Crypto lender Celsius pauses withdrawals; bitcoin slides

Celsius, a controversial cryptocurrency lending platform, said Monday it was pausing all withdrawals, causing more pain in the fragile crypto market.

Celsius is one of the largest players in the nascent crypto lending space, with more than $8 billion lent out to clients and almost $12 billion in assets under management as of May. The group offers users higher-than-average interest rates on their deposits.

“Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, Swap, and transfers between accounts,” the company said in a memo to clients on Monday.

The move has raised concerns about Celsius’ solvency. The firm has seen the value of its assets more than halve since October, when it handled $26 billion in client funds. Celsius’ cel token has also erased 97% of its value in the same timeframe. Celsius is the biggest holder of cel.

“Acting in the interest of our community is our top priority,” Celsius said in the memo.

“In service of that commitment and to adhere to our risk management framework, we have activated a clause in our Terms of Use that will allow for this process to take place. Celsius has valuable assets and we are working diligently to meet our obligations.”

Celsius was not immediately available for additional comment on the situation when contacted by CNBC.

Bitcoin and other cryptocurrencies took a beating on the news. The world’s biggest digital asset tumbled 8% to $25,287, according to Coin Metrics data, falling to lows not seen since December 2020. Ether dropped 8% to $1,329, while Celsius’ cel token plunged more than 50%.

It comes hot on the heels of the $60 billion meltdown of hyped stablecoin terraUSD. The collapse heightened regulators’ fears over crypto products offering investors unusually high returns. Anchor, a lending service, once promised users interest rates of up to 20% on their holdings of terraUSD, a coin that was always meant to be worth $1.

Market participants have suggested that Celsius had exposure to the now-collapsed terraUSD stablecoin. Celsius has denied this.

Just last week, the company said it had not had any issues meeting withdrawal requests. Celsius said it had the reserves and “more than enough” of the cryptocurrency ether, to meet obligations.

In April, Celsius boss Alex Mashinsky told CNBC his company holds on average 300% collateral for each loan it offers to retail investors, while for institutional investors it issues undercollateralized loans.

“We’ve been doing this for five years now, longer than anybody else,” he said at the time. “The business is doing very well.”

Hours before announcing a freeze on account withdrawals, Mashinsky lashed out at a crypto investor raising concerns with Celsius.

“Do you know even one person who has a problem withdrawing from Celsius?” Mashinsky asked, before accusing the investor of spreading “misinformation.”

Crypto lending is still very much a…