Nexo is a project that is part of a burgeoning decentralized finance (DeFi) sector that is aiming to replicate and replace a range of financial services that have been offered by more established, and traditional entities for a number of years.
The advent of cryptocurrencies such as Bitcoin has resulted in the emergence of an entirely new asset class and Nexo enables its users to obtain financing by making a security deposit in the form of a digital asset such as Bitcoin or Ethereum.
Nexo aims to open up access to capital by allowing anyone to borrow funds using their cryptocurrency holdings as collateral and to disrupt the lending industry by allowing people to use their digital funds to receive loans in a number of popular fiat currencies.
Nexo OverviewNexo is based in Zug, Switzerland although the team don’t give away too much information on their exact head office location.
They do announce, however, that the Nexo Group has legal entities in various locations throughout the world and the company was founded in 2017 by Kosta Kantchev, Georgi Shulev, and Antoni Trenchev.
The trio ran a successful Initial Coin Offering (ICO) which ended in April 2018 and raised just over $52m in funding, with Michael Arrington’s Arrington XRP Capital being an early stage contributor.
In addition, the majority shareholders (which are the founders) of Nexo are majority shareholders and founders of Credissimo which is a leading European FinTech Group founded in 2007 which provides instant consumer loans online, e-commerce financing, and bill payment services.
Nexo operates as a legally compliant entity with the team claiming to be SEC compliant and the team also work in compliance with all the applicable regulations of the jurisdictions they operate in.
Nexo complies with all relevant KYC/AML regulations and also holds all customer funds in cold storage in collaboration with third-party custodian BitGo which is SOC 2 Type 2 certified.
BitGo Custody also carries $100 million in insurance protections with Lloyd’s of London meaning that customer funds are insured if a worst case scenario were to occur.
As a result, Nexo is able to operate as an instant crypto loan company available in over 200 jurisdictions which allows people to put up collateral in around 15 digital assets and receive instant access to loans in 45 fiat currencies.
Which Services Does Nexo Provide?Nexo offers two core services based around the depositing and loaning of funds.
Crypto Backed Loan ServicePlatform users are able to deposit over 10 popular cryptocurrencies including Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Binance Coin (BNB) in order to receive a loan in over 40 fiat currencies such as the US Dollar (USD), Euro (EUR), Canadian Dollar, (CAD), Japanese Yen (JPY), and Great British Pound (GBP).
It’s possible to loan an amount worth over 80% (around 50% for BTC/ETH) of the asset deposited and there are two possible interest rates of 5.9% APR and 11.9% APR depending on how you choose to repay your loan.
Nexo has a handy loan calculatorHigh Yield Interest ServiceNexo also allows its users to deposit funds in order to receive interest on their holdings, and interest is paid out on fiat currencies such as USD, EUR, and GBP as well as on “stablecoins” such as USDT, TUSD, USDC, PAX, and SAI.
Users receive an interest rate of 8% p.a. and can add and withdraw funds at any time. Nexo also applies compound interest meaning that users can receive larger amounts in their accounts on a daily basis, and this service is also fee and commission free.
Nexo Card ServiceThe platform also incorporates the Nexo credit card backed by MasterCard which can be used to make in-store and online purchases, or to withdraw money from an ATM.
The card also offers 5% cashback on each purchase which is added to your Nexo wallet when a transaction is settled. Your card’s credit limit depends on the line of credit you have at Nexo, and the card also comes with its own mobile app as well as being fee free with regards to account/inactivity fees or foreign exchange purchases.
How Does Nexo Work?Users can deposit their preferred fiat currency or stablecoin in order to earn interest on the platform, or deposit a range of cryptocurrencies as collateral for a fiat currency loan.
The interest service pays an interest rate of 8% p.a. (which compounds daily) while the crypto loan service sees users pay an interest rate of 5.9% APR or 11.9% APR depending on whether they choose to use the platform’s NEXO token to repay their loan.
Nexo loans are based solely on the size of your security deposit, and there are no credit checks and nothing is reported to credit agencies.
As a result, your credit score will not be affected by using the platform and you aren’t required to provide any information regarding your personal finances.
Currently, the minimum loan amount you can take/withdraw is $500 while the maximum is $2,000,000, and while crypto backed loans are instant, they can take up to 1 business day to process depending on your KYC/AML security checks.
Generally though, these loans are instant and guaranteed and users are expected to receive their funds on the same or the next day alongside the reference “Your Nexo Loan.”
The processing time is as follows:
Local transfers: 1 business dayInternational transfer: 3 to 5 business daysUSDT (Tether): usually take approximately 30 minutesIf you fall behind on your repayments and the cryptocurrency you are using as collateral depreciates in value then the Nexo team will sell off some of your deposit to cover the shortfall, however, you will receive a warning prior to this happening and it requires you to miss payments while your security deposit drops in value on the open market.
As expected, the best course of action is to keep up with your repayments, however, if you fail to make any repayments, and your security deposit appreciates in value, then you shouldn’t have anything to worry about.
Who Can Take Out a Loan on Nexo?The platform is open to users around the world, and in order to obtain a loan, it’s just necessary to register a Nexo account at platform.nexo.io and deposit collateral into the account.
There are no credit checks; however, and when taking a loan in fiat currency, you are required to pass both Basic and Advance verification and will need to and enter your KYC/AML information.
Nexo currently only accepts fiat transfers for repayments from the following jurisdictions:
Nexo’s banking partner will automatically reject any payments sent from jurisdictions which are not on the list, and this may result in additional bank fees.
How Much Can You Borrow on Nexo?In order to determine just how much users can borrow Nexo uses a Loan-to-Value (LTV) system which draws up credit lines based upon the amount of funds put up as a security deposit.
Essentially, The LTV refers to the ratio of a loan to the value of the collateral, and measures the balance of the loan relative to the value of the supporting collateral asset.
LTV is calculated as the loan amount in USD divided by the value of the collateral in USD, expressed as a percentage.
Loan amount: 300.000 USD;Value of collateral: 500.000 USD;Loan-to-Value = ($300.000/$500.000)*100% = 60.0%
It’s also important to remember that your LTV ratio can fluctuate and when the value of your collateral goes down, the LTV goes up.
This simply means that the value of BTC, ETH, LTC, etc supporting your crypto backed loan is trending down on the open market.
As the price of the crypto asset falls, the LTV continues to increase, and the Nexo Oracle has a threshold in place where the collateralized asset will start being sold to pay back part of the loan in order to rebalance the LTV.
This threshold is set at 83.3%, and when the LTV reaches 83.3% the Nexo Oracle will start initiating partial automatic loan repayments, however, you will be notified by SMS and email before that happens.
Loan amount: 5000 USD;Value of collateral: 6 000 USD;Loan-to-Value = ($5000/$6000)*100% = 83.3%With Nexo, there is always the option to transfer more collateral at any time, and the specific LTV ratio attached to your loan also depends on the type of cryptocurrency that you deposit.
Here are the current LTV ratios used by Nexo:
Bitcoin (BTC) and Ethereum (ETH): 50%Stablecoins: 90%Ripple (XRP): 40%Binance Coin (BNB), Bitcoin Cash (BCH), and EOS: 30%Stellar Lumens (XLM): 17%NEXO: 15%For all users of the platform, the current maximum loan amount you can take/withdraw is $2,000,000, while the minimum is $500.
How to Take Out a Loan on NexoThe process is relatively straightforward for anyone used to obtaining a loan from a traditional financial institution and the team have outlined the process in this short video.
In order to obtain a loan, it necessary to follow the following steps:
Sign up for your Nexo account at https://platform.nexo.io/Deposit your crypto assets. The platform currently supports BTC, ETH, XRP, LTC, XLM, BCH, EOS, TRX, NEXO and BNB alongside a range of stablecoins.Complete the Basic/Advanced Verification in the My Profile section;Go to “Withdraw Loan” where you will see the available loan amount;Choose the preferred withdrawal method and enter your bank account/Tether address;Use your loan as you wish.
If you want to take a loan against stablecoins, at least 50% of the loan must be covered using another crypto asset such as BTC or ETH as collateral in order to comply with Anti Money Laundering standards.
The KYC process is fully automated and usually takes less than two minutes.
You will need to upload a high-quality photo of a government issued ID such as a passport or driving license and the name you provide in the verification form should match the one on your ID.
Making Crypto Loan RepaymentsWhen using the platform you can start the repayment process by logging in to
your Nexo account and clicking on the “Repay loan” button.
You are free to choose to repay your loan in crypto, fiat or a combination of both, and there is no minimum repayment required. You can also repay some or the entirety of your loan early at any time, and you only pay interest for the days you borrow.
Interest is charged daily at 00:00 CET on the outstanding balance and is debited from your available loan limit, meaning that interest is added daily to your outstanding balance.
The standard maturity period of a loan is one year which can be renewed on request without requiring any repayment, and the period starts once you make your first loan withdrawal.
Any new loan withdrawal amends the starting date to the date of the last loan withdrawal, and you only pay interest on the funds that you withdraw.
You can also make a repayment by placing an order with the Nexo Oracle to sell a portion of the crypto assets held in your account to repay the outstanding balance in part or fully.
This is handy should your asset appreciate significantly in value, and it’s worth noting that if you repay a loan within 30 days of the last withdrawal, you will still be charged interest for the full 30 day period.
You can make loan repayments at any time and using any amount of fiat or crypto, and you can currently repay a loan using the following currencies:
Fiat: USD, Euro, GBPCrypto: BTC, ETH, XRP, LTC, XLM, stablecoins and NEXO (currently only the interest can be repaid with Nexo)Any combination of Fiat and CryptoThe Nexo Business ModelSupported CurrenciesThe platform accepts a variety of currencies as funding and the following coins can be used as collateral:
BTCETHXRPLTCXLMBCHEOSTRXNEXOBNBStablecoins (USDT, TUSD, USDC, PAX, and SAI)Nexo currently supports 45 different fiat currencies which allows users in a wide range of different countries to make fiat withdrawals.
Currencies such as USD, EUR, GBP, JPY, AUD, and CAD are supported, while Nexo also allows fiat transfers in RON, PHP, UAH, and PKR.
The High Yield Interest service supports the deposit of funds in USD, EUR, and GBP as well as in the USDT, TUSD, USDC, PAX, and SAI stablecoins.
How to Obtain a Discount Using the Nexo TokenThe platform incorporates its native NEXO token which can be used to obtain a discount on the annual interest rate of your crypto backed loan.
The standard Annual Percentage Rate (APR) on the platform is 11.9% and this can drop to 5.9% (a 50% discount) when you use NEXO tokens as collateral or when you make repayments using NEXO.
From February 10th, in order to receive the full 50% Credit Line Interest Discount, you must acquire and stake enough NEXO Tokens in your Nexo Wallet to cover the interest for the period from withdrawing funds from the credit line up until the moment of repayment.
Anyone staking NEXO Tokens in their Nexo Wallet for only part of the duration of their loan will receive a Credit Line Interest Discount proportional to the number of days out of the entire period for which they had a sufficient amount of NEXO Tokens staked to cover the interest.
All interest accumulated on the platform is calculated by the Nexo Oracle which determines the interest and respective discount for every client’s wallet on a daily basis.
If you are planning to withdraw a $1,000 loan for a period of one year, then in one year’s time, your loan would generate outstanding interest in the amount of ±119.00 (1,000 x 11.9% = 119).
Here, to ensure that you qualify for the 50% Credit Line Interest Discount you would need to stake at least ±119.00 USD worth of NEXO Tokens throughout the whole year.
If at a certain point in time your outstanding interests exceeded the value of your NEXO tokens your daily interest would be adjusted accordingly from that moment onwards.
Using the above example, if the value of your NEXO Tokens drops to ±60 USD then the daily interest would be approximately 9% (50% at 11.9% and 50% at 5.9%).
How Secure is Nexo?The team have recently announced that the company has attained the ISO/IEC 27001:2013 Certificate as a result of their information security management system (ISMS) being audited by CISQ, the world’s largest provider of management system certification, and industry leader RINA.
The ISO/IEC 27001 certification ensures that Nexo’s security infrastructure is of the highest standard, and the team employ a range of security protocols such as 256-bit encryption and locking personal information behind secured networks only accessible to a limited number of staff, with all sensitive client information also encrypted via Secure Socket Layer (SSL) technology.
Accounts are secured by a combination of passwords and two-factor authentication (2FA), and you can choose to receive an SMS message, or use an app like Authy to complete your sign ins.
Nexo also complies with all relevant laws surrounding anti-money laundering and terrorist financing which means that all users are required to verify their identity, and Nexo uses Onfido as a trusted third-party to complete the KYC process.
The Nexo DashboardMost importantly, clients funds are held in individually assigned multi-signature wallets in cold storage, held with BitGo which is a fully audited, SOC 2 Type 2 certified, third-party custodian.
As a result, funds held with BitGo are insured up to a value of $100 million as the company is in turn insured by Lloyd’s of London. This custodian agreement applies if the platform gets hacked, loses its private keys, or has funds stolen by an employee.
The company operates to a high degree of professionalism; however, while it is legally compliant in each jurisdiction it operates in, Nexo is still waiting to be regulated by a well respected financial authority.
Is Nexo Suitable for Beginners?When dealing with the DeFi sector, most of the activities involved take some time to get used to. This is also true when dealing with crypto loans, and the platform is generally better suited to individuals with some experience of purchasing/trading cryptos, staking coins, and/or taking out loans and paying back mortgages.
However, Nexo employs a system that is not too difficult to get to grips with and there are no minimum repayment amounts, alongside interest rates of either 5.9% or 11.9%, and you only accrue interest on any amounts withdrawn.
There is also a high level of flexibility when using the platform and loans can be repaid in full at any time, and you can also repay your loan in crypto, fiat or a combination of both.
For beginners, the ability to earn interest on funds you deposit may be the more appealing feature.
In addition, Nexo provides a host of resources on their website and these include a Support Center, Blog, FAQ section, and Help Center. The support team can be contacted by filling out a request ticket, sending an email to [email protected], or by using the Live Chat function, which is located on the bottom right side of your screen.
The team also run a range of social media channels in a number of different languages and these include an official Telegram Group, Twitter account, and Facebook page.
There are also groups available for Chinese and Korean users and the webpage is available in ten languages including French, Spanish, Russian, Chinese, Japanese, and Korean.
Other features such as the Mobile App help to streamline the service and improve the overall user experience, while SMS and email notifications of changes in the value of your deposit are also very handy. The KYC process is also quite straightforward and requires the upload of a high-quality image of your government-issued ID.
All in all, Nexo is suited to individuals with some experience in crypto or investing who have crypto holdings that they would like to put to work.
While Nexo is one of the more straightforward lending platforms to use, you will still need to get to grips with using the Nexo Oracle and staking NEXO coins, and it’s wise to familiarise yourself with the LTV ratio and exactly how it affects your circumstances before taking out a loan.
Nexo have built a very good user interfaceConclusionNexo is an innovative and forward thinking platform for instant crypto loans which allows people in over 200 countries to use their crypto holdings to receive loans in around 45 fiat currencies.
The platform is well designed and the process of creating an account, depositing funds, and taking out a loan is relatively straightforward with the dashboard being easy to navigate and clutter free.
The company is also proving to be very popular and is gaining traction with a significant part of the crypto community as Nexo has processed over $700m worth of loans for its 200,000 users.
The ability to earn interest on funds deposited is another alluring feature while the Nexo credit card and mobile app make spending your loan even easier.
The project allows people to put their digital assets to work and gain instant access to cash while still retaining ownership of their assets.
In addition, the system is highly tax efficient as you never actually cash out meaning that you aren’t liable to pay any additional takes in most countries.
However, like any crypto platform or lending institution it does take some getting used to and if you fail to make any repayments while your security deposit depreciates in value, then part of your security deposit will be sold automatically in order to cover any price shortfalls. As a result, it’s best to stay on top of the LTV ratio, Nexo Oracle, and Staking process to ensure you are comfortable with how the system works.
Furthermore, while Nexo is fully compliant in all the jurisdictions it operates in, it is still waiting to be regulated by a well recognised authority and the crypto industry is known for its volatility and sudden changes.
That being said Nexo is a solid choice for anyone looking to obtain capital by putting up their crypto holdings as collateral, and anyone interested should take a good look at the loan system in order to decide just how they can benefit from using the platform.
Pros Instant Loans Without Cashing OutEarn Interest on Fiat and Stablecoin depositsClean/Easy Interface and KYC VerificationNo Credit ChecksIntegrated Credit Card & Mobile App Cons Somewhat Centralized ServiceMargin Calls PossibleThe Staking Model Takes Getting Used To