Law Decoded, June 13–20: Celsius exodus and liquidity crisis
Last week, the Celsius Network wrote its name in the alarming recent history of the crypto market failures alongside Terra. The American platform has unstaked $247 million worth of Wrapped Bitcoin (wBTC) from the Aave protocol and sent it to crypto exchange FTX while putting the withdrawal option for users on a stop.
Immediately after that, United States securities regulators from five states — Alabama, Kentucky, New Jersey, Texas and Washington — opened an investigation into Celsius. This isn’t the first time the platform is facing suspicions from law enforcement. In September 2021, The Texas State Securities Board scheduled a hearing related to allegations that the network had offered and sold securities in the state that were not registered or permitted.
What is worrying, though, is that Celsius might not appear as a single case of poor management but the first victim in a row amid the ongoing liquidity crisis in crypto. By the end of the week, Hong Kong-based asset manager Babel Finance announced the temporary suspension of redemptions and withdrawals from its products, citing “unusual liquidity pressures.”
United States Securities and Exchange Commission (SEC) Chair Gary Gensler admitted that he’s worried, and the object of his anxiety is the recently published “Responsible Financial Innovation Act,” co-sponsored by Senators Cynthia Lummis and Kirsten Gillibrand. Speaking at The Wall Street Journal’s CFO Network Summit, Gensler implied the bill has the potential to “undermine the protections we have in a $100 trillion capital market.”
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