Nexo, the crypto fintech platform, was recently approved by a real time Armanino Audit, which can be seen at any time by clicking on this link. The audit demonstrates that Nexo has sufficient assets to cover its liabilities.
At the time of writing, the live Armanino Audit shows that Nexo has a collateral ratio of 100%+, and more than $9 billion in client assets. This stands in stark contrast to established financial institutions, which use a fractional reserve system.
Armanino uses a platform called TrustExplorer, which is real-time audit of a third-party platform. Armanino is an independent company, and works with some of the largest financial companies in the world.
Nexo Looks Secure
Nexo offers a range of services, including crypto lending, and also crypto custody services. The crypto fintech space is growing quickly, but US-based competitors are facing some pressure from regulators.
US-based platforms BlockFi and Celsius have seen pressure from US regulators, and US major Coinbase has opted to drop its crypto lending facility, as similar products have been the subject of legal actions.
Nexo’s CEO commented on the situation,
“We’re following the situations very closely. When I say we, I mean both the legal team internally at Nexo and also the law firms we retain in the United States.”
Nexo is based in London, and isn’t subject to US regulations in the same way that US-based exchanges are. Despite its home jurisdiction, these companies may face added pressure as crypto lending facilities become more popular.
Nexo offers interest rates of up to 12% for client deposits, which is far higher than any deposit rate that would be offered by a bank. Clearly, this level of interest makes the DeFi market look very attractive, and will undoubtedly draw investors into the space.
While many nations have their own central banks, central banks coordinate monetary policy, which limits investors’ options. Over the past decade, the biggest central banks in the world have dropped interest rates to near-zero, and in some cases, government bonds actually have a negative yield.
Compared to the double-digit interest rates that a company like Nexo offers, negative interest rates are a hard sell to any investor who can push cash into cryptos.
Potential Broker Dealer
Despite the regulatory push-back in the USA, Nexo may be pursuing a SEC broker dealer license in the USA. The license would allow Nexo to expand its product offerings in the USA, and also give it a heightened level of regulatory compliance in the USA.
One consideration for any business that operates in the USA is that states have a huge amount of control over what kind of financial products are allowed in the state, so a product that is legal in New York may not be allowed in California.
In this way, the US is a more difficult market for crypto and fintech, as compliance is far more difficult.
BlockFi recently learned this first-hand, when the Texas State Securities Board prohibited its interest bearing savings product from being offered in the state,
Director of enforcement at Texas State Securities Board, Joseph Rotunda, commented,
“This legal action affords BlockFi and its affiliates the opportunity to respond to our allegations and present admissible evidence.”
For the moment, no one in Texas will be parking their crypto in a BlockFi BIA – although it is still seemingly available in other states.
Like the savings products that Nexo offers, the BIA from BlockFi offers a much higher rate of interest than a regular bank account, which is very attractive to anyone who is starving for yield.
Part of the issue may be that institutional adoption of these products is still low, but like everything in the world of crypto, it is bound to change in the not-to-distant future.