NEXO: the main offers
Instant Crypto Credit Line
Nexo, platform created in 2017, enables to borrow fiat currencies against depositing cryptocurrencies as collateral. This feature is called “Instant Crypto Credit Line”. Crypto assets are secured by the custodian BitGo. Nexo’s website advertises how quick and swift is the procedure to borrow money (absence of credit checks) and how flexible are the repayments terms (no fees and no minimum repayments).
Nexo lends money in 45+ currencies and accepts as collateral several cryptocurrencies such as BTC, ETH, XRP, LTC, NEXO token, BNB (Binance), etc. with the aim of adding regularly new possibilities. The maximal amount of the loan depends of the collateral provided and can fluctuate between 20% and 50% of the collateral value. Repayments can be done via bank transfer or by selling part of the collateral.
One advantage of this is to make liquid your cryptoassets for uses in ways not yet accessible to cryptocurrencies while keeping ownership and still benefiting from the potential increase of its value.
Earn 8% interests with Fiat currencies or stable coins
For investors not looking for a loan, Nexo has an offer to earn 8% yearly compounded interests by investing EUR, USD, GBP or stablecoins. Nexo promises instant liquidity, daily compounded interests and advertises the investments are 100% asset-backed guaranteed. It means that your money is used to provide the loans granted against cryptocurrencies collateral as explained before. In addition, the collateral of each loan are subject to insurance for an overall amount of € 100 million by BitGo.
NEXO: my doubts
On its website, and the whitepaper that you can download, the link between Nexo and Credissimo is adverstised: “Powered by Credissimo – A leading FinTech Group serving serving millions of people across Europe for over 10 years” or again “10+ years of Fintech success”.
I do know Credissimo group as I invest in their loans on Mintos. Credissimo is considered as a sound loan originator on the platform. The last consolidated financial accounts I have seen are for 2018 and shows a net income of BGN 6.2 million (i.e € 3.1 million) and net equity for BGN 31.9 million (€ 15.95 million) representing 84% of the total balance sheet.
I have been interested in the possibility to earn 8% in a very flexible way. At a first glance this offer looked appealing to me and I decided to look closer.
I tried to figure it out how safe would be my money.
I invest in p2p and I like the fact that I have a claim towards the borrowers. However, here despite the presentation stating “Your funds are secured at all times by asset-backed portfolios of overcollateralized loans” there is no claim towards any borrowers (ergo no identified counterparty) since the investors do not invest directly in any loan. The money goes to a common pot and is used alongside the money of all other investors to provide the loans.
My first conclusion is that an investor bet the safeness of its money on the soundness of Nexo overall, not on any borrower / loan asset-backed.
Therefore the question is: How strong is Nexo?
I tried to find information on the website and could not find any. Then I realised that, despite advertised as “powered by Credissimo” and having “10+ years of Fintech success”, Nexo is not directly part of Credissimo but has been founded by the funders of Credissimo has a separate entity! This is not hidden as it appears in the Support Center but the marketing presentation can be misleading. You can see here the full statement from Nexo’s website.
My conclusion at this point is that the safeness depends on Nexo’s soundness standalone. Of course being founded by shareholders having successfully created and developed a group like Credissimo is a positive aspect. Maybe there are even some synergies in the teams, etc. However, at the end of the day, if Nexo would run into trouble nothing would force Credissimo to step up and support it.
My questions to Nexo Help Center
I decided to ask a few questions to Nexo:
I am contacting you regarding the offer of earning 8% compounded interests by investing on Nexo.
I couldn’t find on the website or in the presentation of Nexo any legal reference regarding the legal entity “Nexo”. I understand that Nexo has been founded by common shareholders of Credissimo but is therefore not part of the group. I checked the consolidated financial accounts of Credissimo and there is no reference of Nexo.
Investing in your product means betting on Nexo’s soundness and not on Credissimo directly since it is an independent entity. I invest on Credissimo loans through Mintos but Nexo’s offer is very different by nature since the money invested goes to a common pot that is in turn use to lend money to borrowers of Fiat currencies against crypto collateral. There is therefore no claim towards the borrowers like there is on Mintos. Again, de facto the investors rely entirely on Nexo’s soundness overall and not on any borrower in particular.
Therefore, my questions are:
– Could you provide me with the legal references of Nexo? Where it is legally registered, etc.
– Is it possible to see the financial accounts of Nexo ? Where?
The entity has been created in 2017 and therefore at least financial accounts for 2018 must exist and 2019 should come in a couple of months.
– For confirmation: the 8% compounded interests correspond to the annual interest meaning that if an investor would withdraw interests from time to time it would reach a bit less than 8% at the end of the year, right? The 8% include the compounding effet of the interests that are served daily.
I think the business model developed is very interesting but there is no information on Nexo’s financial situation itself that in my opinion is needed in such situation. Credissimo is over 10 years old, has robust financials and has publically available information that reassure investors but Nexo, not belonging directly to Credissimo, needs to provide this too.
Thank you in advance for any clarification and information.
Below is the reply from Nexo (I simply disabled the links provided):
Thank you for your email. As a challenger to the incumbent banking sector, we are accustomed to addressing questions like this.
The Nexo Group has legal entities in various locations throughout the world in order to service 200+ jurisdictions in the most efficient manner and is in compliance with all applicable global and local regulations.
Please rest assured that Nexo is a licensed and regulated financial institution and is compliant everywhere it provides services while retains top-tier legal council in the jurisdictions of its operation. All aspects of Nexo’s activities are vetted before execution by the relevant legal and compliance teams. Please find an example of our licences.
The Nexo management consists of successful entrepreneurs and financiers with more than 50 years of combined experience within a regulated environment and all of them have bespoke reputations for protecting and putting the interest of all stakeholders first.
Nexo’s managing partner, Antoni Trenchev, is frequently invited by leading media outlets such as Bloomberg (link) and CNBC (link and link) to comment on the ins and outs of the blockchain space.
Please note that Nexo is not a public company and we are not required to release financial reports. Currently, we are working on being audited by Big 4 company, but the process is very difficult and timeconsuming. Nexo has a revolutionary business model and being a crypto company only makes the auditing even more challenging. For that reason, we cannot provide you with a specific timeframe for the completion of the audit.
Regarding your question for our Earn Interest product – Compound interest (or compounding) is interest calculated on the initial principal, which also includes all of the accumulated interest of previous periods of a deposit. Therefore, if you keep your Euro/stablecoins with us for the entire year you will earn 8% interest.
As the world’s largest and most trusted crypto lender, we thank you for choosing Nexo and becoming part of our mission to decentralize global finance!
Best regards, »
The reply, besides being very “marketing” in my opinion, does not address the issue at stake: how sound is Nexo and would I trust them with my money?
Remember, I focus on the possibility to invest money to earn the promised 8% interests. In the case of the borrowers, what matters is how safely kept is the collateral and what would happen with it in case Nexo would get into financial troubles (to my knowledge the custodian BitGo is considered as a serious partner).
On the bright side, I am happy to know that the management of Nexo has over 50 years experiences (combined 😅) with a regulated environment. I guess I should be proud that my colleagues and I have together probably more than 50,000 years of combined experience in an even more regulated environment that is banking. It goes back from a time where no currency had been invented 😁.
I have not dig into how Nexo can ensure the instant liquidity promise of his product. This is not necessary considering that I cannot, as of today, determine how sound his the entity (I still don’t know where it’s registered, etc. basically nothing). The lack of transparency is a pity as I believe the business model is interesting.
Whenever audited financial accounts will be available, I will gladly have a look at them and it will always be time to clarify this aspect and decide whether to give it a try or if, definitely, it is a no-go.