Due to "extreme market conditions," Celsius Network has paused all withdrawals, inter-account transfers, and swaps, the company announced. The move is intended to stabilize the liquidity of assets and give users a better chance of meeting withdrawal obligations.
Overall, the crypto market has struggled. The company's CEL token was once worth $7 nearly a year ago but fell to $3 by early April and is now only worth 21 cents. In just a few days after claiming that it had the reserves and Ethereum to meet obligations, CEL's value plummeted more than half.
A date for lifting the freeze was not known. Although the company promised that normal operations would be restored "as quickly as possible," it warned that the process would take "time." The company announced that it would suspend various transactions, including withdrawals of funds, without explaining what had caused such a drastic decision. However, the price might be paid by customers. Celsius does not have FDIC insurance, unlike a conventional bank. The roughly 1.7 million people who use the lender might not have many chances to recover their lost funds if it fails. There are some attempts to regulate crypto assets, but they may arrive too late for Celsius' clients.
According to a memo published in Medium, "Due to extreme market conditions, Celsius is halting all withdrawals, swaps, and transfers between accounts. This action aims to better position Celsius to honor its withdrawal commitments in the future."
Celsius has drawn the ire of critics due to its unusually high yields (currently over 18.6% for deposits) and its link to Terra, the failed stablecoin. In November, the company's CFO was arrested on fraud, money laundering, and sexual assault charges. Regulatory agencies in Alabama, New Jersey, New York, and Texas have also examined Celsius' activities, and New Jersey issued a cease-and-desist order last September. In short, Celsius' business has long been viewed as unsustainable - the activity pause doesn't help.
Nexo Shows Interest in Celsius
Investors were left to speculate without knowing why Celsius made these decisions. Nexo AG, a crypto firm, recently sent Celsius a letter offering to buy "all of Celsius Network LLC and Celsius Lending LLC." "Following what appears to be the insolvency of @CelsiusNetwork, Nexo has extended a formal offer to acquire qualifying assets of @CelsiusNetwork," Nexo said on Twitter, with a link to its letter to Celsius.
“Consequently, Nexo maintains financial stability regardless of market conditions. As a result, it has strong liquidity and equity positions to help soften the effects of Celsius' distressed state," said the letter of intent.
According to Nexo, it "could easily acquire from Celsius all or part of Celsius' outstanding collateralized loan receivables secured by their corresponding blockchain collateral, subject to Nexo's risk management and collateral requirements."
"Our focus is to protect and preserve assets, so we can meet our obligations to customers," Celsius Network said. The ultimate objective is to stabilize liquidity and restore withdrawals, swaps, and transfers across accounts as soon as possible. This process will take time, and there could be delays." "We believe that pausing withdrawals, swaps, and transfers between accounts are the most responsible action we can take for the community," Celsius said. However, the company does not provide a timetable for when withdrawals will resume.