What is CELO?
CELO is the native asset of the Celo protocol- an open platform that makes financial tools accessible to anyone with a mobile phone and issues native stable-value tokens (Celo Dollar & Celo Euro). Stable value tokens are a type of cryptocurrency whose price tracks an external currency or commodity. CELO’s primary function is stabilization, ensuring the healthy velocity of assets that globally circulate and transact on Celo. CELO also serves as the key governance mechanism for the Celo Platform. Owning and using CELO supports the growth and development of the Celo platform by enabling each CELO owner to vote on proposals that direct how the core technology operates today and in the future.
To address stability of value, the Celo protocol introduces an asset whose value is stabilized using a monetary policy with elastic supply rules, backed by a variable-value reserve known as the Celo Reserve. Further, it introduces a governance structure that allows the protocol to create a family of local, regional, and utility stablevalue currencies. The introduction of new successful stable-value coins to the family strengthens the stability characteristics of the existing coins. The Celo Reserve supports the Celo Platform and helps to ensure the value of stabilized assets that circulate on the network. The Celo Reserve supports the stability of stabilized value assets by hosting a diversified portfolio of cryptocurrencies supporting the ability of the Celo protocol to expand and contract the supply of Celo stable assets, in line with user demand. The Celo Reserve is composed of cryptocurrencies including CELO, BTC, ETH, and DAI–ensuring that all user transactions with the reserve can happen on-chain, in a decentralized manner, in fully auditable ways.
CELO is associated with different entities such as the Celo Foundation and The Alliance for prosperity that engage in many humanitarian efforts aimed at tackling financial inclusion and poverty. The Alliance was created to grow both global and local ecosystems in service of creating the conditions for prosperous communities by creating low-cost and high-speed payments. To encourage member collaboration and address real-world challenges, the Alliance has created two new working groups: a global remittances committee and regulation and compliance committee.
On the technical side, Celo launched its mainnet in April 2020, and all Celo assets including the CELO token are ERC-20 compliant. Though CELO assets are not ERC-20 tokens on the Ethereum Mainnet, they are Ethereum Virtual Machine (EVM) compatible, meaning all familiar tooling and code that support ERC-20 tokens can be adapted for Celo assets.
The total fixed supply of CELO is fixed at 600 million tokens. CELO’s contract will not allow burning capability, so the supply will not decrease.
How does CELO compare to Bitcoin?
CELO differs from Bitcoin in a few important ways.
First, CELO is ERC-20 compliant token built on its own network, which has perks. Blockchains are not great at speaking to each other—you can not get an Ethereum contract to work with a Bitcoin smart contract without some complicated engineering. However, it’s very easy for ERC-20 and ERC-20 compliant tokens to speak to one another, which means that CELO can be used in most other decentralized finance applications.
Secondly, the CELO DAO model leaves the future of the token in the hands of its community. CELO token holders are able to use their holdings as a means of participating in elections by voting for groups of validators.
Thirdly, unlike Bitcoin, CELO is a governance token and also elementary to the stability mechanism: It is held in a reserve smart-contract and exchanged for Celo Dollars to balance demand excess or shortage. In addition to CELO, a diversified basket of non-Celo crypto-assets comprises the Celo reserve. This reserve is periodically rebalanced towards target asset allocation set via on-chain governance. This helps with the stability of the coin and other assets on the network
Similar to Bitcoin, CELO can be used as a means of payment or a store of value. Although CELO has a stabilization mechanism, its market price may still be very volatile and so it may not be useful for payments or storing value.
Finally, CELO’s market capitalization is smaller than Bitcoin’s. As of March 2022, CELO’s market capitalization was estimated to be $1.4 billion, as compared to Bitcoin’s market capitalization of $800 billion.
Before trading any crypto assets it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset. First and foremost:
No Canadian securities regulatory authority has expressed an opinion about CELO, including an opinion that CELO is not itself a security and/or derivative.
Wealthsimple has performed a legal assessment of CELO prior to making it available on Wealthsimple Crypto and has concluded that CELO is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future and the impact of this on an asset’s value is outlined in our Product Disclosure.
We evaluated CELO based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of CELO, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created CELO;
- The supply, demand, maturity, utility and liquidity of CELO;
- Material technical risks associated with CELO, including any code defects, security breaches and other threats concerning CELO and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and
- Legal and regulatory risks associated with CELO, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of CELO.
Like all other crypto assets, there are some general risks to investing in CELO. These include short history risk, volatility risk, liquidity risk, demand risk, forking risk, cryptography risk, regulatory risk, concentration risk, electronic trading risk and cyber security risk. Each of these risks are described in more detail in our in-app Product Disclosure.
Further, the Celo community, Celo Foundation or the Celo development team and other affiliated entities are not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of CELO have no recourse to Celo or Wealthsimple if CELO declines in value for any reason.
We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading CELO. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.
WDA is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Wealthsimple Digital Assets Inc. dated June 18, 2021. Please be aware that the statutory rights of action for damages and the right of rescission in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Statement.