On Sunday night, with crypto markets already in freefall, controversial crypto lender Celsius announced it was suddenly pausing all customer withdrawals, swaps, and transfers.
"We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations," the company wrote in a blog post on Medium. "We are taking this necessary action for the benefit of our entire community in order to stabilize liquidity and operations while we take steps to preserve and protect assets. Furthermore, customers will continue to accrue rewards during the pause in line with our commitment to our customers."
The company's CEL token quickly reacted, dropping 70% in one hour from a prior high of $0.49 earlier on Sunday down to $0.15, according to CoinMarketCap.
Celsius (CEL) price action on Sunday (CoinMarketCap)
The rest of the crypto market was not having a good day either on Sunday when Celsius shared its news, though nothing compared to CEL's dramatic drop. Bitcoin was down 9% on Sunday at the time of writing, Ethereum down 9%, BNB down 9%, Cardano down 11%, Solana down 12%, and Dogecoin down 9%.
Celsius launched in 2017 and offers customers high yield for crypto deposits, which it lends out to other crypto firms. It shares that business model with BlockFi and Nexo, among other players. In the past year, many regulators have made clear they view these high-yield crypto lending products as unregistered securities offerings; by last September, four states (New Jersey, Texas, Alabama and Kentucky) had sent Celsius cease-and-desist letters. That month, Coinbase shuttered its own planned Lend product after the SEC threatened to sue if it launched.
But in February of this year, Blockfi paid $100 million to settle with the SEC and 32 states and agreed to properly register its investment products for SEC approval.
Its peers Celsius and Nexo have not yet announced similar settlements or plans.
In response to the Celsius news (and to inevitable comparisons), BlockFi CEO Zac Prince tweeted late on Sunday that all BlockFi services "continue to operate normally."
All products and services @BlockFi continue to operate normally, including loans, interest earning, trading, credit card and deposits / withdrawals. We have zero stETH exposure and exited the principal positions we had in GBTC last fall.
