Cryptocurrencies | The risks are growing for the CDPQ partner

The company in which Caisse de depot et placement du Québec (CDPQ) is betting to venture into cryptocurrencies recognizes, for the first time, that it can be tightened by stock market police, which increases the risk level of this investment up to sa. 300 million announced last fall.

Posted at 7:00 am

Julien Arsenault

Julien Arsenault
The Press

Celsius Network recently added regulatory changes to the many risks – such as theft of virtual currencies, missing passwords and irrevocable transactions – that await its depositors in a six -page document that has been post online. The term “regulatory risks” did not previously appear in the previous disclosure.

Based in London, the company is a platform that aggregates deposits of cryptocurrencies such as bitcoin and offers loans and interest, often more than 10%, to depositors, which is higher than that offered by banks. . traditional. Last October, it accepted Quebecers ’woolen stocking from its investors. The pension plans manager has not measured the extent of its bet, but it could reach up to 300 million, according to its latest annual report, published last week.

“If I’m an investor in Celsius, it’s definitely a yellow flag because there’s a risk passing over the company,” said Martin Lalonde, portfolio manager at Rivemont, a firm that offers a bitcoin-based mutual fund.

The company’s business model may be at risk depending on regulatory changes.

Martin Lalonde, portfolio manager at Rivemont

Cryptobanks like Celsius are not regulated, but that could change soon. In the United States, for example, the CDPQ partner has been under the watchful eye of regulatory authorities – the Securities and Exchange Commission (SEC) – for several months. One of the main reasons: Celsius pays its depositors with its own virtual currency, which some stock market watchers say is an unregistered offer of securities that violates the rules.

“CEL (the digital token of Celsius) faces various risks […] as well as regulatory risks ”, the company emphasizes, without advancing the potential consequences of possible changes in the regulatory framework.


PHOTO PROVIDED BY CISION

Based in London, Celsius Network has received an investment from CDPQ that could reach 300 million.

It also makes cryptocurrency loans to hedge funds, but it is not considered a bank. This means that no one is protecting the money of the depositors. In addition, cryptobanks are not subject to a minimum capital threshold on their reserves, unlike financial institutions.

On Tuesday, the company did not respond to questions sent by The Press.

There is a lot of uncertainty

Any legislative change south of the border will have consequences for the company, which will then have to follow multiple rules in order to continue its activities. Last February, the SEC imposed fines worth US $ 100 million on BlockFi, a platform similar to Celsius Network, for regulatory violations. This is the first punishment of its kind. The Celsius Network may also suffer.


PHOTO ROBERT SKINNER, THE PRESS

Martin Lalonde, Portfolio Manager and President of Investissements Rivemont

We say to these companies: “Wô, you can’t do anything”. By giving notice of this, Celsius wanted to let the filers know that something was happening. We will see in the coming weeks if a decision will be made.

Martin Lalonde

Caisse sees something different.

Her spokeswoman, Kate Monfette, said in a statement that her partner’s departure was a “proactive effort to update [ses] disclosure policies, “added that the company is” hyper-growing in a hot industry. ”

“This is a great time for us to look at this sector and invest in new asset types while taking a very focused and thoughtful approach and working with our partners for industry regulation.” , he wrote.

Mr. Lalonde has a category: CDPQ’s investment is “more risky than initially” due to circumstances. The portfolio manager added, however, that it would take several years before figuring out if the Quebec institution had made a bad bet.

Several American financial institutions such as Morgan Stanley, JP Morgan and Wells Fargo have entered the virtual currency niche. Caisse’s decision, even if it was risky, was not in a hurry, the portfolio manager at Rivemont believes.

Learn more

  • 1 million
    Celsius Network says it has more than 1 million customers worldwide

    Source: Celsius network

    420
    CDPQ’s net assets will be approximately 420 billion by the end of 2021

    Source: Caisse de dépôt et placement du québec

Leave a Comment