when desperately waiting to hear it, it was silent. He did not offer updates as the community endured this trial. NAKAKAINISwrote a customer to a Celsius community Telegram group.
In response to a customer tweet on Saturday, Alex Mashinsky replied, do you know a single person who has had difficulty withdrawing their funds from Celsius? Why are you sharing fear and misinformation?
Celsius did not answer our questions. At the time of publication, the CDPQ did not offer comment, but this article will be updated when we receive their response.
Source: Radio-Canada
