Caisse invests in cryptocurrency lender Celsius Network that the U.S. market authorities are investigating

MONTREAL —
The Caisse de dépôt et placement du Québec (CDPQ) has just participated in a US$400-million investment in Celsius Network, a cryptocurrency interest and lending platform in the crosshairs of U.S. market authorities.

The investment led by WestCap, the growth capital firm of former Airbnb CFO Laurence Tosi, in partnership with the Caisse, establishes a total value of US $3 billion to the company founded in 2017.

“Blockchain technology has disruptive potential for many sectors of the traditional economy,” said Caisse chief technology officer Alexandre Synnett, in a statement. “As the adoption rate of digital assets increases, we intend to seize the right investment opportunities, while working with our partners to regulate the industry.”

CRYPTOCURRENCY LOAN

The deal comes a month after Celsius found itself in the crosshairs of market regulators in Texas and New Jersey. They allege that the interest payment in the form of Celsius’ issued cryptocurrency — CEL — constitutes an unregistered security offering.

The company disputes this interpretation.

Celsius Network specializes in deposits and loans of cryptocurrencies, such as Bitcoin or Ethereum. More than 1 million customers are registered on its platform, according to the company, which says it has total assets of US $25 billion.

Part of its business model relies on its cryptocurrency account offered to individuals, but it also offers to borrow using cryptocurrencies as collateral assets.

The company lends deposited cryptocurrencies to institutional investors. It claims that 80 per cent of the proceeds from these exchanges are returned to depositors in the form of interest.

The remaining 20 per cent is used to fund its development. Over the past three years, it claims that the value of interest paid is equivalent to US $850 million.

Accounts paying interest on cryptocurrency deposits have gained popularity among crypto enthusiasts amidst historically low interest rates on bonds and traditional banking products. Interest rates on some of Celsius Network’s products can be as high as 17 per cent.

The US $400-million investment by the Caisse and its partner will allow Celsius to hire new employees and develop new products.

CEO Alex Mashinsky believes that the investment will first and foremost reassure regulators and strengthen the credibility of his service.

“It’s not the US $400 million,” he told a Financial Times reporter. “It’s the credibility that comes with the people who sign the cheque.”

Both the Caisse and WestCap have expressed confidence in the company and assured that the crypto lender is working with regulators.

“Celsius is the world’s leading cryptocurrency lender and has a strong management team that puts transparency and customer protection at the heart of its business,” said Synnett.

— This report by The Canadian Press was first published in French on Oct. 12, 2021. 

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