• S Pettigrove and M Bacina

Celsius freezes withdrawals, swaps and transfers



Celsius, a US based cryptocurrency exchange and lender, suspended all withdrawals, swaps and transfers between accounts on Monday, 13 June 2022. In a blog post, the Celsius team cited “extreme market conditions” and stated that it is “taking action today to put Celsius in a better position to honor, over time, its withdrawal obligations”.

Celsius’ Terms of Use state that title to digital assets held in custody wallets shall remain with the user. In suspending withdrawals, swaps and transfers, Celsius relied on the same clause which also specifies that it may suspend access to services, including custody services and custody wallets, in the event of market disruptions or periods of volatility. Celsius is not a licensed bank or depository institution and does not assume fiduciary obligations to its users. Digital assets held in Celsius are not covered by private or government insurance or segregated under client securities laws.

At the time of writing, all withdrawals, swaps and transfers from Celsius remain suspended. It has been reported that Celsius has appointed Citigroup and lawyers to explore restructuring options. On Friday, it was also reported that US State regulators are investigating the accounts freeze.


It remains to be seen how a US Court would deal with users’ digital assets held by Celsius in the event of insolvency. A user may be an unsecured creditor unless they can establish a proprietary interest in assets held by Celsius. That analysis is potentially complicated where a user has transferred digital assets to Celsius or a third-party custodian which holds the private keys to those assets.

In an Australian context, we are not aware of any Court decision which has addressed the status of users’ digital assets in the event of the insolvency of a firm. However, as many readers will be aware, the Treasury recently completed a consultation on establishing a bespoke licensing regime for crypto asset exchanges, brokers and custodians. The Treasury proposal contemplates a custody regime which would require crypto assets to be held on trust for customers and appropriately segregated.