Cryptocurrency: Caisse investment in complexity

The decision calls for the “modern equivalent” of a bank launch, when financial institutions were forced to close due to information or rumors that they lacked liquidity, according to ESF UQAM Finance Professor Alexander F. Roch. “It’s sending the wrong message to investors and even customers. »

Celsius Network customers may lose a lot of money due to the company’s difficulties and the collapse of cryptocurrency, says Alexander F. Roch. “Once that happens, it’s hard to put toothpaste back in the tube. It is difficult to restore this trust. »

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

The collapse of the cryptocurrency market shook Celsius. In May, the assets of its investors amounted to 12 billion US dollars against 27 billion dollars, which were in October last year.

The question of the future of Celsius Network remains open, but cryptocurrency expert Louis Roy believes that the model of a company that offers loans by taking cryptocurrencies as collateral remains relevant. “I think he’s here to stay,” said Grant Thornton, president of Catallaxy, a subsidiary of Raymond Chabot Grant Thornton.

For his part, Alexander F. Roch believes that it is difficult to comment on the long-term viability of such a business model. While he acknowledges that the service may be of interest, he notes that cryptocurrencies “have no fundamental value. “It simply came to our notice then. If the price of bitcoin falls, there is nothing behind this security. »

Celsius Network’s freeze contrasts with the confidence shown by its management team shortly before Sunday’s announcement. On Saturday, the company’s chief executive Alex Mashinsky accused his critics of misinformation. “Do you know anyone who has had problems withdrawing their funds from Celsius? Why do you share fear and misinformation? “, – he wrote on Twitter the day before the blockade of transfers.

In addition to the scalded customers, this decision is a failure for the Caisse de depot et placement du Québec (CDPQ), which invested $ 150 million in the platform last October.

At Caisse de depot we say that we follow this file “very closely”. It is noted that the difficulties of Celsius arise at a time when investors are reducing their risk in all asset classes. “Celsius is actively fulfilling its obligations to customers and is fulfilling its obligations to customers today,” said spokeswoman Kate Monfett.

The investment has been criticized

Caisse’s investments have been criticized while the Celsius Network is under scrutiny by the United States Stock Exchange, which is investigating the industry to determine whether platforms such as Celsius should be regulated by the Securities and Exchange Commission (SEC).

In May, Louis Morisset, president and CEO of the Financial Companies Authority (AMF), told a parliamentary committee that the Quebec Stock Exchange was cooperating in an SEC investigation.

“It simply came to our notice then. […] It is possible that what they are doing at the moment will not meet current standards. They issue real estate securities, they distribute securities, “he said.

According to the president of Catallaxy, Louis Roy welcomes questions from regulatory authorities, while this new industry needs a regulatory framework. “It’s new, it has a lot of innovations. We have no choice but to integrate such entities into the regulatory framework and control them as such. If you want to play in the major leagues, you need the rules of the major leagues. »

The fall of cryptocurrencies and the difficulties of Celsius are a reminder of caution for independent investors who want to invest in them, warns Louis Roy. “It simply came to our notice then. People need to know that this is a product in the category of products that is risky. »