Casey Wagner

<div id="highlights-block_62a798060a159" class="highlights">
 <ul>
 <li>Celsius announced on Sunday evening that it would be pausing withdrawals, swaps and transfers between accounts on its platform due to “extreme market conditions&#8221;</li>
 <li>Industry members are calling the situation a run, and it can happen to others in the space</li>
 </ul>
 
</div>



As cryptocurrencies and related equities continue to tumble, industry participants are questioning how the <a href="https://cms.blockworks.co/celsius-lending-platform-suspends-withdrawals-and-transfers/" target="_blank" rel="noreferrer noopener">crumbling</a> of crypto lending platform Celsius might impact digital asset markets elsewhere. 



“Certainly we could see some contagion,” Rasheed Saleuddin, head of research at Blockworks, said. “Transparency is key in shadow banking markets.”&nbsp;



Celsius, sometimes referred to as a quasi-bank because it straddles the line between decentralized and centralized finance, said on Sunday it would pause withdrawals, swaps and transfers between accounts on its platform due to “extreme market conditions.”



“We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations,” the firm wrote in a <a href="https://blog.celsius.network/a-memo-to-the-celsius-community-59532a06ecc6" target="_blank" rel="noreferrer noopener">blog post</a>. 



The company said its decision to pause withdrawals was essential to “stabilize liquidity and operations.”



Monday morning, crypto exchange Binance paused bitcoin withdrawals for about three hours as markets continued to reel from Celsius. Binance attributed the suspension to “minor hardware failures” that caused transactions to backlog, according to a <a href="https://twitter.com/binance/status/1536398693523501056?s=20&amp;t=52LiWVMEesEcbAb6O3vmoQ" target="_blank" rel="noreferrer noopener">tweet</a>. 



“We&#8217;ve seen a lot of transactions, and we&#8217;re nowhere near the size of Binance,” said Chris Kline, chief operating officer and co-founder of Bitcoin IRA. “We have a couple billion dollars — they&#8217;ve gotten almost a trillion, but you can imagine what happens, the technology really gets pushed to the limit, and it&#8217;s a stress test on your system.” 



Runs can stress any financial system, Kline added.&nbsp;



“Just like if this was happening in stocks, there&#8217;d be houses like Fidelity, TD Ameritrade, etc., having problems with too many people in the system,” Kline said. “Too many people doing things causes backlogs.”



What is happening to Celsius and <a href="https://cms.blockworks.co/?s=Terra" target="_blank" rel="noreferrer noopener">what happened to Terra’s UST</a> in May are runs, Saleuddin said, and there is no telling which other companies could be impacted. 



“Is BlockFi at risk? Nexo? It depends how liquid they are,” Saleuddin said.&nbsp;



​​Fellow quasi-bank Tether attempted to distance itself from Celsius in a <a href="https://tether.to/en/celsius-feels-impact-of-market-volatility-tether-reserves-hold-strong/?utm_source=newsletter&amp;utm_medium=email&amp;utm_campaign=cryptocodex&amp;cdlcid=5d67e01f195063fa4f65341a" target="_blank" rel="noreferrer noopener">blog post</a> Monday. 



“While Tether’s investment portfolio does include an investment in the company, representing a minimal part of our shareholders equity, there is no correlation between this investment and our own reserves or stability,” the lending platform said.&nbsp;



Because its disclosures are vague, it’s impossible to know exactly how risky Tether’s assets are, Saleuddin said.&nbsp;



“But we do know they hold tokens, precious metals, a decent amount of low-grade commercial paper, and are exposed to Celsius,” Saleuddin said. “What would it take for a run on Tether? The truth is that we don&#8217;t know.”



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Binance

Celsius Withdrawal Halt Reveals Run Risks on Other Crypto Banks

Jacquelyn Melinek

<div id="highlights-block_6151d86e159fb" class="highlights">
 <ul>
 <li>The direct deposit launch was driven by customer feedback that “making frequent transfers is time-consuming and inconvenient,” Coinbase said</li>
 <li>The company also announced its debit card ‘Coinbase Card’ will be rolling out general availability for US customers starting this Fall</li>
 </ul>
 
</div>



Coinbase users will soon be able to directly deposit any percentage of their paycheck into their accounts on its crypto-exchange platform, <a href="https://cms.blockworks.co/coinbase-ceo-50-of-the-people-he-spoke-to-in-dc-think-crypto-is-a-risk/" target="_blank" rel="noreferrer noopener">the company said</a> on Monday.&nbsp;



“We are rolling out direct deposit to the first customers over the next few weeks. We are starting with customers in the US and plan to roll it out to more countries in the future,” Coinbase Senior Director of Product and Head of Payments &amp; Financial Hub Prakash Hariramani said in an email to Blockworks.



The US-based company has over 100 digital assets listed on its exchange and about 68 million verified users across over 100 countries, which is up 58% from 43 million users at the end of 2020.&nbsp;



Users can get paid in any of the cryptocurrencies available on the crypto exchange or opt for US dollars on the platform, the company said. The company has also partnered with a number of companies, including M31 Capital, Nansen, and SuperRare Labs to help businesses pay employees in crypto.&nbsp;



“Choose to get paid in crypto so you can make recurring buys or earn interest on your income (by getting paid in USDC, DAI, or other interest-yielding assets), or choose to get paid in US dollars,” the company said in a statement.&nbsp;



Prior to the direct deposit announcement, in order to buy, sell or trade cryptocurrencies on Coinbase, users had to transfer their funds from personal bank accounts, another crypto-exchange, or personal wallets.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“We heard regularly from our customers that making frequent transfers has been time-consuming and inconvenient for them,” Hariramani said. “Our goal with direct deposit is to make it easier for our customers to make regular crypto investments by automating the process,” Hariramani added.&nbsp;</blockquote>



Users can manually set up the new direct deposit service or have Coinbase automatically update paycheck allocations through the application. There are no transaction fees on the conversion of direct deposit funds from USD to cryptocurrency, the company said. However, it noted that a spread applies when users buy, sell or trade cryptocurrencies.



<h3 class="wp-block-heading">Other ways to spend</h3>



The company recently launched its <a href="https://www.coinbase.com/card" target="_blank" rel="noreferrer noopener">Coinbase Card</a>, a Visa debit card that gives up to 4% back in crypto rewards on eligible purchases. In June, some people were invited off the waitlist, but the card will begin rolling out general availability this Fall for all US-based customers, excluding Hawaii residents, a spokesperson told Blockworks. 



Earlier this year, other cryptocurrency companies like <a href="https://cms.blockworks.co/gemini-mastercard-to-launch-crypto-rewards-card/" target="_blank" rel="noreferrer noopener">Gemini</a>, <a href="https://cms.blockworks.co/blockfi-releases-visa-rewards-credit-card-to-us-clients/" target="_blank" rel="noreferrer noopener">BlockFi</a> and <a href="https://cms.blockworks.co/sofi-offers-crypto-for-credit-card-rewards/" target="_blank" rel="noreferrer noopener">SoFi</a> launched reward cards that let cardholders earn percentages back in crypto-based rewards on their purchases.



Coinbase has Money Transmitter Licenses <a href="https://www.coinbase.com/legal/licenses" target="_blank" rel="noreferrer noopener">in most states</a>, and its Visa card is issued by financial services company MetaBank, however Coinbase itself does not clarify if direct deposits held in US dollars are protected by Federal Deposit Insurance Corporation guarantees. <a href="https://help.coinbase.com/en/coinbase/other-topics/legal-policies/how-is-coinbase-insured" target="_blank" rel="noreferrer noopener">Documentation</a> from Coinbase clearly indicates that USDC, the platform’s primary stablecoin — as well as any cryptocurrency balances — are not insured.



According to the company, when US customer funds are held as cash, &#8220;they are maintained in pooled custodial accounts at one or more banks insured by the FDIC&#8230;in a manner to make available pass-through FDIC insurance up to the per-depositor coverage limit then in place (currently $250,000 per individual),” however, pass-through insurance typically <a href="https://www.sewkis.com/publications/fdic-requirements-for-pass-through-deposit-insurance-in-brokered-deposit-programs/">does not apply</a> to pooled custodial accounts under US law, and this implied-guarantee has never been put to the test.



Coinbase is also exploring additional use cases for crypto payroll, Hariramani said, but he did not share any additional details for future plans. “As crypto becomes more mainstream, users and employers will continue to benefit from a crypto payroll solution,” he added.



<h3 class="wp-block-heading">Growing demand for direct deposits into crypto</h3>



Coinbase isn’t the only platform to see demand for direct deposits, either.&nbsp; Chris Kline, COO and co-founder of Bitcoin IRA, a platform for holding digital assets in retirement accounts, said that he’s seeing an uptick in requests from users to be able to add portions of their paychecks to their self-directed IRA accounts.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“People actively designating a piece of their payroll to be turned into bitcoin and then securely having it added to their personal savings wallet is a trend I think we’ll continue to see,” Kline added.</blockquote>



Even though digital asset prices are notoriously volatile, Kline said he thinks direct deposit of cryptocurrencies will also see more widespread adoption soon. “This is a positive for the crypto ecosystem because it means more participants will be taking part in an engaging asset class, leading to more active and engaged investors watching their personal finances.”



This story has been updated on September 27, 2021, at 4:44 pm ET



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Bitcoin IRA

Coinbase’s New Direct Deposit Feature Allows Users to Get Paychecks in Crypto

<div id="highlights-block_610317ac5fb86" class="highlights">
 <ul>
 <li>Bitcoin IRA, a large digital asset IRA platform, said more than 75% of their clients are over the age of 45 and 31% of near-retirees between the ages of 55 to 64 are invested in cryptocurrencies. </li>
 <li>Kingdom Trust’s platform Choice, an individual retirement accounts provider, and bitcoin mining firm Compass Mining announced today that they&#8217;ve joined forces to offer IRAs in a tax advantageous account for miners that produce crypto.</li>
 </ul>
 
</div>



The global cryptocurrency market is growing at a fast pace and while people generally think crypto retail investors are a younger demographic, there’s a new group emerging as prominent players: people looking to save for retirement via IRAs and benefit from tax advantages. 



According to stats from Bitcoin IRA, a large digital asset IRA platform, more than 75% of their clients are over the age of 45 and 31% of near-retirees between the ages of 55 to 64 are invested in cryptocurrencies.



In order to take advantage of the opportunity, Kingdom Trust’s platform Choice, an individual retirement accounts provider, and bitcoin mining firm Compass Mining announced that they&#8217;ve joined forces to offer IRAs in a tax advantageous account for miners that produce crypto. 



In general, the US Internal Revenue Service views bitcoins as taxable property, so they’re taxable in the same fashion as stocks or bonds. But, it’s possible for those investing in bitcoin to avoid hefty capital gains taxes by including digital assets in certain retirement accounts.



This means Choice users can buy bitcoin mining machines through an IRA and any coins created would be able to have tax-free appreciation in their retirement account like other assets such as real estate.&nbsp;



“We want to make it simple, approachable, relatable and easy,” Whit Gibbs, founder and CEO of Compass Mining said during a Twitter Space “Bitcoin Circular Economy” event on Thursday.&nbsp;&nbsp;



“You get to make bitcoin for yourself and we’re in a golden era of bitcoin where it’s incredibly profitable as well. It’s awesome to be able to onboard people to mining and get the tax advantage they can stack until they’re ready,” Gibbs said.&nbsp;



The platform launched in 2020 and has more than 125,000 retirement accounts with 20,000 alternative assets and $18 billion assets under custody.&nbsp;



As the retirement space grows, more companies in the crypto space are working together and building awareness in a tax-advantaged way, Meltem Demirors, chief strategy officer at <a href="https://cms.blockworks.co/coinshares-to-launch-business-segment-following-record-q1/" target="_blank" rel="noreferrer noopener">CoinShares</a>, said during the Twitter Space event.&nbsp;



<h3 class="wp-block-heading">Crossing generations</h3>



Although Bitcoin IRA mainly has an older user base, its service is available to people 18 years old and older, as long as they have earned income to contribute to the IRA. 



While the younger generation is known for diving into crypto, the older generation is catching on as well, Chris Kline, chief operating officer and co-founder of Bitcoin IRA, said in an interview with Blockworks. The older demographic is investing in cryptocurrency through self-directed retirement accounts due to a desire to catch up on retirement funds, inflation fears and tax benefits, he said.&nbsp;



Bitcoin IRA started in 2016 and went through waves of interest as price volatility loomed, Kline said. But he believes in the value of bitcoin long term and sees a huge shift in clients now wanting exposure to the cryptocurrency world.



In 2017, Bitcoin IRA had 700 account holders and as to date it is up about 14,186% to over 100,000 users with about $1.5 billion in total transactions, Kline said.&nbsp;



“What’s driving the investments is that [users] are seeing accelerated growth in crypto at seriously large levels,” Kline said.&nbsp;



About 13% of Americans invested in cryptocurrency in the past 12 months, according to a recent <a href="https://www.norc.org/NewsEventsPublications/PressReleases/Pages/more-than-one-in-ten-americans-surveyed-invest-in-cryptocurrencies.aspx" target="_blank" rel="noreferrer noopener">survey</a> by NORC at the University of Chicago. While 62% of the respondents said they aren’t investing in cryptocurrency because they don’t understand it enough.&nbsp;



The cryptocurrency markets have a lot of movement and volatility, which is something older generations aren’t used to, Kline said. But in order to reassure customers, he said Bitcoin IRA is hyper-focused on expanding its functions and accessibility, while sharing content and education beyond their products to educate users on the crypto space, too.&nbsp;



Although Kline said he isn’t a financial advisor or tax expert, he said there are more benefits to an IRA because you won’t have to pay <a href="https://cms.blockworks.co/theres-no-merit-to-that-80-crypto-capital-gains-tax-rumor/" target="_blank" rel="noreferrer noopener">capital gains</a> taxes, even though funds are subject to normal tax rates when accessed.&nbsp;



“To help Americans retire we have to offer more options, what started as a manual concept of a bitcoin IRA has evolved into 24/7 self-trading and expanded further with the first earned program so users could make interest on their assets,” he said. So, people can use bitcoin and get paid in bitcoin as rewards.&nbsp;



“Bitcoin is here to stay, it’s a big thing and we’re seeing clients wanting exposure to it,” Kline said. “Our mission is to help Americans retire, they’re behind on retirement planning and using alternatives [like bitcoin] is where they’re going for that accelerated growth,” he said.

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