This week’s AMA begins here with updates from Alex, followed by some questions with Roni Cohen-Pavon (one of Celsius’ legal advisors and partner at Israel’s top law firm HFN), and ends with community questions. As always, the timestamp from YouTube is hyperlinked to each question below.

Summary: Alex starts with some updates, including a walkthrough of viewing stats about Celsius in the app, on the Celsius website, and on Celsians.com. We hear from Roni about how he got into crypto law, and how Celsius has focused from the beginning on transparency and compliance with local regulations. Celsius has always been proactive in filing with regulatory bodies like FinCEN and the SEC, and will only offer services in a jurisdiction with explicit approval. We also learn from him that Celsius will soon be opening offices in Australia and Gibraltar, UK, and is currently applying for lending licenses in two new US states.

Looking to the future, we learn that Celsius is planning to add options for legal beneficiaries to the app, will keep withdrawals free even with high ETH gas fees, and will likely open up new partners through the recent ruling by the US OCC. We also learn that Celsius will increase rates on BTC, ETH, and other coins this week due to higher yield. Excitingly, Alex also let us know that the target for the equity round is $30 million due to investments from other institutions, and that CEL token will be listed on a big exchange during the first week of August.

Finally, much of this AMA is focused on the fact that from the beginning, Celsius has strived to work in the best interest of their users and has aimed to do everything in a transparent way that is in accordance with all local regulations. While Celsius’ business model has sometimes taken some work to explain to regulators, it has helped ensure that Celsius’ business can remain stable during the ups and downs of crypto markets and has given regulators no reason to intervene. Celsius is even planning to roll out a new feature with interest payments that will allow you to verify that you are earning the correct amount, as well as being able to verify that Celsius actually earned this interest and see how much everyone else earned that week.

And if you’d like to earn interest on your crypto, gold, and stablecoins with Celsius, scroll to the end for instructions on how to get $20 in BTC when you sign up.

Celsius Updates

1. Great week for Celsius. Big surge this week in new users and deposits, and the BnkToTheFuture raise has currently crossed $18.8 million from 850 investors from all around the world
2. Gem ACH and SEPA. Celsius is working to lower fees on these payment methods and will do so in the future to be able to give back more to the community
3. Looking for more data? Celsius publishes data real-time on the community page. Here you can see how many people are using and joining Celsius, as well as how much they’re depositing and Celsius’ total AUM. You can also look on the website at the Top 100 holders of CEL. Putting all of this info together, you can see the direction the company and CEL token are moving. Celsians is also a great website that shows interest rates, wallet locations of CEL token, and community growth, among other metrics.

Questions with Roni

Q: Roni– Tell us a bit about your background, and why you decided to work with Celsius.
Roni: Just to make it clear– I work for HFN, which is Israel’s biggest law firm– and I do not work for Celsius. For 20 years we’ve been dealing with global, borderless industries that are driven by regulation. And for the past six years I’ve been focusing on FinTech, payment processing, AML, etc– I actually bought my first Bitcoin in 2014.

In 2016, I noticed that regulation was affecting the price of cryptocurrencies– I was doing regulation and AML worldwide, and I thought that I should trade based on regulation worldwide. After doing more research, I realized that cryptocurrency is going to change the financial world, and decided that I wanted to make this into the law that I practiced. However, at the time, no one really believed that Bitcoin was going anywhere, because the only thing anyone knew about it was that it was associated with the Silk Road and criminals. Working at the biggest law firm in Israel, my firm couldn’t afford to risk their reputation by diving into the crypto space, so they took baby steps. Importantly, we had to understand who we could onboard safely– we see ourselves as gatekeepers, and if we onboard a client it means that we’re giving the client our endorsement. We only want to work with businesses who aren’t going to scam people, and who are building something good that we’re going to be proud of.

I remember during my first meeting with Alex in 2018 he asked me two things: 1. Keep him out of trouble, and 2. Help him convince people that Celsius isn’t too good to be true. He knew that he needed to build trust, to help people understand that Celsius is working with regulators and doing things in a way very similar to how people traditionally make money from their assets– but this was very difficult back then. Our first big decision was not to do an offshore ICO. We wanted to do it in the UK with a top-tier law firm– and we had to convince those guys to get into crypto and work with Celsius. Then we had to structure how to approach the ICO offering in the US, and we were one of the first companies to file a Form D with the SEC that declares everything that Celsius is doing, and also registered with FinCEN. Most importantly, we wanted these big regulators to know that from the beginning we are not hiding anything. A big difference between Celsius and other companies– regulators are always so surprised that Celsius filed a Form D because no one else bothered to do it. Usually you cannot find any connection between crypto companies and SEC unless it is due to fraud, but Celsius is voluntarily submitting forms and information to them.

We were really ahead of our time– in 2018 there was no requirement for AML for ICOs and crypto transactions, but we implemented a comprehensive KYC and AML process because we didn’t want this to be a problem in the future– and now all of these things are required for everyone, so Celsius was really ahead of the curve.

Q: Could you compare working with what Celsius vs what some other crypto companies have done?
Roni: In the case of many other companies, they decided to push KYC/AML to later– but because of this, exchanges are getting shut down, people are not able to withdraw their money from exchanges– because if you can’t show regulators where you got your money, that makes it worthless. Simply put, I’ve come across companies and clients who decided not to do AML/KYC, and they don’t exist anymore because they were not able to take the money to a bank or pay their employees once regulators started looking into where the money was coming from.

Looking back, it was easy to know that we should do KYC/AML, but it was not an easy decision to do it– especially when so many of our competitors were not. I think it was a quite challenging to go through, but without that we wouldn’t be here today.

Q: You’ve helped us be first to apply for some of these licenses all around the world– could you share some secrets with our viewers about this process?
Roni: It’s not a secret– it’s not that easy to get a license in the crypto space! Regulators aren’t trying to kill it immediately like in the past, but the fact is that they still don’t really understand it– some are taking a step back and are not really willing to regulate it. When we first launched the app, we approached several regulators, because while we launched the ICO from the UK, that didn’t mean that we needed to operate from the UK. But no one wanted to touch it, just because the regulators didn’t understand it, and it’s not easy to know which licenses to get and where, especially because of Celsius’ business model– you can buy crypto, send it to Celsius and earn interest, and get loans– and these are all different services governed by different regulators in the same state (and may vary from state to state).

The world is changing now– things are a bit clearer after the AMLD5, so more and more regulators are willing to do the registrations, and we have completed registration with the FCA in the UK. Normally registrations are 1 to 2 pages, but everyone in my department in the UK worked on this for about two weeks– including how we manage risk, how our IT services connect with each other, our AUM, how we secure the money, and what our future plans are– and we ended up filing 270 pages describing Celsius.

Q: How is Celsius expanding as a result of the equity raise?
Roni: I’m really happy about the recent round of funding as well, because this will enable us to apply for more licenses worldwide, and open more offices as well. We are now opening an Australian office, which I think is a really good market with a lot of opportunity, and not too many crypto companies have entered this space yet. So we’ll start there with AUSTRAC, which is the parallel of FinCEN in the US. This will allow us to buy/sell crypto, as well as obtain a lending license there.

Next in line is Gibraltar, where Celsius will have an office to service the UK market, especially in the post-Brexit era. Not many companies are able to take into account the differences between the UK and Europe, and so Celsius realized they need to treat the two as separate entities moving forward. We are also applying for lending licenses in two US states that are currently blocked, and are in discussions with regulators there. Following the equity raise, the prerogative I received is that wherever Celsius is able to get licenses and new jurisdictions, we will apply for them. Ultimately, it’s all about building trust, and showing people that what we do is not too good to be true in a fully transparent way.

Q: How do you convince regulators and potential users that Celsius’ service is not too good to be true?
Alex: When we give back as much to the community as we do, of course people are going to say it’s too good to be true! But now that there are other companies offering similar rates, everyone believes that we might actually be able to do it. So the issue wasn’t that Celsius’ rates were too good to be true, it’s just that everyone else before Celsius was stealing so much from you– that’s what the problem is. And when you use other services who charge fees, people don’t even consider that you can do this without charging fees.

Roni: Regulators don’t always understand what Celsius is doing. My personal vision is that the only way to bring crypto to the masses is through trust and traditional tools such as licenses. Similarly, adoption of digital banks only happened after the FCA and FinCEN came in and started regulating these systems. So we are constantly discussing with regulators and trying to get their blessing if we can’t get licenses from them, and we are constantly trying to add licenses and jurisdictions as well.

Alex: Our job is to convince the regulators that we are providing traditional services while simply offering more because we are acting in the best interest of our community. Celsius decided from day one that there was no conflict between being compliant with regulators and providing these financial services, while most of the other projects and ICOs decided not to register with anyone or go through KYC/AML. And this is one of the main reasons why we have been able to avoid issues like subpoenas from the SEC that many others in this space have seen.

Roni: If you look back to mid-2017, the SEC acted against companies that they thought were not acting in the best interest of their clients. As long as you provide good services and are fully transparent, the regulators will have no incentive to act against you. And it’s important not to forget that to be able to work with the big institutions that we work with, Celsius must be able to verify that all money is clean. I think it’s really telling that one of the first regulations for the crypto space was AML, and this is crucial because one bad apple could ruin Celsius’ business and cause a crackdown from regulators.

Community Questions

Q: What is the benefit of investing in Celsius Network through BnkToTheFuture?
Alex: We are not a neutral marketplace like DeFi, and we are not like a bank who is only acting in the interest of their shareholders– we are actively acting in the best interest of our users. We wanted to further align the interests of our users with those of Celsius, and we thought the best way to do that was allowing our users to participate and benefit from the value creation of our company by owning equity. And I think it’s important that we are bringing in our community at the same level as a big investor like Tether, and they are not getting special benefits compared to anyone else who wants to invest.

Q: With the new guidance from the US OCC allowing banks to be custodians for digital assets, do you see Celsius acquiring a banking license?
Alex: Prior to this announcement from the OCC, banks were unsure whether or not they could touch cryptocurrencies and if the regulators would crack down on them for this. I don’t see this change as making it likely that Celsius will become a bank, but I do see this making it more likely that Celsius will now be able to work with many more banks in the crypto space.

Roni: Alex, I’m so proud that you gave the best legal answer a lawyer could give. I think this will be great for adoption and this will allow more projects to grow and also create more potential partners for Celsius as well.

Q: Why don’t you have $10 or $100 loans?
Alex: There are both technical and regulatory requirements in different countries around the world, but we are working to make the minimum loan value smaller. We’ve already brought it down considerably– in the beginning our minimum loan was $10,000, then $5,000, and now we’re down to $1,000.

Q: How does earning interest on gold work? Can we buy the gold through Celsius, where is it stored, and can we sell it through Celsius?
Alex: Yes, you can buy XAUT (Tether’s tokenized gold) through the app with Simplex, or you can also buy it from exchanges like FTX or Bitfinex. We don’t hold the gold– what we sell and hold is the token, XAUT, and the gold is held by Tether in a vault in Switzerland. To sell it, you would need to send it to an exchange, as Celsius does not offer these services. And we do plan to add a few other assets, such as PAX Gold, soon.

Q: When depositing large amounts into Celsius, is it flagged by or to the authorities?
Roni: Celsius works in full compliance with reporting requirements in every country that they operate. I’m not sure the exact requirements for this situation off the top of my head, but it should be in the Terms and Conditions.

Alex: Like Roni said, there are things we need to watch on deposits. SARs (suspicious activity reports) are something we are required to file if we suspect something about money that is deposited with us– whether it’s from a flagged country, or a source that has legal issues, we may need to report it to stay compliant. But a big deposit, even if it’s $10 million, is not necessarily an automatic trigger for us to report any information to any regulating body.

Q: Do I need to remove ETH from Celsius to stake it in the future?
Alex: No, our rate will always represent what we can earn against it. If we can earn more lending it out, then we will pay out a higher rate than staking. However, we can always fall back on the staking rate and pay that out if lending is not as lucrative for any specific coin or token. And we’ve actually raised the rates on BTC, ETH, and a few other coins this week because we’ve been able to increase our yield on them.

Q: I find it hard to on- and off-ramp Canadian dollars to Celsius. Is there a team working on a solution to streamline this process for Canadian users?
Alex: We do offer earning on TCAD through Celsius, and do offer buying through Simplex on several other coins and stablecoins in the app from Canada. We are planning to add more assets– the Canadian regulators have recently approved a few more stablecoins, and we are always working to simplify the fiat onboarding process for users in all jurisdictions.

Q: With increasing gas fees on Ethereum, is Celsius planning to charge withdrawal fees?
Alex: No, we are planning to continue to subsidize withdrawal fees for our users, although withdrawals may be slowed down a bit as we look for ways to bundle these transactions together to keep the costs down.

Q: What processes have you started with the UK FCA?
Roni: We have filed for registration with the FCA– so they know that Celsius is doing business from the UK. For this, we have broken down all of the activities Celsius engages in– including interest-earning, borrowing, and fiat lending. This also included all of the legal advice Celsius has received over the past two years, the technology infrastructure, and the budget both in a good scenario and in a stress scenario. This actually wasn’t too difficult because we had already conducted thorough due diligence prior to the fundraising round, and this will make it much easier for us to now use this information to apply for licenses worldwide.

Alex: We also have a UK auditor– you can see our public 2019 audit here, and we are currently working on our 2020 one now. I also just got back from an internal product review that will be launching in a few weeks– when you get your interest, you will be able to verify that you were paid at the correct rate, that the interest was earned by Celsius, and what everyone else earned that week as well. The level of transparency that Celsius offers today does not exist at another financial institution in the whole world! And we do this because we want to earn your trust, and we know the best way to do that is to deliver your interest every week in a way that is as transparent as possible.

Q: Can you please explain what sets CEL token apart from other altcoins? I think that many altcoin founders are just hustling for more BTC.
Alex: It’s true– so much of what you said is true! With past tokens and alts, especially during the ICO craze, there is an ICO, and as soon as possible, the founders dump their token on the community after hyping it and listing it as many places as possible.

But look at what Celsius does– the opposite of everything I just said! We didn’t list the token on a centralized exchange (Liquid) until a whole year after we had a working product. Liquid is a regulated exchange, and we also did not want to pay a listing fee– we didn’t want pay out a $1 million listing fee just so we could dump our token on the community. This is the opposite of what we’re trying to do!

We are constantly trying to create value for our community. I’ll give you another example– we have 25 million locked CEL token allocated to our employees when the price of CEL hits $1.50. And this is a great incentive for our employees to work toward building this company to be the best that it can be. As always, we will always work in the best interest of our community.

Q: Are there any plans to include inheritance preferences within the app?
Roni: Because Celsius attaches accounts to specific people using KYC, this makes it much easier for a beneficiary to come to Celsius and show a will saying that they have a claim to someone’s money after their death. Following due diligence, Celsius can then release these funds in accordance with regulations in their local jurisdiction. In this case, there is a clear advantage over decentralized solutions or holding your own keys.

Alex: And just to add to that in the app, we are allowing the ability to designate a legal beneficiary.

Q: Why is there no insurance offered for deposits of Bitcoin? How do I know you will return it?
Alex: Legally, the Bitcoin is still yours, we are just turning around and lending it out to others to earn you yield. So the question is really– is the wallet insured? Many of our competitors absolutely have insurance for their coins in cold storage. But the biggest problem with that is that there is no way to earn yield on assets in cold storage– you need to rehypothecate these assets to earn yield. Now, while the money is moving between wallets, and while we’re in the process of lending or borrowing it– we do have $20 million of insurance with our hot wallet provider, Fireblocks.

Roni: One of the biggest issues we run into when speaking with insurers or regulators is that they simply don’t understand Celsius’ business model. It’s important to note that users who deposit with Celsius have a very strong legal right both to the money that was sent to Celsius, and the interest that was credited to the user’s account. Celsius’ creditors are its users, and that’s why we need to display the updated AUM– because this proves to the users/creditors that Celsius has enough money to pay them back. Celsius takes on the liability to pay back users’ deposits and their interest, and will also act against any institutions who are not returning funds so that they can pay them back to users.

Alex: And in two-and-a-half years, we’ve never had an institution not return their principal, or not pay off their interest, or even be late in paying their loan back. We’ve probably had thousands of margin calls with ups and downs in the market over the past few years on our institutional lending side, with absolutely no issues in recovering funds or owed interest– and this just tells you the quality of the institutions that we are working with.

Q: What regulations are preventing Texas residents from earning interest on stablecoins in the Celsius app?
Roni: The money transmission laws in the US– there’s always a question of whether they apply to cryptocurrencies or not. About half of the states said yes, while some others are a bit vague, and others are taking retroactive steps. So this is why we take a day-to-day approach for evaluating the regulatory environment in different states and countries. Our approach focuses on the utility that we would be bringing to Celsius users in a specific location, how many people it would help, and how difficult and expensive it might be to attain the necessary licenses. Each and every state and country is on the roadmap, but they will be prioritized by these factors.

Q: Do you have a target for total users by the end of 2020 or 2021?
Alex: We are hoping to raise close to $30 million total in this equity raise, as even though the window is closing on BnkToTheFuture, we are still in discussions with other bigger institutions for this round. We are using this money to accelerate the growth of Celsius– for example, the day Tether funded us, we doubled the rewards to the community for bringing in new users.

Right now, the best way to see what’s happening is to sign up as an ambassador for Celsius, and help grow the community that way. We don’t have all of the answers at Celsius, and we know that our community will be the ones who really help us grow. We want to be able to enable and empower our community to build this company for the community– and this will allow it to be a self-sustaining solution.

Q: Given the recent demonstration of freezing USDC in the wallets of bad actors, what would prevent a future government order freezing or invalidating USDC deposits more broadly?
Roni: First of all, I don’t think this is much of a risk. While crypto and blockchain brings us lots of opportunities, they also bring bad actors lots of advantages as well– this was proved back in 2017 and 2018 with lots of ICO scams and other issues. Ultimately, I see this as a good thing, because it helps to protect the community, and acts as a tool of enforcement. As more trust and stability enters this market, which will partially be brought by regulation, bigger players will start to enter the field as well.

Alex: And in reality, it’s a spectrum– you have coins like Zcash and Monero who are trying to be completely anonymous, and on the other end you have regulated stablecoins, with lots of other coins in the middle. By listing so many different stablecoins, we are giving our users options based on their jurisdiction, to help our users reach their financial goals.

Q: From a risk management perspective, how do you think about things like gap risk and liquidity risk when lending on behalf of Celsius’ clients?
Alex: That’s a great question, because when you think about these things, they typically apply to banks– banks use up to 50:1 leverage, so regulators are sweating bullets that the banks are going to make a mistake that could wipe out their assets. But Celsius does not use leverage– we only lend what we have on deposit, and this is why we can always return all assets to our customers at any time.

Q: What are the compliance bodies Celsius works with and how much does it cost every year?
Roni: Celsius, as a UK company, is obviously compliant with UK law– and by having offices in the US and Israel they are also fully compliant in these locations as well. We also are taking into account what we need for opening up our location in Australia, and because we have so many users and partners in Europe, we also take European Directive compliance into account as well– and we are adding more jurisdictions every month.

Alex: It costs millions of dollars– our compliance department is bigger than our marketing department. We do this to protect our business and our users– compliance, and working with regulators, is not cheap or easy! What Celsius does in these scenarios is a lot of trailblazing to be able to offer these services– in accordance with local regulations, which has never been done before in many of these jurisdictions.

Q: Do you have a list of Celsius-approved exchanges?
Alex: Yes, the DEXs (decentralized exchanges) and the centralized exchanges that we think are acting in your best interest are listed on our website. What we are worried about with some other exchanges is wash trading– and this is a situation where real trading is not happening, and it is just a trick to encourage you to buy the token at a specific price.

Also, first week of August, we are launching with one of the big exchanges in a partnership– and you will see how this business is done the right way.

Want to unbank yourself with Celsius (and get a free $20)?

• Install the Celsius wallet (https://celsius.network/get-the-app/)
• Use a referral code during registration (148895d2c9)
• Deposit $200 of crypto or stablecoins

You will earn $20 in BTC once you hold your deposit for 30 days