In May and June of last year, Celsius Network, a failed crypto lender, approached Wall Street bank Goldman Sachs and Abu Dhabi-backed fund ADQ with a project branded Celsius Web Services (CWS), according to pitch documents obtained by The Block. The project aimed to offer generic versions of Celsius’ products, including those focused on yield and custody, and was described as a “web3 toolbox for a New World.” Alex Mashinsky, the former CEO of Celsius, who resigned in September, spearheaded the CWS plan and hoped to raise $1 billion to get it off the ground.
The Network was facing mounting pressure at the time, and Mashinsky hoped to shift attention to the CWS project to pivot away from the company’s core business of lending out crypto assets. The funds were already gone, however, and no one had any idea how bad things were at the time, according to a source familiar with the matter. Ultimately, the CWS plan did not come off, with Goldman and ADQ passing and Celsius’ existing investors following suit. The last-gasp pivot provides insight into how Mashinsky hoped to save his ailing crypto empire.
CWS: An Amazon Web Services of Crypto
The CWS project aimed to create the Amazon Web Services of crypto, according to a source familiar with the matter. It was a strategy that surprised some people within the business, given how recently Celsius had banked $750 million from external investors. A second person close to it said that the CWS plan went by many names internally, with a summary often used being “Plaid for web3.” Plaid is a fintech startup that helps customers connect their financial data to new apps and services.
The Goldman deck, dated May 2022, states that Celsius hoped to explore how it could partner with the bank to further its involvement in the crypto industry. CWS had a dedicated internal team, the deck promised, and the “full backing” of the board and external investors. Most of the deck consists of a high-level overview of the types of services Celsius could offer through CWS. The initiative would see white-label its products, with credit cards, staking, prime brokerage, insurance, and NFTs listed as potential areas CWS could encompass in the future.
The ADQ deck, dated June 2022, pitched the creation of a Central Bank Digital Currency (CBDC) for which Celsius and Polygon, a blockchain scaling company, would jointly provide the technology. According to the plan outlined in the deck, the UAE’s central bank would act as the “sole issuer” of the Digital Dirham CBDC, while both supplied the infrastructure to run it. For Celsius, that meant providing the types of white-labeled products outlined in the Goldman deck. Chainlink, another crypto startup, was positioned in the deck as a provider of on-chain infrastructure and proof of reserves.
Lessons Learned from Celsius’ Failure
Celsius Network’s failure highlights the risks and challenges associated with crypto lending. The company’s inability to avoid the collapse of its core lending business despite its attempt to pivot to other ventures, such as CWS, shows the need for caution in the crypto lending industry.
Furthermore, the company’ failed pivot to CWS highlights the importance of having a solid business model and executing it effectively. The company’s inability to secure funding for CWS shows that even well-funded startups can fail if they don’t have a viable business model or fail to execute it effectively.
The failure of Celsius Network also underscores the need for regulatory oversight in the crypto industry. Crypto lending platforms are currently unregulated in many jurisdictions, leaving investors vulnerable to fraudulent schemes.
Conclusion
The failed attempt by Celsius Network to launch Celsius Web Services (CWS) offers valuable insights into the challenges and risks associated with pivoting a crypto business towards new products and services. While the proposed CWS initiative had ambitious goals to become a “web3 toolbox for a New World,” its timing and execution were not ideal.
