Cryptocurrency borrowing and lending platform Nexo has announced that it is withdrawing its products from the United States over the ‘‘coming months’’ over regulatory challenges. The announcement was made through the company’s website on December 5.
“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,” the statement read. “Despite inconsistent and changing positions among state and federal regulators, Nexo has engaged in a significant ongoing effort to proactively provide requested information and modify its business in response to their concerns,” it added.
The company said it had been forced to exit certain states in the US to comply with the regulators. “During 2021 and 2022, we have off-boarded clients from New York and Vermont and suspended new registrations for all US clients for our Earn Interest Product,” it noted.
According to the company, the Earn Interest Product will no longer be available for existing clients in Indiana, Maryland, Kentucky, Oklahoma, Wisconsin, California, Washington, and South Carolina from December 6, 2022. However, Nexo assured users that it was proceeding with processing withdrawals instantly.
Concerns arise over the sustainability of Nexo’s high-yield-bearing accounts
Nexo came under fire in November when users questioned how the company offered up to 10% in its high-yield bearing product amid a bearish market following the collapse of FTX. Market analyst Dylan LeClair commented on Twitter: “Ask yourself how Nexo is paying 10% on stablecoins while DeFi yields are 1% and short duration US Treasuries are 4.5%.”
The firm’s co-founders, Antoni Trenchev and Kalin Metodiev, defended their company, saying that the platform is solvent. Metodiev said, “insolvency, bankruptcy, is nowhere in Nexo’s reality, and we believe, we hope, we aspire,” while working hard to deliver a strong and sustainable future to the users.”
The comments were in response to a cease and desist order against the digital asset lender from the California Department of Financial Protection on September 26. The regulator accused the 4-year-old firm of “offering and selling securities without prior qualification, in violation of California Corporations Code section 25110.”
The announcement comes amid market volatility that has forced Nexo’s rivals, including BlockFi, Voyager Digital, Celsius, and Three Arrows Capital, out of business. The collapse of the crypto derivatives exchanges FTX also pushed regulators to enforce more compliance in the space.