When Regulation Comes Knocking | Lending Platform Nexo Takes Three Measures to Prepare, Crypto.com Increases Insurance to $750 Million

As regulatory authorities turn their focus towards lending platforms, BlockFi, "Coinbase Lend", and Celsius Network have faced scrutiny, while Nexo and Crypto.com, which also offer lending services, have managed to navigate the situation.

Lending Platforms Under Regulatory Scrutiny

BlockFi has recently been issued cease-and-desist orders by regulatory agencies in Alabama, New Jersey, and Texas, citing the offering of unregistered securities in their trading activities.

Subsequently, the New Jersey Attorney General's office also ordered Celsius to halt the issuance of interest-bearing cryptocurrency products, while the Texas State Securities Board called for a hearing to assess potential legal action, both alleging that Celsius products involved the sale of unregistered securities.

Following suit, Coinbase announced the discontinuation of its lending products on 9/17, stating a commitment to finding a clearer regulatory framework for the industry as a whole.

In response to these developments, lending platforms Nexo and Crypto.Com have taken action.

Nexo: Seeking Acquisition of SEC-Licensed Platform

To preempt regulatory scrutiny, Nexo's CEO Antoni Trenchev revealed in an interview plans to navigate these challenges, emphasizing that while lending platforms are currently the target, the entire crypto industry is in the same regulatory boat:

Nexo's legal team and retained law firm in the U.S. are closely monitoring the situation. While U.S. regulators have put pressure on BlockFi and Celsius, all companies operating crypto businesses within the U.S. must navigate the same regulatory hurdles.

Firstly, Nexo is seeking to acquire a broker-dealer platform with SEC approval to offer a "revised version" of Nexo's lending products through this platform.

Secondly, Nexo is in discussions with a U.S. national bank for a strategic partnership and aims to issue Nexo's lending products through a banking charter.

Lastly, Nexo will apply for an exemption to issue securities to non-accredited investors lawfully.

However, Trenchev noted that the framework for the securities exemption issuance and the construction of a comprehensive plan are not yet finalized. Meanwhile, Crypto.Com has increased its insurance coverage once again, setting a new record in the crypto industry.

Crypto.Com Expands Insurance Program

Crypto.com announced on 9/20 that it is expanding its insurance program to a scale of $750 million, surpassing the $700 million cold storage insurance program announced by crypto custody service provider BitGo on 4/21 earlier this year.

Crypto.com claims this will provide additional protection for 1,000 users on its platform, covering insurance for both direct and indirect custody providers, applicable to assets stored in cold storage with Crypto.com's custody partner Ledger Vault.

Headquartered in Hong Kong, Crypto.com may be the only lending platform among those mentioned that is geographically distant from this wave of regulatory crackdowns. While Nexo is based in London, they are also actively preparing for potential regulatory challenges.

The recent public statements from the SEC have repeatedly targeted lending platforms, with Coinbase even receiving a Wells Notice directly, leading to the announcement of the cessation of its lending products. It is expected that the regulatory measures the SEC intends to push forward extend far beyond these actions.