Canada’s second-largest pension fund has said its inaugural investment in the digital asset sector reflects a belief that blockchain technology will shake up the financial industry, even as cryptocurrencies attract mounting regulatory scrutiny.
Caisse de Dépôt et Placement du Québec (CPDQ), the US$300bn Canadian pension fund manager, on Tuesday joined WestCap, the fund set up by former Airbnb and Blackstone executive Laurence Tosi, in leading a funding round for Celsius Network — a crypto lending platform that has been targeted by US state regulators who say it has breached securities laws.
Alexandre Synnett, executive vice-president and chief technology officer at CDPQ, said he expected that taking a stake in Celsius despite the regulatory pressure might appear unusual. “We knew from the beginning of this investment that we would have questions,” he said in an interview with the Financial Times.
“The conviction that we have is around the blockchain technology,” he said. “In a positive way, I think it will change the way the financial services are interacting.”
The move by the public pension manager to join Celsius’ $400m equity raising, which valued the company at $3bn, represents a fresh signal that money managers are willing to tolerate the regulatory clouds hanging over many crypto businesses in order to tap what they see as a crucial investment opportunity in digital assets.
But Synnett cautioned that there were limits to CDPQ’s enthusiasm for cryptocurrencies. He said the fund is focused on making “opportunistic” investments in “diamond in the rough” early-stage companies leveraging blockchain technology, as part of its $40bn exposure to fintech worldwide.
“This is a small diversification play. We are not going to go all out on digital assets,” he said, adding that CDPQ would not consider allocating funds directly into digital assets. “Bitcoin? No, absolutely not,” he said.
The backing from big investors comes a month after Celsius was drawn in to a broad US regulatory crackdown on crypto companies that offer customers yields on deposits of digital assets. State authorities in Texas, New Jersey, Alabama and Kentucky said Celsius’ yield-bearing accounts amount to an unregistered securities offering.
Celsius, founded in 2017, offers its customers interest of as much as 17 per cent on deposits of cryptocurrencies. The company pays the interest in crypto, including in its own token.
Alex Mashinsky, Celsius chief executive, told the FT on Tuesday he hoped the fundraise would reassure regulators about the stability of his crypto lending business and help open doors in the mainstream financial markets.
Synnett said CDPQ had carefully considered the regulatory pressure as part of its due diligence, but that the scrutiny on Celsius reflected broader uncertainty surrounding the crypto industry.
“We are all aligned with our partners in our willingness to work collaboratively with regulators, including in the US,” he said. “We want to be the good guys.”