James Cirrone

CitiGroup has developed a permissioned blockchain for institutional customers to interact with digital assets.&nbsp;



The new product, called Citi Token Services, intends to provide clients access to tokenized deposits, cross-border payments and automated trade finance solutions 24 hours a day.



Citi’s head of global services Shahmir Khaliq said this development advances the goals of the Regulated Liability Network, a <a href="https://regulatedliabilitynetwork.org/">whitepaper</a> published in November 2022 professing the desire to get the world’s financial system to a place where on-chain, 24/7 programmable, final settlement in sovereign currencies is possible.&nbsp;



“Digital asset technologies have the potential to upgrade the regulated financial system,” Khaliq said. “The development of Citi Token Services is part of our journey to deliver real-time, always-on, next generation transaction banking services to our institutional clients.”



Maersk partnered with Citi Treasury and Trade Solutions (CTTS) for Citi&#8217;s digital asset trading service, which would serve the same purpose as “bank guarantees and letters of credit” in traditional finance, according to a <a href="https://www.businesswire.com/news/home/20230918024720/en/Citi-Develops-New-Digital-Asset-Capabilities-for-Institutional-Clients">press release</a>.



Both companies reported that the pilot program was able to provide instantaneous payments to service providers via smart contracts, something that would be beneficial to companies with many vendors.&nbsp;



Ensuring liquidity for premier banking clients is also emphasized in this new product launch, highlighted by the inclusion of a cash management pilot.



“Citi Token Services provides corporate treasurers with a new tool to manage global liquidity on a just-in-time, programmable basis. Frictions related to cut-off times and gaps in the service window will be reduced,” CTTS global head of digital assets Ryan Rugg said in a statement.&nbsp;



It appears that Citi has beaten JPMorgan to this, as the largest bank in the US by assets is still in the “early stages” of exploring a similar private blockchain service, according to <a href="https://www.bloomberg.com/news/articles/2023-09-07/jpmorgan-jpm-explores-blockchain-deposit-token-for-payment-settlement">Bloomberg</a>.&nbsp;



<a href="https://blockworks.co/news/deposit-tokens-stablecoins-defi-jpmorgan">JPMorgan first showed interest in bank-issued deposit tokens</a>, different from CBDCs or stablecoins, in February 2023.



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Citi to pilot private blockchain services for institutional clients

Shalini Nagarajan

<div id="highlights-block_62bac1813dbfa" class="highlights">
 <ul>
 <li>Celsius reportedly wants users to activate &#8220;HODL mode&#8221; to win an argument with lawyers</li>
 <li>Withdrawals and transfers on the platform have been frozen since June 12</li>
 </ul>
 
</div>



Embattled crypto lender Celsius Network is hoping that a show of support from its users will save it from bankruptcy.



Celsius, dogged by a liquidity crisis for weeks, has been resisting guidance from its own lawyers to file for Chapter 11 bankruptcy, <a href="https://www.theblock.co/post/154368/celsius-seeks-show-of-client-support-as-lawyers-push-for-chapter-11-bankruptcy" target="_blank" rel="noreferrer noopener">The Block</a> reported on Monday, citing people familiar with the matter.



Under a Chapter 11 bankruptcy, a court helps a business restructure its debt and obligations while it continues to operate — it is also among the most expensive of bankruptcy proceedings.



In a bid to win an internal argument with its lawyers, Celsius now wants to prove that most users would prefer the company dodge bankruptcy altogether.&nbsp;



Users can reportedly demonstrate their support by activating “<a href="https://support.celsius.network/hc/en-us/articles/360007608077-What-is-the-HODL-Mode-" target="_blank" rel="noreferrer noopener">HODL Mode</a>” in their Celsius accounts — a security feature for customers who don’t wish to withdraw or transfer funds for an extended period.



Celsius has <a href="https://cms.blockworks.co/celsius-lending-platform-suspends-withdrawals-and-transfers/" target="_blank" rel="noreferrer noopener">blocked withdrawals</a> and transfers on the platform since June 12, but users can still display trust in the network by initiating the HODL feature, the report said. Despite withdrawal restrictions, Celsius has continued to receive some client deposits.



The company is said to be unable to publicly announce its stance on the matter due to legalities. CEO Alex Mashinsky, who is currently in the US, reportedly isn’t able to comment on the firm’s position either.



Celsius’ situation initially sparked fears the rout might affect other companies in the crypto industry in an already tough market environment. Rival BlockFi was struck by <a href="https://cms.blockworks.co/blockfi-inks-250m-credit-deal-with-ftx-to-ease-liquidity-fears/" target="_blank" rel="noreferrer noopener">liquidity concerns</a> shortly after Celsius as <a href="https://cms.blockworks.co/crypto-fund-three-arrows-capital-facing-potential-insolvency-report/" target="_blank" rel="noreferrer noopener">insolvency rumors swirled</a> around crypto hedge fund firm Three Arrows Capital.



“We are experiencing the biggest crypto crash in history,” Louis Schoeman, managing director at <a href="https://forexsuggest.com/">Forexsuggest</a>, said. “With massive inflation data and the semi-collapse of the Celsius network driving the downward spiral, I think only the best fundamentally strong crypto projects will survive this bear market.”



To explore potential financing options, Celsius has reportedly <a href="https://cms.blockworks.co/celsius-calls-on-citigroup-for-options-after-liquidity-squeeze-report-says/" target="_blank" rel="noreferrer noopener">hired</a> banking giant Citigroup, law firm Akin Gump Strauss Hauer &amp; Feld, and management consultants from Alvarez &amp; Marsal.



<h3 class="wp-block-heading">High yield, high risk</h3>



Launched in 2017, Celsius became popular among retail investors for paying <a href="https://cms.blockworks.co/wheres-the-liquidity-crypto-lending-explained/" target="_blank" rel="noreferrer noopener">lucrative interest rates on crypto</a> as high as 18.6%. The interest rate is earned by allegedly lending cryptocurrency to institutional investors and through decentralized finance protocols.&nbsp;



Celsius would&#8217;ve had to take on severe risk to offer such high returns in a low interest rate environment.



Data on its <a href="https://celsius.network/about-us" target="_blank" rel="noreferrer noopener">website</a>, which calls on users to “Borrow like a Billionaire,” shows the firm lent out more than $8 billion to clients and held nearly $12 billion in assets under management as of May.



“If Celsius is insolvent, it will be a harsh hit to the industry, particularly in terms of the trust of retail investors in the industry alongside a potential contagion across the industry,” Mads Eberhardt, cryptocurrency analyst at Saxo Bank, said.



Celsius’ CEL token currently changes hands for around $0.74, having lost half of its value over the past week, according to data from <a href="https://www.blockworksresearch.com/assets/cel/" target="_blank" rel="noreferrer noopener">Blockworks Research</a>. CEL plunged to $0.24 just after it froze withdrawals — 97% below its record high of $8.05 posted one year earlier.



The troubles at Celsius means the US could soon provide more clarity on regulation towards custodial providers and lenders, said Marcus Sotiriou, analyst at digital asset broker GlobalBlock, in hope of bringing more stability to the crypto space.&nbsp;



Celsius didn’t immediately return Blockworks’ request for comment.



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Celsius Clashes With Lawyers Over Chapter 11 Bankruptcy: Report

<div id="highlights-block_62aaed53cdd11" class="highlights">
 <ul>
 <li>Citigroup will also advise on offers, including Nexo’s bid to buy some of Celsius’ assets</li>
 <li>Abrupt user withdrawals echo the Mt. Gox meltdown in 2014, a crypto exec told Blockworks</li>
 </ul>
 
</div>



After freezing user accounts on Sunday, <a href="https://cms.blockworks.co/tag/celsius/" target="_blank" rel="noreferrer noopener">Celsius</a> has recruited Citigroup to advise the crypto lender on its next steps.



Celsius has brought on the bank in an advisory role, <a href="https://www.theblock.co/post/152230/citigroup-celsius-advising-after-withdrawal-freeze" target="_blank" rel="noreferrer noopener">The Block</a> reported on Wednesday. While Citigroup won’t directly provide any funds to Celsius, it will lay out possible financing routes, the report said.



In addition to its advisory role, Citigroup will reportedly help Celsius evaluate offers, including one made by rival lender Nexo, which formally approached its competitor to buy some of its distressed assets, at the time Celsius signaled liquidity issues. 



Nexo <a href="https://cms.blockworks.co/nexo-knew-celsius-was-in-trouble-before-lenders-withdrawal-freeze/" target="_blank" rel="noreferrer noopener">told Blockworks</a> it was aware Celsius had trouble with its withdrawal obligations and its findings pointed to the “unsustainability” of its business, even before the lender publicly admitted to it.



Celsius’ move to pause user withdrawals and transfers due to “extreme market conditions” triggered a fearful crypto market sell-off reminiscent of Mt. Gox’s catastrophic <a href="https://www.reuters.com/article/us-bitcoin-mtgox-bankruptcy/mt-gox-files-for-bankruptcy-hit-with-lawsuit-idUSBREA1R0FX20140228" target="_blank" rel="noreferrer noopener">bankruptcy</a> in 2014, said Youwei Yang, director of financial analytics at StoneX. At the time, the Tokyo-based crypto exchange lost about 850,000 bitcoin in a hack, leading to the firm’s collapse.



In a <a href="https://blog.kaiko.com/celsius-reaches-boiling-point-c9b258f4474f" target="_blank" rel="noreferrer noopener">report</a> Wednesday, crypto research firm Kaiko said Celsius suffered from a combination of poor risk management, bearish market conditions, and overexposure to stETH (<a href="https://cms.blockworks.co/will-lido-staked-ether-trigger-the-next-big-crypto-crash/" target="_blank" rel="noreferrer noopener">staked ether</a>, a derivative of ether locked in the Ethereum Beacon Chain), which drove the firm into a “Lehman-esque” position.



<blockquote class="wp-block-quote">“Even if they do survive this onslaught, I don’t see how anyone can trust the likes of Celsius to keep their assets safe going forward,” Conor Ryder, research analyst at Kaiko, wrote.</blockquote>



Citigroup declined to comment, while Celsius didn’t respond to a request for comment by Blockworks. On Wednesday, Celsius CEO Alex Mashinsky did <a href="https://twitter.com/Mashinsky/status/1537147449088872449" target="_blank" rel="noreferrer noopener">post a brief note</a> on Twitter — his first since his company suspended withdrawals — thanking the Celsius community for their patience.



Citigroup’s appointment wouldn’t be a new one for the crypto lender. The bank reportedly advised Celsius on taking its bitcoin mining subsidiary business public. In May, the network <a href="https://www.prnewswire.com/news-releases/celsius-network-announces-confidential-submission-of-draft-registration-statement-by-bitcoin-mining-subsidiary-celsius-mining-llc-301547547.html" target="_blank" rel="noreferrer noopener">submitted</a> a confidential S-1 draft registration for the subsidiary’s initial public offering — expected to become effective after the SEC’s review.



<h3 class="wp-block-heading">Prospects for reorganization</h3>



Celsius has also <a href="https://cms.blockworks.co/celsius-lawyers-up-following-account-freeze-liquidity-crunch/" target="_blank" rel="noreferrer noopener">tapped</a> Washington, DC-based law firm Akin Gump Strauss Hauer &amp; Feld to explore potential financing options from investors, the Wall Street Journal reported.



Dane Lund of DeFi Alliance sees that as a move to head off potential small claims court actions from its customers, which would become impossible if the company files for bankruptcy protection.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Yesterday, the WSJ reported that Celsius engaged Akin Gump for restructuring advice. This tells unsecured creditors that efforts to seek judgments in court are unlikely to unlock liquidity soon enough to beat the automatic stay.&mdash; Dane Lund (@lund_dane) <a href="https://twitter.com/lund_dane/status/1537091805061296130?ref_src=twsrc%5Etfw">June 15, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The chaos triggered by Celsius is proof that not all lending platforms are equal, according to Mauricio Di Bartolomeo, cofounder of Canada-based crypto lender Ledn.



Clients will be further incentivized to ask the right questions to gain more information on how the yield they are paid is generated, he told Blockworks. “If they are not satisfied with the answers they receive, they could proactively choose to withdraw their assets or close their loans at that particular platform,” he added.



When asked how sustainable companies in the crypto lending space are, Bartolomeo said the models used to generate yield by each vary widely, and it would be unfair to characterize them under the same umbrella.



<blockquote class="wp-block-quote">“There are significant differences in the risk management policies and in the yield generation strategies being employed by the various lenders,” he said.</blockquote>



“Those lenders who took significant risks [such as] generating yield in DeFi with their depositors’ assets, lending uncollateralized to low credit quality borrowers, taking directional market risk with client assets may be finding themselves in some trouble now,” he added.



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Celsius Calls on Citigroup for Options After Liquidity Squeeze, Report Says

Jacquelyn Melinek

<div id="highlights-block_621557c086517" class="highlights">
 <ul>
 <li>Rod Bolger has over 25 years of experience in traditional financial institutions from other industry players like Bank of America, Citigroup and PwC</li>
 <li>Celsius has over $8.2 billion in loans processed, over $18.9 billion in assets and about two million community members as of Feb. 18</li>
 </ul>
 
</div>



Cryptocurrency lender Celsius has tapped a Royal Bank of Canada alum as its new chief financial officer, the company’s CEO Alex Mashinsky told Blockworks.



Rod Bolger previously held the same title at the Canadian bank, one of the country’s largest. He has over 25 years of experience in traditional finance, with resume stints including Bank of America, Citigroup and PwC.



<div class="wp-block-image"><figure class="alignright size-full"><img loading="lazy" decoding="async" width="300" height="300" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Rod-Bolger-celsius-cfo.jpg" alt="" class="wp-image-17763" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Rod-Bolger-celsius-cfo.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Rod-Bolger-celsius-cfo.jpg?w=150 150w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Rod-Bolger-celsius-cfo.jpg?w=257 257w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Rod-Bolger-celsius-cfo.jpg?w=261 261w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Rod-Bolger-celsius-cfo.jpg?w=219 219w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Rod-Bolger-celsius-cfo.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Rod-Bolger-celsius-cfo.jpg?w=50 50w" sizes="(max-width: 300px) 100vw, 300px" /><figcaption>Rod Bolger, Celsius CFO | Source: Celsius</figcaption></figure></div>



Bolger replaces Celsius’ Interim CFO Roni Cohen-Pavon, who will remain in his role as the company’s chief revenue officer. Cohen-Pavon stepped in after former CFO Yaron Shalem was suspended last year following his arrest in Israel on suspicion of money laundering, Blockworks <a href="https://cms.blockworks.co/celsius-suspends-cfo-due-to-external-fraud-sexual-assault-investigation/" target="_blank" rel="noreferrer noopener">reported</a>.



Mashinsky told Blockworks that Shalem has since been dismissed.



“[Shalem] was questioned by the police in relation to a matter that happened before he joined Celsius, so we suspended him. And since then, he’s no longer with the company,” Mashinsky said. “It’s not a good situation, but nothing he did had to do with Celsius, so there was no money missing or wrongdoing that occured at Celsius.”



Bolger is tasked with implementing controls to protect client assets and help the company expand globally.



&#8220;I am thrilled for the opportunity to join such a fast growing mission-based company such as Celsius,&#8221; Bolger said in a statement. “I feel fortunate to be able to bring my traditional finance and banking experience to help grow this visionary global company.&#8221;



This move adds to the ongoing trend of talent migrating from other industries, mainly finance, into crypto. This shift has been building for years and is expected to continue to accelerate, Blockworks <a href="https://cms.blockworks.co/the-upside-is-huge-tradfi-talent-flocks-to-crypto/" target="_blank" rel="noreferrer noopener">reported</a>.



Bolger made over $4 million at RBC, according to <a href="https://www.erieri.com/executive/salary/rod-bolger-akvo" target="_blank" rel="noreferrer noopener">data</a> by the Economic Research Institute. He left the bank in September 2021 after five years. 



<blockquote class="wp-block-quote">“The fact that he wanted to jump into crypto is phenomenal,” Mashinsky said. It’s rare that high-paid executives at banks leave for crypto companies, but Bolger did, which speaks volumes to the crypto industry’s ability to attract talent, Mashinsky added. </blockquote>



“There are CFOs who do number-crunching, and there are CFOs who love creating businesses and, [Bolger] is doing the latter,” he said.



Celsius has over $8.2 billion in loans processed, over $18.9 billion in assets and about two million community members, as of Feb. 18, its website <a href="https://celsius.network/about-us" target="_blank" rel="noreferrer noopener">stated</a>. In November, the company expanded its Series B funding round from $400 million to an oversubscribed <a href="https://cms.blockworks.co/?s=celsius#:~:text=Celsius%20Expands%20its%20Series%20B%20From%20%24400M%20to%20Oversubscribed%20%24750M" target="_blank" rel="noreferrer noopener">$750 million</a>, marking one of the largest funding rounds in crypto history.



Celsius hopes that it can continue to “build that bridge from TradFi to crypto” alongside other crypto-focused companies by bringing in talent from both traditional finance and crypto, Mashinsky commented.



“We don’t want to take the worst habits from Wall Street, we want to bring the best ideas that help crypto…there are trillions of dollars [in traditional finance] that need to cross that bridge, and that’s what is at stake,” Mashinsky said.



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Celsius Recruits Royal Bank of Canada Vet as CFO After Arrest of Predecessor

Liz Coyne

<div id="highlights-block_6176c5e28023d" class="highlights">
 <ul>
 <li>Citi is working to connect clients to wallets and enabling corporate clients to accept consumer payments, Fraser said</li>
 <li>The global bank sees benefits from the digital asset space around processing, fractionalization, programmability and transparency, she said.</li>
 </ul>
 
</div>



Digital assets will be part of the future of financial services and financial markets, Citigroup CEO Jane Fraser told Yahoo Finance Monday morning.



During a larger conversation about Citigroup employees returning to the office, she shared her views on decentralization, digital assets, cryptocurrencies and more.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">&quot;It’s clear that digital assets will be a part of the financial services and financial markets, the future of them,&quot; <a href="https://twitter.com/Citi?ref_src=twsrc%5Etfw">@Citi</a> CEO Jane Fraser says, later adding: &quot;Real-time payments will be here in the near term, and digital currencies may be part of that future.&quot; <a href="https://t.co/jKUi01vLxu">pic.twitter.com/jKUi01vLxu</a>&mdash; Yahoo Finance (@YahooFinance) <a href="https://twitter.com/YahooFinance/status/1452632446231535627?ref_src=twsrc%5Etfw">October 25, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“It&#8217;s clear that digital assets will get part of the financial services, and financial markets,” Fraser said. “Real-time payments are both, both in the sense of their frictionless, they&#8217;ll become more global. They&#8217;ll become ubiquitous. [They] will be here in the near term, and digital currencies may be part of that future”



Two years after the global bank abandoned its CitiCoin crypto experiment, Citi <a href="https://www.citivelocity.com/citigps/bitcoin/" target="_blank" rel="noreferrer noopener">announced</a> that it was <a href="https://cms.blockworks.co/citigroup-gets-back-into-crypto/" target="_blank" rel="noreferrer noopener">considering</a> offering client cryptocurrency services such as trading, custody and financing.



Now the bank is proceeding thoughtfully and with appropriate caution, said Frasier. “There&#8217;s still a lot of questions about how the space evolves around regulatory clarity around some of the scalability around resiliency, certainly around some transparency, and making sure that there are the appropriate guardrails in the system, particularly for our retail clients we don&#8217;t want them participating in areas that know they&#8217;re not necessarily as well equipped to understand the risks of.”



In late August the bank was <a href="https://cms.blockworks.co/citi-considering-trading-bitcoin-futures/" target="_blank" rel="noreferrer noopener">looking into</a> trading bitcoin futures contracts on the Chicago Mercantile Exchange (CME) in an effort to provide institutional clients with exposure to digital assets. Then, Citi’s move into bitcoin futures trading followed other major banks announcing digital asset strategies, including Goldman Sachs and Bank of America.&nbsp;



Today Citi is working to connect clients to wallets, and enabling businesses and corporate clients to accept consumer payments — but proceeding with caution, according to Fraser.&nbsp;



“We&#8217;re building the infrastructure for retail, real-time payments, we&#8217;re doing so cautiously because space is moving so quickly, and not all the guardrails that you would like to see are yet in place,” she said. “As a banking CEO, I do believe guardrails are important and necessary with a safe, safety and soundness of the financial system.&#8221;