Crypto Lender Celsius Owes £4 Billion to Customers Following Bankruptcy Filing

JM — Mon, 12 Jun 2023 06:35:12 +0000

Celsius Network files for bankruptcy amid $4 billion user debt

UK-based Celsius Network, a crypto lending platform, has filed for bankruptcy and revealed that it owes £4bn to its users as a result of a $1.2 billion hole in its balance sheet. Celsius blamed rampant inflation, war in Ukraine, the collapse of several other crypto funds, and increased reluctance to do business with firms holding crypto assets. As a result, users began withdrawing their digital assets from Celsius’ platform at a rapid pace, leaving the company unable to meet its obligations. The bankruptcy filing comes after Voyager Digital and Three Arrows Capital also entered bankruptcy in the past three weeks.

Crypto business closures highlight losses and raise concerns

The company has promised to act quickly to generate ‘meaningful recoveries’ for stakeholders. Viktor Prokopenya, a London-based fintech investor, believes that central banks must act now to introduce the right regulation and support for crypto and ensure political stability before too much trust evaporates from the asset class.

Central banks urged to act to prevent wider asset class fallout

The news follows the growing trend of cryptocurrency firms entering bankruptcy in the past few weeks, with over $1tn wiped off the global crypto assets’ value in the past three months, as per CoinMarketCap data. Such an event could signal a 2008 style mortgage crisis or a 1930s ‘run on the bank’ if too many people try to cash in without the necessary collateral in place.

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Crypto Markets Plunge, DeFi Platform Causes Panic in the Markets

JM — Sun, 11 Jun 2023 17:09:13 +0000

Total Crypto Market Value Sinks Below $1 Trillion

The total crypto market value has sunk below $1 trillion due to the DeFi platform, Celsius, borrowing too much and juggling client money across risky DeFi protocols and aggregators to provide high returns. They could not pay back the money owed, thus causing investors to abandon ship. Large exchanges have been forced to lay off employees in the midst of the crisis.

DeFi Investors Lose Over 75% Market Value

Decentralized Finance (DeFi) investors have lost over 75% market value due to this recent wave of selling. Celsius Network could be the Lehman Brother’s moment for crypto as they were unable to pay back investors and opted to send out a smoke signal reporting that they were lost at sea. An event that can be seen as the DeFi equivalent of a bank run.

Effective Regulation is Key

Although mistakes are often made, crypto innovators are trying to create something useful. DeFi promises long-term financial gains that can increase value creation for everyone. However, effective regulation is key, as financial services provided by DeFi applications that do not comply with regulations can expose both retail and institutional participants to risks. It is imperative that policy makers act now before the situation becomes untenable.

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