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Could Celsius Customers Secure Their Funds Better?

5 Sep, 20224 min readRegulation
Could Celsius Customers Secure Their Funds Better?

There is one golden rule in cryptocurrency: not your keys, not your coins. Users need to understand the importance of being the sole owner of a private key providing access to funds. Unfortunately, the new group of Celsius customers looking to get their money back has found that out the hard way.

More Disgruntled Celsius Customers

When Celsius Network filed for bankruptcy, things went from bad to worse very quickly. Many users got caught up in these proceedings as they entrusted their precious cryptocurrency balances to a third-party service provider. Unfortunately, that provider is a custodian who will take control over user funds, forcing users to always ask for “permission” when trying to withdraw money. Usually, that is not too big of a deal, but Celsius Network does not have the necessary liquidity to facilitate mass withdrawals.

As the Celsius Network case is now in court, many people want to get their money back sooner rather than later. That is not as straightforward, although a group of 64 people has filed a petition for such an outcome. Their petition aims to force Celsius to allow withdrawals from custodial accounts. Celsius froze all platform withdrawals in mid-June 2022 and has not changed course since.

Additionally, the Celsius team is hopeful they can resume lending services as normal. A new mining operation is being constructed to increase money and liquidity. However, the group of over 60 people represents more than $22.5 million in funds. The new “group” is not the same as the Unofficial Committee of Credits, representing a different group of Celsius customers looking to get their money back.

The 64 people claim their funds are in custodial accounts instead of Celsius’ yield-generating solution. Those funds should have been segregated from other customer funds, as they belong to two different product classes. However, segregation seemingly never happened, putting every affected Celsius customer in the same boat. The group hopes to recover their funds separately regardless of the bankruptcy proceedings.

Control Your Private Keys To Avoid Issues

One may wonder why someone would put their cryptocurrency into a custodial account to which they do not have the private key. Doing so seems counterproductive, although Celsius’ Custody Account enables users to transfer and swap assets or use them as loan collateral. They do not earn rewards, so there is no immediate reason to keep money in that account unless one needs a loan right away. It is not a long-term storage solution whatsoever.

The Custody Account solution by Celsius offers convenience. Users do not need to worry about private keys or seed phrases. Instead, they give up control to a third party whom they “trust”. That approach works until things go wrong, like in Celsius’ case. Everyone involved in cryptocurrency – including institutional players – must control their private key at all times to avoid unnecessary and counterproductive proceedings like this one.

There are many wallet solutions on the market to make that process easier. One such solution is Ambire, a non-custodial Web crypto wallet focused on empowering users and offering peace of mind. It is easy to set up – all it needs is an email address and password – but it also allows for connecting to a hardware wallet. Unlike other wallets, there is no need to install a browser extension, and the wallet has two-factor authentication support for extra protection.

For cryptocurrency users with a lower risk appetite, Ambire allows for paying network fees in stablecoins rather than spending ETH, BNB, AVAX, etc. But the most important aspect is being in control of one’s private keys at all times. Ambire will never know your private keys or have access to funds, establishing a safe and secure wallet environment supporting dozens of cryptocurrencies.

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