As it struggles with growing regulatory attention from US regulators towards cryptocurrency businesses, cryptocurrency lending platform Celsius Network has secured $400 million in fresh equity capital from investors.
The second-largest pension fund in Canada, CDPQ, and WestCap, the fund founded by former Airbnb and Blackstone CEO Laurence Tosi, took the lead in the funding round.
Major investors have backed Celsius a month after the company was implicated in a widespread US regulatory assault on cryptocurrency businesses that offer clients yields on digital asset deposits. Authorities from the states of Texas and New Jersey declared that Celsius’ yield-bearing accounts constitute an unauthorized offering of securities.
The Financial Times quoted Celsius CEO Alex Mashinsky as saying he hoped the fundraising effort would satisfy regulators about the viability of his crypto loan firm and assist open doors in the established financial systems
It’s not the $400 million. The credibility of the individuals who signed the checks, he claimed.
The 2017-founded company Celsius provides up to 17% interest on cryptocurrency deposits to its clients. The business uses cryptocurrencies, including its own token, to pay interest.
The most recent fundraising round, according to Celsius, values the company at more over $3 billion, a significant rise from a modest stock raise last year led by Tether, the organization behind the named $69 billion stablecoin, which valued Celsius at $120 million.
The business expanded quickly over the past year as interest in crypto lending and yield methods soared. With more than 1 million registered members, Celsius reported that the platform’s total assets this month exceeded $25 billion, up from $10 billion in March.
But in September, the New Jersey attorney general’s office issued an injunction requiring the business to stop distributing bitcoin products with interest. In order to determine whether to take similar action, Texas state authorities published a notice in February asking for a hearing.
According to Celsius, every aspect of their business complies fully with US law.
The crackdown came as regulators in five states pursued BlockFi, a different cryptocurrency lender, and the Securities and Exchange Commission threatened to sue Coinbase if it released a yield-bearing product.
Authorities have questioned the degree of transparency surrounding what crypto platforms do with investors’ money in order to earn the yields they pay, in addition to their inspection of compliance with securities regulations.
While Celsius maintains that it exclusively uses deposits for lending and cryptocurrency mining, Texas and New Jersey officials have accused the company of engaging in “proprietary trading.”
The pressure from the regulatory authorities did not discourage Celsius’s new investors. “It’s fairly common for [regulators] to begin looking at some of the market leaders in order to clarify their own standards,” Tosi of WestCap said. The process of regulating a new market includes this.
Tosi claimed that his organization had spent nine months conducting due research on Celsius and was confident in the institutional business’ survival, even in the event that regulators restrict retail crypto lending.
When Celsius announced its intention to move to the US in June, it withdrew its application for the Financial Conduct Authority’s registration process for crypto asset enterprises. Celsius had previously operated out of the UK.
The most current set of available accounts, filed in the UK, revealed $356 illion in customer deposits and $29 million in revenue for the year, both of which were mostly driven by gains from fluctuations in the holdings’ cryptocurrency valuations.
According to the financial statements, Celsius makes money from token sales, cryptocurrency lending, and “discretionary trading” of cryptocurrencies, including “speculative trades” based on price changes. The trading statements, according to Mashinsky, were included for extra security.
We never take customer assets and either buy more of them or sell them since that isn’t what we do. Our goal is to generate a profit, and trading the asset itself isn’t how we accomplish it, he said.
