VOIP Pioneer Says New Startup Is Paying Users Interest on Millions in Crypto

Celsius, a cryptocurrency lending startup, says it's paying thousands of users interest for depositing bitcoin and ether with its wallet app.

Revealed exclusively to CoinDesk, Celsius claims to have garnered more than 10,000 users since the soft launch of its mobile app on June 29, with an average deposit of 0.5 bitcoin or 5.5 ether earning up to 6.7 percent on an annualized basis.

The interest comes from income Celsius makes lending fiat and crypto, much of the latter to hedge funds that want to short, or bet against, the coins.

"When we make interest income we pay a chunk of that back to the people who gave us BTC," said Celsius CEO Alex Mashinsky, who's best known as a pioneer of Voice over Internet Protocol, the technology that allows phone calls via cyberspace.

Celsius raised $50 million in an initial coin offering last year, selling a token called CEL. Since then, it has gathered crypto deposits worth several million dollars, with hundreds of new users joining the platform each week in September, the company said.

Unlike new rival Compound, which strictly lends crypto, most Celsius loans are issued in fiat, although the company requires crypto to be pledged as collateral for these.

Mashinsky told CoinDesk that Celsius' custodial crypto wallet, offered through a partnership with the qualified custodian BitGo, resembles a bank account in that users earn interest on their deposits every Monday.

Also like a bank, Celsius loans out part of the money deposited by crypto wallet users.

Conversely, Celsius COO Daniel Leon argued that the startup could attract new users away from such institutions by consistently offering better returns to depositors and cheaper loans to borrowers without credit checks.

Mashinsky said Celsius will use this blockchain to hold itself accountable for distributing all profits after operating costs to users.