Bitcoin Slips After Crypto Lender Celsius Network Freezes Withdrawals

LONDON, June 13 (Reuters) – Bitcoin tumbled on Monday after leading U.S. cryptocurrency lending firm Celsius Network froze withdrawals and transfers citing “extreme” terms, in the latest sign of how financial market turmoil is causing distress in the cryptosphere.

The Celsius move sparked a slide in cryptocurrencies, with their value falling below $1 trillion on Monday for the first time since January last year, driven by an 11% drop in the biggest token bitcoin.

After Celsius’ announcement, Bitcoin hit an 18-month low of $23,476. Ether token No. 2 fell 16% to $1,177, its lowest level since January 2021.

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“It’s still an uncomfortable time, and there’s a risk of contagion around crypto more broadly,” said Joseph Edwards, chief financial strategy officer at fund management firm Solrise Finance.

Celsius offers interest-bearing products to clients who deposit cryptocurrencies on its platform and then lend cryptocurrencies to earn a return.

In a blog post, the company said it froze withdrawals, as well as transfers between accounts, “to stabilize liquidity and operations while we take steps to preserve and protect assets.”

“We are taking this action today to put Celsius in a better position to meet, over time, its withdrawal obligations,” the New Jersey-based company said.

‘GRAY ZONE’

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Celsius and crypto firms that offer similar services to banks are in a “grey area” of regulation, said Matthew Nyman of law firm CMS. “They are not subject to any clear regulations requiring disclosure” of their assets.

Celsius CEO Alex Mashinsky and Celsius did not immediately respond to requests for comment from Reuters outside of U.S. business hours.

Celsius raised $750 million in late November from investors including Canada’s second-largest pension fund, the Caisse de depot et placement du Quebec. Celsius was then valued at $3.25 billion.

As of May 17, Celsius had $11.8 billion in assets, according to its website, down more than half from October, and had processed a total of $8.2 billion in loans.

Mashinsky, the CEO, was quoted in October last year as saying Celsius had more than $25 billion in assets.

The company’s website, which urges customers to “Earn High. Borrow Low,” says it offers interest rates of up to 18.6%.

Rival crypto lender Nexo said on Monday that it had offered to buy Celsius’s outstanding assets.

“We contacted Celsius on Sunday morning to discuss the acquisition of its secured loan portfolio. So far Celsius has opted out,” said Nexo co-founder Antoni Trenchev.

Celsius did not immediately respond to a request for comment on Nexo’s offer.

Reporting by Tom Wilson and Elizabeth Howcroft in London; additional reporting by Abinaya Vijayaraghavan in Bengaluru and Alun John in Hong Kong; Editing by Bradley Perrett and Jane Merriman

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