The announcement came to the day exactly eight months after CDPQhad invested $150 million in Celsius, a company providing lending services in the cryptocurrency universe.
Due to extreme market conditions, we are announcing today that Celsius is pausing all withdrawals, transactions and inter-account transfersthe company wrote in a statement. (New window) Sent to its customers shortly before 11 p.m. on Sunday.
We understand that this is difficult news, but we believe our decision is the right one […] is the most responsible action we can take to protect our communitycontinues the press release.
As Radio-Canada reported in late May, Celsius was hit hard by a crash in cryptoasset prices during the week of May 9th. Some customers of the platform had complained that they lost everything after receiving cryptocurrency loans from Celsius.
Since then, Celsius has struggled to recover. According to company statistics, the company lost nearly $2 billion in customer deposits last month. Celsius claimed in October that it manages $27 billion worth of cryptoassets on behalf of its clients. That number had fallen to $12 billion in May. Since then, the company no longer publishes the total of the assets under management on its website.
The value of CEL, the cryptocurrency the company created and which its customers are encouraged to use, has fallen from around $3 in April to $0.20 today. At the time of investment CDPQCEL was priced at $5.60.
Cryptocurrency price collapse
Current crypto market conditions suggest that Celsius is likely not over the hill just yet. Most major cryptocurrencies tumbled over the weekend as a wave of panic swept through the market, partly fueled by worrying economic indicators hitting the global economy.
On Monday morning, the S&P 500 lost more than 3% of its value, while the Dow Jones fell just over 2.5%. These two indices are having a tough year, falling 21.4% and 16.3% respectively since the start of 2022.
The price of Bitcoin, the most popular cryptocurrency, was down almost 16% in a 24-hour period as of Monday morning. From a peak of over $67,000 in November 2021, the price of bitcoin, which is normally very volatile, is now just over $23,000.
For Hilary J. Allen, a law professor at Washington College of Law and an expert on crypto regulation, it’s no wonder the crypto market is collapsing given the current economic circumstances.
No wonder that in an environment of rising interest rates, easy money is leaving the system. There is less money to invest in cryptoassetsjudges her.
Ms. Allen says investors who have placed cryptoassets alongside Celsius could be hit hard if the company collapses.
For people who didn’t have a lot of money to invest in, it’s potentially devastating. We have seen [l’effondrement des cryptomonnaies Terra et Luna en mi-mai] that there has been at least one suicide. People would post suicide prevention lines in groups on Reddit and so on. I suspect we’ll see the same thing at Celsius because a lot of people have invested a lot of money that they couldn’t afford to lose.adds Ms. Allen.
A business model that has been criticized
When investing in Celsius, the CDPQ
Blockchain technology has disruptive potential for several sectors of the traditional economysaid Alexandre Synnett, senior vice president and chief technology officer CDPQ in a press release.
Radio-Canada’s investigation raised concerns from crypto experts, who pointed out that Celsius is employing financial practices similar to those that led to the financial system implosion in 2008. Several American states had also alleged that the company had sold unregistered securities, forcing the company to curtail its operations in the United States.
The federal Treasury Department, which didn’t specifically comment on Celsius, ruled that companies that operate unregulated — like Celsius — were doing business in Canada illegally.
The report also revealed that Celsius has several people in its orbit who are at the center of controversy in the crypto world, including one person linked to websites that Canadian financial authorities are keeping an eye on.
In response to questions arising from our investigation that raised concerns about Celsius’ activities, the CDPQ
are subject to a rigorous analysis process in order to make informed decisions in the interest of our depositorsa spokeswoman replied.
dismay among customers
Sunday night’s announcement caused consternation among Celsius customers. In response to the company’s tweet stopping transactions, many customers criticized the decision. Radio silence from the company’s CEO, Alex Mashinsky, also responded.
Alex tweets all the time, he brags that Celsius is a wonderful company, he criticizes other platforms. And now that we’re desperately waiting to hear it, it’s quiet. He didn’t offer any updates as the community is going through this ordeal. IT’S DISGUSTINGwrote a customer in a Telegram group of the Celsius community.
In response to a tweet from a customer on Saturday, Alex Mashinsky replied:
Do you know someone who had trouble withdrawing their money from Celsius? Why do you share fear and misinformation?
Celsius did not answer our questions. At the time of this article’s publication, the CDPQdid not comment, but the text will be updated when we receive her reply.