Crypto scandal surrounding Berliner Bank Nuri shows dangers in the Bitcoin world

As an exchange office: Accounts blocked: Crypto scandal surrounding Berlin Bank Nuri shows dangers in the Bitcoin world

Berlin’s digital bank Nuri has aggressively promoted a “Bitcoin income account” with attractive three percent interest rates a year for about a year. Anyone who has completed it can no longer get their money because it ended up in the United States in a complicated way.

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Sure, anyone who has read the general terms and conditions of Nuri’s “Bitcoin Earnings Account” should not be surprised. But who gets this far when Berliner Bank still has phrases like “High return is history” on its website? Not with Nuri’s Bitcoin earnings account. This increases the value of your bitcoins by up to 3% per year. And all by itself. ” advertise?

In fact, it is now clear that Nuri’s customers have no business relationship with Nuri at all. Contrary to what the announcement suggests, investors in the “Bitcoin yield account” have signed a contract with the American company Celsius Network – and they have now stopped all payments to their customers.

The business model works like this: Nuri acted as an intermediary and offered the account on behalf of Celsius. The customers then entered into the contract with the Americans. They make a living by borrowing cryptocurrencies, preferably bitcoin, from their customers against interest payments and then lending them to other customers. Celsius makes money when their loans pay higher interest rates than the promised customers like Nuris.

Celsius Network stops paying

The model works well as long as cryptocurrency prices rise. If they fall like they did last time, it will be difficult. Now you can argue that this is true for any bank, but Celsius Network is technically not a bank. Legally, the company is more of a kind of exchange office. This means that there is no deposit insurance for Bitcoins at Celsius. And now it’s taking revenge. Because many customers demand their deposits back when cryptocurrencies fall and Celsius had always promised to pay them off, the US company now has to cancel loans to have the necessary liquidity. This does not work adequately, which is why Celsius stopped paying out on Monday. The company is said to manage about $ 12 billion in cryptocurrencies.

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German customers at Nuri are also hit by payment freezes. How many there are is uncertain. Nuri says it has about 500,000 customers, a fraction of whom have closed the “Bitcoin earnings account”, as Kristina Walcker-Mayer, the head of the neobank, told the website However, the size of this fraction is unknown. However, even one percent of Nuri customers would already make up 5,000 affected people.

First of all, their money is not gone. It is likely that Celsius will release access to accounts again as soon as the US company has more cash to process payments.

The risky cryptocurrency business

However, the case shows how risky it is to trade with such neobanks. As shown, the Celsius business model does not indicate that it is not a bank. Even Nuri customers can only gradually find out that they do not close the Bitcoin earnings account with Nuri, but with Celsius, and that there is no deposit insurance there. Not transparent either: Nuri itself is not a bank at all, but a financial services provider that uses the banking license and infrastructure from Solarisbank, which operates such a platform for neobanks. But Solarisbank also disclaims any responsibility for Nuri and Celsius’ business.

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The process shows how risky the crypto business is for investors. Although Nuri does not hide the risks of its Bitcoin income account, they are only visible if you read the terms and conditions carefully. Only then does it become clear that Nuri is not a bank that lends money to another non-bank with Celsius, and that the umbrella organization Solarisbank does not assume any responsibility either. In the United States, this business model has already gotten into trouble. Regulators have banned Celsius from opening new accounts here since mid-April. This does not apply to foreign customers, which is why Nuri continued to offer the Bitcoin income account. It can still be found on the website today, although no new contracts can be signed at this time.

Lesson for investors: Cryptocurrencies are based on the idea of ​​deregulated financial markets. Anyone wishing to take part in this must therefore also do without the protection known from the conventional banking system, such as deposit protection. Therefore, crypto investments are for experienced investors who can assess and hedge risks. Beginners should not be fooled by terms like “earnings account” and relatively high interest rates of 3 percent and more, and if in doubt, check very carefully who they create cryptocurrencies with and what routes the money takes to it – and what security offered to you.

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