Cryptocurrency: Caisse’s investment in difficulty

The ruling is reminiscent of the “modern equivalent” of a bank failure, when financial institutions were forced to close due to information or rumors that they lacked liquidity, said ESG-UQAM finance professor Alexander F. Roh. “It sends the wrong message to investors and even clients. »

According to Alexander F. Roch, Celsius Network customers could lose a lot of money due to the company’s difficulties and the cryptocurrency fiasco. “Once this happens, toothpaste is hard to put back into the tube. It is difficult to restore this trust. »

In the afternoon, CEL, the cryptocurrency created by the company and which it recommends to its clients, lost 18.74% to 30 US cents. When Caisse announced its investment in the company in October, CEL was worth US$5.60. Celsius’ announcement shocked the cryptocurrency market. In the afternoon, the value of Bitcoin, the most widely used cryptocurrency, fell 14.10% to $23,548.74.

The collapse of the cryptocurrency market shocked Celsius. In May, the assets of its depositors amounted to $12 billion, compared with $27 billion held in October last year.

The future of the Celsius Network remains open, but cryptocurrency specialist Louis Roy believes that the model of a company that offers loans by accepting cryptocurrencies as collateral remains relevant. “I think it’s for a long time,” said the president of Catallaxy, a blockchain subsidiary of Raymond Chabot Grant Thornton.

Alexander F. Roh, for his part, finds it difficult to comment on the long-term viability of such a business model. While he acknowledges that there may be interest in this service, he points out that cryptocurrencies do not have “fundamental value. “It comes from nothing. If the price of bitcoin collapses, there is nothing behind this collateral. »

The Celsius Network freeze contrasts with the confidence shown by its management shortly before Sunday’s announcement. On Saturday, the company’s big boss Alexei Mashinskiy accused his critics of disinformation. “Do you know anyone who had problems withdrawing funds from Celsius? Why are you sharing fear and misinformation? “, he tweeted the day before the transfer freeze.

Aside from the burnt customers, this decision represents a setback for Caisse de depot et Placement du Québec (CDPQ), which invested $150 million (M$) in the platform last October.

At Caisse de depot, we say we are following this file “very closely”. It is noted that the difficulties of Celsius arise at a time when investors reduce risk across all asset classes. “Celsius proactively delivers on its commitment to customers and delivers on its commitment to customers to date,” said spokeswoman Kate Monfette.

Investment Criticism

Caisse’s investment has come under fire while Celsius Network is under the gun of US stock exchange authorities who are studying the industry to see if platforms like the Celsius platform should be regulated by the Securities and Exchange Commission (SEC).

In May, in a parliamentary committee, Autorité des Marchés financiers (AMF) President and CEO Louis Morisset said that a Quebec stock market watcher was involved in the SEC investigation.

“We continue to first understand what they are doing. […] Perhaps what they are doing at the moment does not comply with the current rules. They issue real estate securities, they distribute securities,” he said.

Louis Roy welcomes regulatory issues, Catallaxy president said, while this new industry needs a regulatory framework. “It’s new, it has a lot of innovations. We have no choice if such objects are integrated into the regulatory framework and controlled as such. If you want to play in the big leagues, you need the rules of the big leagues. »

The fall of cryptocurrencies and the difficulties of Celsius is a reminder of caution for independent investors who want to invest in them, Louis Roy warns. “We see it. People need to know that this is a product in a product category that is risky.”