The warning came as Celsius Network, a DeFi platform and one of the largest crypto lenders, announced that it was “pausing all withdrawals, swap, and transfers between accounts” for its 1.7 million clients.
“The wider crypto ecosystem has been rocked again – not by ‘real’ cryptocurrencies like Bitcoin, but by DeFi,” said Nigel Green, CEO of deVere Group, one of the world’s largest independent financial advisories.
“The unprecedented move by Celsius is effectively blocking clients from accessing their assets which will do little to quell fears from critics that some DeFi platforms could be Ponzi schemes,” he noted.
Celsius Network said in an email to customers late on Sunday that due to extreme market conditions, “we are announcing that Celsius is pausing all withdrawals, Swap, and transfers between accounts. We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations.”
Celsius operates in much the same way as a bank, but rather than in fiat money it does so in cryptocurrency. It collects deposits and then loans them out.
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“There are legitimate and serious concerns about networks’ high yields, links to failed dollar-pegged stablecoin Terra, and reserves,” said Green, urging people to exercise caution and scrutiny on crypto lending firms which offer clients lucrative double-digit yields on assets like Bitcoin and Ethereum.
The DeFi lending giant Celsius halting withdrawals has weighed on the broader crypto sector with Bitcoin, the world’s largest digital token plunging to the lowest in 18 months in Asia trading on Monday.
Decentralised finance or DeFi offers financial instruments without relying on intermediaries such as brokerages, exchanges, or banks by using smart contracts on a Blockchain.
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