Celsius Revival Hinges on “Crypto-Based Solutions and Tradable Wrapped Assets”

A new recording has emerged of Celsius Network Co-founder Nuke Goldstein discussing the plan to use “crypto-based solutions” to repay its Earn customers and revive the company’s fortunes.

Crypto Lender to Create CEL-Wrapped Tokens That Could Be Traded on Uniswap

In the recording, sent anonymously to crypto YouTuber Tiffany Fong, Goldstein outlines Celsius Network’s proposed recovery plan in greater depth. The plan was hinted at in another leaked recording of a Celsius All Hands Meeting, where company CEO Alex Mashinsky and Chief Compliance Officer Oren Blonstein spoke about “unprecedented and really innovative solutions” to honour creditor claims.

According to Goldstein, Celsius intends to first simplify its coin holdings by consolidating its remaining funds consisting of more than 50 different cryptocurrencies into Bitcoin (BTC), Ether (ETH), and USD Coin (USDC). After the consolidation, Celsius will create a “wrapped claims token” to be known as Celsius X (Cx). The wrapped token will represent the ratio between the amount Celsius owes its creditors and the amount the company actually has on hand.

Celsius customers will then be able to redeem the wrapped tokens for a specific ratio. Conversely, they can keep their Cx tokens on the Celsius platform and wait for a larger payout when revenue starts streaming in from the company’s bitcoin-mining operations and other potentially lucrative opportunities in the broader crypto market.

Additionally, Goldstein claimed that Celsius customers would also be able to trade the wrapped tokens on decentralized exchanges such as Uniswap, where market forces would determine their value.

Plan Could Allow Customers to Speculate on Celsius’s Future

Tiffany Fong indicated that she received the Goldstein recording before the All Hands Meeting on September 8. According to her estimation, the price of the proposed Cx tokens will probably not be pegged 1:1 to the value of the original cryptocurrency in the same way assets like Wrapped BTC (wBTC) are pegged 1:1 to Bitcoin. She explained this would be primarily because of the deficit in the Celsius balance sheet, which, according to the crypto lender’s latest Coin Report, stands at $2.5 billion.

While there is a risk of Cx prices tumbling in the event of mass sell-offs, the recovery plan allows customers to speculate on the crypto company’s long-term future.

Is Celsius Copying the Bitfinex Playbook?

Many Celsius customers have likened the proposed recovery plan to what Bitfinex did after losing 12,000 BTC in a 2016 hack. In the Bitfinex recovery solution, the crypto exchange opted to issue BFX tokens representing the value of the lost BTC. The idea was to buy back the BFX tokens from Bitfinex customers at $1.00 per token. Conversely, customers could receive a percentage of shares in Bitfinex, allowing them to speculate on the exchange’s eventual recovery.

It is said that within half a year, the recovery plan enabled Bitfinex customers to make back 75 to 100% of their funds. However, Bitfinex’s repayments were greatly aided by the recovery of about $3.6 billion in BTC from hackers responsible for the attack.

Celsius has no such luxury to fall back on. Instead, it will rely on revenue from BTC mining and transaction fees from its proposed rebranding as a crypto custodian to cover the deficit in its books.

Celsius’s Unsecured Creditors Committee (UCC) has acknowledged meeting with CEO Alex Mashinsky, who presented a proposal to them. However, the Committee has yet to publicly give its opinion on the proposal, instead urging the crypto lender to file the whole plan with the bankruptcy court.