This article comes fromThis article comes from, by Kadhim Shubber & Joshua Oliver
Odaily Translator | Nian Yin Si Tang
Odaily Translator | Nian Yin Si Tang
Cryptocurrency lending platform Celsius Network has completed a new round of equity financing of US$400 million. At the same time, the company is grappling with increased scrutiny of crypto businesses by U.S. regulators.
The round was led by WestCap and Caisse de dépôt et placement du Québec (CDPQ). WestCap is a fund founded by former Airbnb and Blackstone executive Laurence Tosi; Caisse de dépôt et placement du Québec (CDPQ) is Canada's second largest pension fund.
The fundraising comes a month after U.S. regulators launched a broad crackdown on crypto firms that offer customers yield on digital asset deposits, and Celsius has not been spared. State authorities in Texas and New Jersey said such interest-bearing accounts at Celsius amounted to an unregistered securities offering. The charges have since been joined by Alabama and Kentucky.
Celsius CEO Alex Mashinsky told the Financial Times that he hoped the capital raising would reassure regulators about the stability of the company’s crypto lending business and help open the door to mainstream financial markets.
"It's not just $400 million, it's the credibility investors bring."
Founded in 2017, Celsius offers clients up to 17% interest on cryptocurrency deposits. The company pays interest in cryptocurrencies, including its native token.
It is worth mentioning that as part of an investigation into the reserves of stablecoin providers, Bloomberg last weekto report, Tether has provided billions of dollars in loans to Celsius Network, and Mashinsky said the company paid Tether an interest rate of 5%-6%. The investigation found that Tether was the main investor in Celsius Network's $30 million funding round in June 2020. Subsequently, Mashinsky tweeteddisclosedisclose
, they did borrow from Tether, but Tether provided USDT instead of USD. Celsius Network provides collateral for such loans.
The company has grown rapidly over the past year amid the popularity of crypto lending and yield strategies. Celsius said total assets on its platform hit $25 billion this month, up from $10 billion in March, and it has more than 1 million registered users.But in September, the New Jersey Attorney General's OfficeThe company stopped issuing interest-bearing cryptocurrency products. And the Texas regulator also issued anotifynotify
, calling for a hearing in February next year to assess whether to take similar action.
But Celsius said all of its operations are in full compliance with US law.Previously, the U.S. Securities and Exchange Commission (SEC)had threatened
, will sue the exchange if Coinbase launches a planned yield product. Meanwhile, authorities in five states are pressing on with another cryptocurrency lending platform, BlockFi.
In addition to scrutinizing compliance with securities rules, authorities have also raised questions about the transparency of how crypto platforms handle investor deposits to generate the returns paid.
Officials in Texas and New Jersey allege that Celsius engaged in “proprietary trading,” while the firm insists it only uses deposits for lending and crypto mining.
The flurry of regulatory pressure hasn't stopped Celsius from attracting new investors. “It’s typical for (regulators) to start reviewing some of the market leaders to clarify their own rules,” said WestCap’s Tosi. “It’s also part of the process of regulating new markets.”
Tosi said his firm has spent nine months conducting due diligence on Celsius and is confident in the viability of Celsius’ institutional business, even with current regulators restricting its retail crypto lending business.
Celsius originally operated in the UK, but said in June that it intended to relocate to the US and withdrew its application to the UK’s Financial Conduct Authority (FCA) crypto asset company registration regime.
Accounts filed by Celsius in the U.K. through February 2020 showed $356 million in customer deposits and $29 million in revenue for the year, driven by profits from changes in the valuation of crypto-assets.
The accounts show that Celsius’ income comes from token sales, cryptocurrency loans, and “discretionary trading” of cryptocurrencies, including “speculative trading” based on price fluctuations. Mashinsky said the disclosure of the deal was made after careful consideration.
