Cryptocracy hits German private banks | BR24

In its entirety, the value of all cryptocurrencies worldwide is only estimated at about one trillion dollars: a few months ago it was three trillion dollars. The fall in the price of cryptocurrencies like Bitcoin is spreading.

Neobank Nuri announces partnership with Solarisbank

Bitcoin borrowers such as the American platform Celsius Network and the German neo-bank Nuri, which works with it, are now also in the spotlight. Nuri forwarded Bitcoin balances to the US platform and promised protection through the partnership with Solarisbank in Berlin, which belongs to the German Deposit Insurance.

Until a few weeks ago, savings banks and other banks also increasingly planned to offer their private customers in Germany financial products based on Bitcoin and other cryptocurrencies. However, the Berlin neo-bank Nuri, formerly known as Bitwala, shows how risky such financing can be.

US financial partner Celsius Network refuses to pay out

On the one hand, Nuri offered trading in cryptocurrencies and on the other hand a so-called “Bitcoin income account”. Following the acquisition, customers were able to transfer their bitcoins to the US provider Celsius Network for an interest rate of recently three percent per year, but the company has now frozen its accounts.

A Celsius blog post talks about a necessary measure to stabilize liquidity and operations. Insolvency in the United States is feared. The flight from Bitcoin and other cryptocurrencies seems to have jeopardized many lending and lending agreements, which could now only be implemented with large losses.

Nuri’s bitcoin earnings accounts could be secure with Solarisbank

Neobank Nuri with an estimated 500,000 customers works with Berlin Solarisbank. She has a German banking license, euro deposits of up to 100,000 euros must be secured with her.

If necessary, the Guarantee Fund of the Federal Association of German Banks (BdB) and its member banks shall be liable for such deposits if the “Bitcoin Earnings Account” also falls under it.

In any case, Celsius Networks in the United States has no such protection for customer funds. The New Jersey-based company is one of the unregulated U.S. financial services companies in the money services industry (MSB) over which there is no public oversight.

Celsius Network passed on crypto assets from Bitcoin & Co

Celsius’ business model is to manage cryptocurrencies for their owners in a decentralized way, thereby creating new extra revenue. The core idea is that customers do not have to sell their cryptocurrencies to make a profit. They should keep their Bitcoin, participate in possible price increases and at the same time receive interest income by lending the coins to the US platform.

If, instead of profits, there are losses and investors want to liquidate their Bitcoin balances, such a business model can quickly reach its limits. The cryptocurrencies and their equivalent value (in dollars) are not stored by Celsius, but are sold on to other providers (decentralized) for a fee or interest as profitable as possible. More complicated financial products are said to have been used as swaps, which can switch back and forth between different cryptocurrencies.

Difficulties arise in the crypto market because many customers want to get out of Celsius quickly and perhaps at unfavorable prices, bottlenecks can arise in several places, which makes reverse treatment difficult or in the worst case even impossible.

The world’s largest crypto exchange Binance paralyzed temporarily

The turbulence around the Celsius Network following the previous fall in the price of Bitcoin and other cyber currencies also paralyzed the world’s largest cryptocurrency exchange Binance in China for at least several hours at the beginning of the week. Binance chief Changpeng Zhao pulled the emergency brake and suspended Bitcoin withdrawals for several hours due to a “backlog”.

The trading stoppage was initially expected to last only half an hour. Then Binance CEO asked for a little more patience via Twitter: “It takes longer than I originally thought” (Changpeng Zhao). The problem only affects the Bitcoin network. Other networks remained intact. It then took until the evening for Binance to make it all clear.

Further development is still open

How things will continue with Celsius, Nuri and Solarisbank is currently still open. A solution to the difficulties would also be conceivable for the Bitcoin lender in New Jersey and the German bank customers in Nuri, especially if the market for cryptographers finds a way up again. At the moment, however, the situation remains tense as the Bitcoin price moves towards $ 20,000 and the sale since last week is still ongoing. This is the lowest level since 2020.

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