Nexo Crypto Lending Platform To Cease US Operations
Lending platforms have struggled to achieve regulatory clarity in the US, and Nexo has had enough
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Nexo, a digital assets platform which offers lending services and an exchange, said it will gradually phase out US operations as a direct result of a “dead end” in its attempts to gain clarity from US regulators.
In a statement, Nexo claimed it had engaged in “more than 18 months of good-faith dialogue with US state and federal regulators” — but, despite “rhetoric to the contrary,” it could not reassure customers that “regulators are focused on their best interests.”
Starting Tuesday, the company added, its flagship interest-bearing investment products will no longer be available to existing clients in eight more states: Indiana, Kentucky, Maryland, Oklahoma, South Carolina, Wisconsin, California and Washington. The yield-bearing offering had already ceased operations in New York and Vermont.
Lending platforms in the US have been under scrutiny by state regulators, especially following the collapse of Celsius and Voyager. When Coinbase attempted to launch a lending program in 2021, the SEC issued a Wells notice — which informs the recipient that it intends to sue in court. Coinbase subsequently abandoned the Lend effort, with a terse note explaining the SEC decision: “We don’t know why.”
Nexo noted in its update that it took a variety of actions over the last couple of years to attempt to stay in compliance with US regulations, including registering its token sale with the SEC, exiting New York markets, and refusing new funds from US customers into its Earn Interest product when BlockFi — another crypto lender that recently sought bankruptcy protection — was ordered to undertake similar action, in February 2022.
Multiple crypto companies and mainstream finance stalwarts have expressed their frustration that US regulations remain unclear. At Money20/20 in October 2022 , May Zabaneh — the VP of PayPal’s blockchain and cryptocurrency division — said that “There has to be some clarity that comes out, some standards, some ideas of the dos and the don’ts and some structure around it… otherwise that mainstream adoption will really be inhibited.”
Brad Garlinghouse of Ripple told CNBC last year that although in “markets like Singapore and even parts of Korea where there really has been a thoughtful government-led effort to define and have clear regulatory frameworks around cryptocurrencies… Ironically, here in the United States they have not provided that same clarity.”
Paul Grewal, the Chief Legal Officer at Coinbase, explained in a blog post referencing their doomed Lend product that “After our initial meeting, we answered all of the SEC’s questions in writing and then again in person. But we didn’t get much of a response. The SEC told us they consider Lend to involve a security, but wouldn’t say why or how they’d reached that conclusion.”
Blockworks has reached out to Nexo for comment.
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