Due to erratic market circumstances and financial challenges, the Singapore-based cryptocurrency lending and trading platform Vauld has ceased withdrawals, trading, and deposits as of Monday. Vauld now joins prominent cryptocurrency brokers Voyager Digital and Celsius Network LLC in suspending trading and withdrawals.
Babel Finance, another cryptocurrency loan business, has stopped accepting withdrawals.
The firm stated it had suspended operations after consumers withdrew about $200 million over the previous three weeks, which saw cryptocurrency values collapse, in a blog post authored by Vauld CEO Darshan Bathija, a graduate of BITS Pilani. Other platforms that have suspended customer withdrawals have claimed “unusual liquidity pressures” as the cause for stopping consumers from getting their money out.
In order to evaluate options, including a potential reorganisation, Vauld claimed to have retained financial and legal counsel. The business has hired Kroll as a financial advisor, Cyril Amarchand Mangaldas as legal counsel in India, and Rajah & Tann Singapore LLP as legal counsel in Singapore. The startup secured $25 million in July 2017 from a group of investors that included Pantera Capital, Coinbase, and Peter Thiel’s Valar Ventures.
Prior to this, prices of cryptocurrencies had been declining as a result of the US Federal Reserve increasing policy interest rates to control inflation, depleting the market of surplus liquidity. The two stablecoins TerraUSD and its sibling cryptocurrency Luna, however, lost more than $40 billion in investor funds in May when they deviated from their dollar peg. Other significant digital assets, including Bitcoin, which has lost more than 50% of its value since May, also saw a selloff after the one in TerraUSD.
The liquidity crisis these corporations are experiencing is the most important part of this trend. Given its significant stakes in Luna, Three Arrows Capital (3AC), a Singapore-based hedge fund, had its assets under management fall by over 70% following the collapse of TerraUSD and Luna. As a result, 3AC missed payments on $670 million in loans provided to them by Voyager Digital. Due to the knock-on effects of this, Voyager Digital had to halt trading, deposits, and withdrawals. Similar to Celsius Network, another lender, all withdrawals, swaps, and transfers between accounts for its 1.7 million clients were halted last month. Significantly, 3AC has declared bankruptcy.
Cryptocurrencies are a highly leveraged asset class, as seen by the numerous instances of crypto lenders being forced out of business by the skyrocketing prices of digital assets. According to a Wall Street Journal story, exchanges including BitMEX and Deribit liquidated 3AC’s leveraged bets on several cryptocurrencies after it failed to pay margin calls. 3AC is a significant borrower in the system. The article also mentioned that certain lenders have begun returning loans provided to sizable clients in order to assess their financial stability due to the volatility in the cryptocurrency industry.