Crypto lender Nexo to exit US market after cease-and-desist orders from state and federal regulators
2022 is shaping out to be a terrible year for not just cryptocurrencies but also for crypto companies. While all eyes are on the now-bankrupt crypto exchange FTX, UK-based crypto lender Nexo said on Monday it is phasing out its products and services in the US market after receiving cease-and-desist orders from multiple state and federal regulators over its interest-earning products.
Back in September, eight U.S. state regulators including California, Kentucky, Maryland, New York, Oklahoma, South Carolina, Vermont, and Washington charged Nexo for offering interest-earning accounts without registering the investment products as securities. The regulators charged Nexo for allegedly failing to register its Earn Interest product and other investment products as securities. The states later filed cease-and-desist orders against the company.
In particular, California’s Department of Financial Protection and Innovation said Nexo’s interest-earning accounts promised an annual interest rate as high as 36%. However, Nexo said that the 36% interest was only applicable for one asset and that it did not advertise the high rate.
In a blog post on Monday, Nexo said: “Our decision comes after more than 18 months of good-faith dialogue with US state and federal regulators which has come to a dead end. Although regulators initially encouraged our cooperation and a sustainable path forward appeared viable, the events of recent weeks and months and the subsequent change in regulators’ behavior point to the opposite.”
We’ve covered Nexo on multiple occasions. The crypto lender offers a solution to crypto holders looking to put idle assets to work. According to the company, an existing crypto asset holder can use their assets as collateral for a loan or lend it out to collect interest. Earnings are very appealing, and the platform supports a variety of crypto assets. Earnings on crypto assets are slightly lower – roughly 8-13% per year – whereas stablecoins can yield up to 20%.
Founded in 2018 and based in the Cayman Islands, Nexo is the world’s first instant crypto-backed loan. The crypto lender helps crypto investors unlock the value of their wealth by providing them with instant loans in USD, EUR, and USDT (Tether) against their crypto holdings.
By pledging their assets, rather than selling them, clients obtain immediate liquidity and keep the upside of future value appreciation of their cryptocurrencies and tokens. The concept has quickly gained an enormous following amongst crypto miners, hedge funds, companies that have conducted ICOs, and many more. Investors of all sizes and nationalities have found various reasons why Nexo is their first association with crypto-backed loans.
While based in Cayman Island, Nexo Financial LLC is a Delaware limited liability company with its principal place of business in London, according to state regulators.