Nexo, one of the newest crypto lenders, said on Monday it would phase out its high-yield product for US customers.
The move comes as Nexo’s high-yield crypto interest product has come under scrutiny as investors question the balance sheet transparency and health of crypto exchanges, particularly major lenders, amid continued industry fallout from the collapse of FTX.
“Our decision comes after more than 18 months of good faith dialogue with U.S. state and federal regulators that have reached an impasse,” Nexo said in its statement.
The announcement came shortly after the company’s co-founder and managing partner, Antoni Trenchev, joined Yahoo Finance Live for an interview.
“I think we are one of the best examples of transparency in the blockchain space,” Trenchev said.
Formed in 2017, Nexo specializes in crypto lending, a segment of the market that has seen at least three major companies – Voyager Digital, Celsius Network and BlockFi – all file for bankruptcy protection, leaving thousands of customers as as creditors in the ongoing Chapter 11 proceeding.
When Voyager and Celsius froze customer accounts from June, Nexo reacted quickly by publicly displaying its financial resiliencemaking an offer to acquire “qualifying assets” from Celsius.
A few hours after Celsius froze the accounts, Nexo reminded customers the company performs daily proof of attestation of its responsibilities, a longer practice that has become a staple for companies looking to build trust with customers.
“We went the extra mile to show that our assets exceed our liabilities, which very few companies in the industry have done,” Trenchev told Yahoo Finance.
Like other crypto lenders, Nexo lends customer deposits from its Earn Interest product and has permission to “remortgage” those deposits, per its terms of service. In the event of default, its terms state that the company is entitled to terminate its agreement and “take any action it deems necessary to protect its interests”.
As recently as Nov. 29, Nexo’s website was offering an APY of over 10% on select crypto deposits, though Trenchev was quick to tell Yahoo Finance that the company’s average customer wasn’t earning. this level of performance.
“They earn a much lower percentage,” Trenchev said. “The reason is that as a company we have never relied on outside funding.”
Even proving a match between assets and liabilities, whether through crypto or through a third party, may not show investors what they need to know before using a crypto app, FTX being the case. the newest and most important. And many crypto exchanges still only show client assets without revealing client liabilities.
Daily attestation reports from Nexo show that the company fully backs over $2.59 billion in customer liabilities with collateral, although it does not share the cryptocurrencies it claims as assets on its balance sheet.
Like FTX, Celsius and other crypto companies, Nexo has issued its own crypto token (NEXO-USD). Of its total balance sheet, “less than 10% is made up” of the token, according to Trenchev.
The concern around FTX began in early November, when Coindesk disclosed a leaked balance sheet of FTX subsidiary Alameda. The toll showed that of the $14.6 billion in assets claimed by Alameda, most of them turned out to be circular holdings, with the majority coming from crypto tokens or collateral created by FTX and other companies. affiliates who exceeded their offer in the market. Just days after this financial information was leaked, FTX went bankrupt.
A month after expressing interest in acquiring the assets of Celsius, Nexo announced that it would begin a due diligence process for Vauld, another struggling crypto lender. Although Celsius’s pitch didn’t make it past Celsius’s filing for bankruptcy, Trenchev said the due diligence process for Vauld was underway.
The company also took a minority stake in Hulett Bancorp and its federally chartered bank, Summit National Bank, in September. The move, the company said, “would allow Nexo to offer its U.S. retail and institutional customers services that include bank accounts, asset-backed lending, card programs, as well as escrow and custody through Summit National Bank”.
With a market capitalization of $366 million, the Nexo token has sold 5% in the past 24 hours at 65 cents.
David Hollerith is a senior reporter at Yahoo Finance covering cryptocurrency and stock markets. Follow him on Twitter at @DsHollers
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