Crypto lending firm Celsius saw over 2,000% growth in deposits, but concerns surround where deposits go

Quick Take

  • Cryptocurrency lending firm Celsius Network has seen 2,165% growth in deposits since it opened its business last year, but there are concerns surrounding how interest is generated from these deposits
  • Celsius states that it lends to hedge funds, institutional traders, and exchanges to earn interest, however, the firm does not make clear that it also lends to margin traders through margin trading programs run by some exchanges
  • One of these exchanges is Bitfinex, which is entangled in a series of legal disputes recently; lending to margin traders on Bitfinex gives the exchange full control over risk management of the loans and may expose Celsius to regulatory and operational risk

Celsius Network, a cryptocurrency lending company, has seen 2,165% growth in deposits over the past year, although the mechanism that allows these deposits to generate interest is clouded by uncertainties.

According to Celsius CEO Alex Mashinsky, the firm has processed over 160,000 lending transactions and accumulated around $345 million assets under management since it opened its business a year ago. A separate statement from Celsius' custody partner BitGo also notes that the company has transacted more than $1.5 billion over the past year. 

How deposits generate interest

As auspicious as the growth is, there might be issues surrounding the company’s interest generation mechanism and its risk disclosure to users. The company states on its website that Celsius lends the