Quebec Pension Manager and WestCap Invest $ 400 Million in Cryptocurrency Lending Platform

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The Caisse de depot et placement du Quebec made its first investment in a cryptocurrency company, even amid growing scrutiny of the world of digital assets from global regulators.

La Caisse, which is Canada’s second-largest pension fund manager, announced on Tuesday that it was participating in a US $ 400 million funding round for New Jersey-based cryptocurrency lending platform Celsius Network. The WestCap group, based in San Francisco, is investing alongside La Caisse, a private equity firm created by former Airbnb executive Laurence Tosi.

The main activity of Celsius is to facilitate the lending of cryptocurrency to retail and institutional investors. Users deposit cryptocurrency using the Celsius app, and the company then lends the funds to borrowers for returns of up to 17%.

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“The way we look at Celsius is that it’s the bank of the future. They offer loan and deposit services not only to retail investors but also to institutions. In addition, we really liked the management team and the expertise it offered in the cryptocurrency world, ”said Alexandre Synnett, Executive Vice-President and Chief Technology Officer at La Caisse, in an interview. .

The investment values ​​Celsius at over US $ 3 billion, a significant jump in the company’s valuation from its previous funding round last June. At that time, the company was worth around US $ 120 million. The controversial cryptocurrency firm Tether International – which issues the Tether stablecoin, and whose executives are being questioned by the US Department of Justice over allegations of bank fraud – was the main investor in Celsius’ first capital increase.

In a statement announcing the latest funding, Celsius said it would use the funds to double its team from 486 to 1,000 employees and to grow globally. The company has processed $ 8.2 billion in loans and claims to have one million registered users on its platform.

Crypto loans have come under heavy pressure from US regulators, who say the services do not comply with securities laws. Last month, the U.S. Securities and Exchange Commission blocked crypto exchange giant Coinbase from offering a new crypto lending product that would have allowed users to earn interest on holdings of a stablecoin called USDC. (A stablecoin is a type of cryptocurrency that is backed by an underlying asset, such as the US dollar, to avoid wild price swings.)

Celsius Network has also been targeted by US regulators. Texas and New Jersey recently accused the company of offering residents unregistered titles. States argue that Celsius markets its products as alternatives to bank savings accounts and therefore should be registered with regulators for proper oversight.

Celsius was once based in the UK, but moved its operations to the US after the UK’s Financial Conduct Authority imposed rules requiring all crypto asset companies to be registered with it.

Mr. Synnett indicated that the Caisse is aware of the regulatory pressure on crypto lending companies. But, he said, the pension manager believes blockchain and crypto technology is here to stay, and the industry needs to be regulated in the right way.

“We made this investment with the expectation that this technology is not going to go away,” he said. “We will continue to look for companies in this space. It’s a good way to diversify and position ourselves as global investors in the digital asset industry.

Canadian pension funds largely appear to stay away from major investments in crypto companies, making the Fund’s large investment in Celsius an anomaly. The Ontario Municipal Employees Retirement System (OMERS) pension fund has a stake in Purpose Investments, which launched a Bitcoin ETF earlier this year. Its venture capital arm, OMERS Ventures, previously invested in three other crypto firms – Digital Currency Group, Citizen Hex and OB1 – but has since abandoned those investments.

With a report by David Milstead

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