Crypto lender Celsius is freezing withdrawals - after its founder promised to reinvent the financial system and never act like a traditional bank
- Crypto lender Celsius has frozen all withdrawals, swaps and transfers between accounts.
- The network's founder Alex Mashinsky pledged to revolutionize finance and has said he "hates the banks".
Major crypto lender Celsius Network froze all of its customers' accounts Monday — after promising for years that it wouldn't act like a traditional bank.
Celsius founder Alex Mashinsky has repeatedly criticized traditional financial institutions, arguing that they lock up investors' hard-earned savings to boost their own balance sheets.
"I hate the banks," he told Crypto Briefing last year. "You can't retire when you make 1% on your savings - the Fed is screwing all Americans, so the banks can put more profit on their balance sheets."
Mashinsky has also promised in the past to "unbank the banked and bank the unbanked". He spoke at November's Web Summit in Lisbon wearing a T-shirt that read "banks are not your friends".
With cryptocurrencies plummeting, Celsius moved to freeze all withdrawals, swaps, and transfers between accounts Monday.
"We are taking this necessary action for the benefit of our entire community in order to stabilize liquidity and operations," Celsius said in a blog post, citing "extreme market conditions" as the reason for the move.
It managed $11.8 billion in assets as of May 17, The Wall Street Journal reported, and it says it has 1.7 million users.
During the 2008 financial crisis, rumors that the UK's Northern Rock would act similarly led to a bank run - when investors line up to withdraw their cash because they believe that a financial institution may be about to go bust.
Many influential crypto entrepreneurs have promised to develop a new financial system that cuts out unnecessary middlemen and makes finance cheaper and more democratic. But in a nightmarish 2022, critics have accused leading crypto firms of exploiting their customers in a similar manner to the banks they have pledged to replace.
Last month, Terra's UST stablecoin lost its peg, causing its sister luna token to crash to $0. That left some investors stomaching thousands of dollars worth of losses.
The project's founder Do Kwon — who had previously mocked one of his critics for being "poor" — has since been accused of siphoning up to $80 million a month from Terra before his two cryptocurrencies crashed.
Similarly, regulators have previously questioned Celsius over its high-yield products - which some have likened to a Ponzi scheme. The states of New Jersey, Texas, and Alabama all slapped the company with a cease and desist order last year, according to Bloomberg.
Some analysts have even warned that crypto may be experiencing the equivalent of a bank run, with investors rushing to sell their tokens as digital assets' value continues to plummet. In the aftermath of Celsius' announcement, the network's native token cel nosedived 49% and bitcoin fell to an 18-month low.
"Crypto fans have become used to volatile rides, but these rollercoaster descents are increasingly hard to stomach," Susannah Streeter, a senior markets analyst at Hargreaves Lansdown, said.
Some of the world's highest-profile investors and economists are vocal in their criticism of the likes of bitcoin and the crypto ecosystem. Former Microsoft boss Bill Gates said recently he would never own any crypto as it is not "adding to society." And Warren Buffett, the 91-year old boss of Berkshire Hathaway, has said more than once that bitcoin is not for him.
"If you told me you owned all the bitcoin in the world and you offered it to me for $25, I wouldn't take it," Buffett said at Berkshire's annual shareholder meeting last month. "What would I do with it?"