Celsius Bankruptcy Shows Crypto-Banking Math Doesn’t Add Up

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Welcome to Bloomberg Crypto, our bi-weekly look at Bitcoin, blockchain and more. If someone forwarded it to you, subscribe here. In today’s edition, Michael P. Regan looks at crypto-banking calculations that don’t add up:

There’s a joke from the last century that bankers respect what’s called “3-6-3 rule.” They pay 3% on deposits and take 6% on loans – a clever business model that allows them to hit the golf course at 3 p.m. on a weekday, profits in hand.

The numbers have changed over the years – it’s more like paying 0.1% on deposits now and taking 5.7% on loans – but the 3-6-3 joke is still a pretty useful way to illustrate net interest margins that determine profitability. are the most basic services of a bank. As long as this second number is higher than the first, everyone in the industry can play the afternoon.

It’s obvious that Alex Mashinsky, CEO of Celsius Network, didn’t want to abide by any part of the 3-6-3 rule. Not even the punchline about arriving at the golf course before 3 p.m. “Stablecoins provide a much-needed alternative to banking hours and 5-day work weeks that banks have imposed on us,” Mashinksy reportedly said in a 2019 Press release.

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