Standing in a spacious, white living room and sporting a black T-shirt, Alex Mashinsky, CEO and co-founder of cryptocurrency lender Celsius Network, urged his customers to ignore the naysayers.
“Don’t listen to the FUD-ers, look at the facts,” Mashinsky said on the YouTube livestream on July 17, using crypto slang for “fear, uncertainty and doubt.” A few minutes later, he reassured the audience of “Celsians,” as the platform’s users are nicknamed, that the company is prudently deploying their crypto deposits.
Like a bank, Celsius borrows from one set of clients, lends to other customers and pockets the difference in interest. Unlike a bank, it only borrows and mainly lends cryptocurrency, and it does not have government deposit insurance. The company claims to have gathered a total of more than $1 billion worth of crypto deposits as of June.
As an example of its high lending standards, Mashinsky said Celsius strictly demands collateral when making a loan.
“When you’re using any other platforms that are like Celsius, what you care about is, who is the borrower?” Mashinksy said. “Is the lender doing non-collateralized loans? Celsius does not do non-collateralized loans. … Celsius will not do that because that would be taking too much risk on your behalf.”
The statement was at odds with what Celsius’ own representative had told CoinDesk just a few days before.
In response to a question from CoinDesk, Anastasia Golovina, an external spokesperson for Celsius at the Ditto PR agency, confirmed the company also makes uncollateralized loans, on what she described as a limited basis.
“Celsius’ total uncollateralized loans are less than a fraction of 1 percent out of tens of thousands of loans issued since 2018,” Golovina told CoinDesk by email on July 13, referring to the number of loans but not the dollar volume. “All of these were normal size loans and were done to institutions with billions of dollars in equity.”
When subsequently asked about the dollar volume of the uncollateralized loans and about Mashinsky’s denial of their existence on the AMA, Golovina did not provide a response.
Read more: Crypto Lending 101
Even if small, the uncollateralized lending is one of several salient items that Celsius has downplayed or not shared with depositors.
Celsius is a major player in a budding corner of the crypto industry. In the past year, lending activity has mushroomed as some holders sought to earn a yield on their assets, others sought to raise cash without selling their coins and market makers borrowed to fill orders quickly.
The phenomenon could potentially improve liquidity and price discovery for crypto assets. (Disclosure: Another crypto lender, Genesis Capital, is owned by Digital Currency Group, which is also the parent company of CoinDesk.)
But like all lending, the crypto kind carries risk – and Celsius may be taking more of it than depositors fully realize.