The adventure of the Caisse de depot et placement du Québec (CDPQ) in cryptocurrencies turns into a nightmare after only eight months. Its partner Celsius Network is freezing withdrawals and transfers for its 1.7 million customers over what is perceived as a liquidity crisis – raising fears for the worst for its future.
Updated yesterday at 5:10pm.
“Suspending such activity is an extreme plan that destroys trust in any company,” said Phillippe Jetté, senior cryptocurrency analyst at firm Rivemont Investissements. “So the situation is absolutely critical. »
Celsius, which received 150 million US (approx. 190 million CAN) from the wool stockings of the Quebecers, was presented by the CDPQ as a “world-class company” at the latest last autumn and caused consternation among its customers with reference to the “extreme conditions”. ” of the market that has caused the price of crypto assets to plummet in recent weeks.
Several questions remained unanswered as of Monday, the day after the announcement. In a statement sent to The pressthe Quebec pension plan manager — minority shareholder of Celsius — limited himself to saying that he is “following these files closely” while defending his partner.
Celsius CEO Alex Mashinsky, who is very active on social networks, remained silent. In response to a tweeter on Saturday, he claimed everything was under control.
“Do you know someone who had trouble withdrawing their money from Celsius? he wrote, about 24 hours after freezing.
The only certainty for the time being: “It will take a while” to find a solution, the company suggests, whose assets are probably not sufficient to settle its customers’ withdrawals and pay the interest.
“The next few hours and days will be crucial, but Celsius in its current model […] is probably already dead and buried,” believes Mr. Jetté.
As major indices slumped on Monday, the cryptocurrency market followed the same trend. The most widely held cryptocurrency, Bitcoin, was trading at $23,255 by the end of the afternoon, down 12.4%.
Crypto banks like Celsius are inspired by the model of traditional banks. They pool deposits from cryptocurrencies like bitcoin and offer depositors loans and interest, often in excess of 10%.
The problem is that these new players are unregulated and nothing protects depositors’ money. In addition, unlike traditional financial institutions, they are not subject to a minimum capital threshold in their reserves.
Like other platforms, Celsius is under US regulators’ scrutiny by rewarding its depositors with its own virtual currency (CEL). According to the Stock Exchange Police, this practice constitutes an improper offering of unregistered securities.
Alexandre F. Roch, professor of finance and cryptocurrency analyst at ESG UQAM, believes that there will “definitely be a need to review the Celsius model”.
“A bank that can no longer meet its liquidity needs and has to stop everything overnight, that undermines its credibility, that’s for sure,” he said. It also erodes investor confidence. It sends a very bad signal to the market. Investors will wait for Celsius to allow them to withdraw their crypto assets and when that happens everyone will withdraw their funds and it could crash Celsius. »
Portfolio manager at Rivemont, Martin Lalonde, sees promise in the cryptocurrency sector. He understands the interests of the Caisse. Given the turn of events, one thing is clear.
“What we can say is that they didn’t bet on the right foal when they left,” says Mr. Lalonde.
It was not possible to speak to Alexandre Synnett, Caisse’s senior vice president and chief technology officer, who praised the merits of Celsius when announcing the investment last October. The CDPQ also failed to explain the due diligence process that led it to bet millions on a company whose existence is uncertain eight months later.
“Celsius is acting proactively to meet its commitments to its customers and has historically met its commitments to its customers,” institution spokeswoman Kate Monfette said via email.
According to Mr. Lalonde, since Celsius was like a bank, the Caisse may have underestimated the regulatory risks.
- 12 billion
- In May, Celsius’ fortune was valued at $11.8 billion, according to its website. That’s more than half less than last October.
Sources: CELSIUS AND CDPQ
- 3 billion
- Celsius Network received this value last fall.