Blockchain-based DeFi platforms need scrutiny, experts warn investors
As leading cryptocurrencies, investors in DeFi (decentralized finance) platforms must also exercise “caution and scrutiny” amid growing concerns about the liquidity of this particular type of cryptocurrency service, experts warned Monday.
The warning came when Celsius Network, a DeFi platform and one of the largest crypto lenders, announced that it was “stopping all withdrawals, exchanges and transfers between accounts” for its 1.7 million customers.
“The broader cryptoecosystem has been shaken 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 advisors.
“Celsius ‘unique move effectively blocks customers from accessing their assets, which will do little to allay critics’ fears that some DeFi platforms may be Ponzi schemes,” he noted.
Celsius Network said in an email to customers late Sunday that due to extreme market conditions, “we announce that Celsius is stopping all withdrawals, exchanges and transfers between accounts. We are taking this action today to put Celsius in a better position to to respect their withdrawal obligations over time. “
Celsius operates in much the same way as a bank, but instead of in fiat money, it does so in cryptocurrency. It collects deposits and then lends them out.
“There are legitimate and serious concerns about network high returns, links to failed dollar-denominated stablecoin terra, and reserves,” Green said, urging people to exercise caution and scrutinize cryptocurrency companies offering customers lucrative double-digit returns on assets such as Bitcoin and Ethereum.
DeFi lending giant Celsius stops withdrawals has weighed on the broader crypto sector with Bitcoin, the world’s largest digital token plunging to its lowest point in 18 months of trading in Asia on Monday.
Decentralized Finance or DeFi offers financial instruments without relying on intermediaries such as brokerages, stock exchanges or banks by using smart contracts on a blockchain.
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(Only the headline and image of this report may have been reworked by Business Standard employees; the rest of the content is automatically generated from a syndicated feed.)
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