Celsius says he needs more time to recover his financial situation

  • “Acting in the interest of our community remains our priority and we will continue to work around the clock,” Celsius said.
  • The company said it is maintaining an open dialogue with regulators and officials regarding its withdrawal freeze

Celsius froze withdrawals on its platform due to a debilitating liquidity crunch a week ago. Now, the crypto lending network has said it needs more time to recover its financial situation.

“We want our community to know that our goal continues to stabilize our liquidity and operations. This process will take time,” the struggling lender said in a Blog In Monday.

Celsius said it is maintaining open communication with regulators and officials regarding its decision to suspend withdrawals, trades and transfers between user accounts.

The company cited “extreme market conditions” for the suspension. He also paused the Twitter Spaces and Ask Me Anything sessions so he could focus on other issues at hand.

“Acting in the interest of our community remains our priority and we will continue to work around the clock,” Celsius said.

Celsius generates revenue (and therefore returns for its users) by remortgage customer deposits. But centralized lenders like Celsius can be forced out of their various positions when withdrawal requests exceed its cash reserves.

A liquidity crisis is sustained when the assets generated by these outflows still fail to meet the demand for withdrawal. Some Celsius users are concerned that their deposits will be lost with Celsius capital, as the platform works to avoid its own liquidation.

“The sell-off has been a problem in all markets, including crypto,” said Fernando Martinez, head of Americas at digital asset platform OSL.

To help explore its financing options, Celsius reportedly hired banking giant Citigroup and law firm Akin Gump Strauss Hauer & Feld last week.

The recent chaos in the cryptocurrency markets has been exacerbated by industry players facing this type of financial difficulty. Investor anxiety eased when Celsius suspended withdrawals and transfers on June 12, followed by hedge fund firm Three Arrows Capital facing potential insolvency.

Babel Finance joined the turmoil in to suspend withdrawals on Friday, citing “unusual pressures on liquidity”.

Celsius and Three Arrows Capital’s issues were partly due to exposure to Ether-staked Lido (stETH), a replacement token for ether (ETH) locked into Lido Finance’s staking protocol.

StETH had mostly been seen as a safe asset; effectively pegged 1:1 with ETH and backed by ETH staked inside Ethereum’s Beacon Chain. But an influx of ETH withdrawals from the Curve decentralized trading protocol has made stETH harder to trade, driving its value to fall. drop 6% below par.

In any case, at least five state regulators have launched urgent investigations into Celsius’s activities, in an effort to ensure that such incidents do not happen again.

This isn’t the first time Celsius has caught the attention of regulators. In September 2021, regulators in Alabama, New Jersey and Texas sent the company cease and desist letters who said he was offering unregistered securities (interest-bearing crypto accounts) in violation of state law and did not provide enough information about what he did with their deposits.


Get the top crypto news and insights of the day delivered to your inbox each evening. Subscribe to Blockworks’ free newsletter now.


  • 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]

Comments are closed.