Why this crypto credit company is ‘safer for customers’ than other banks

Antoni Trenchev, co-founder and managing partner of Nexo, joins Yahoo Finance Live to discuss how the company is transforming the crypto lending space and potential crypto regulation in the second half of 2021.

Video Transcript


Welcome to Yahoo Finance Live. As we watched, we saw the growth of people in crypto turning to lending platforms, BlockFi, of course, one of the ones we talk about a bit on this show. Celsius which we had earlier this week. But there is another, Nexo, which is gaining traction. And for more on what this platform has seen as people turn to trying to earn yield on their crypto assets, I want to reach out to the co-founder and managing partner of Nexo. Antoni Trenchev is joining us now.

And Antoni, when you look at that, it seems like a no-brainer to explain that, but there are, I guess, nuances that are maybe different to how you interact with the bank. But tell me about what you’ve seen here in terms of growth on your platform and how much money per user could come in now.

ANTONY TRENCHEV: Well, the growth has been spectacular. This time last year, we had nearly $2 billion in assets under management. Right now we’re sitting on $15 billion. So that’s 700%, 800% growth, which is, obviously, in line with the growth that crypto itself has seen. But we see people who weren’t native to space coming in, experimenting with crypto.

The Elon Musk, Paul Tudor Jones and Michael Saylor of the world have had their effect on attracting people. And quite frankly, in the macro environment further exacerbated by the response of governments and central banks to the difficult COVID situation, everything holds up in favor of companies such as Nexo and the crypto space in general.

Yeah and on your platform you pay up to 12%, yield-wise, on a crypto asset. It’s a bit of an apples and oranges comparison, I suppose, if you compared it to an interest rate at a bank, because there is additional volatility in crypto. But I mean, when you look at that, how has that changed, maybe, as people point fingers and get comfortable?

We were talking with BlockFi earlier. And obviously there are counterparty risks and risks around centralized lending platforms that people need to consider here. So they were saying there was a small number that people could actually drop off to start with. But on average, what do you see as people sort of test your platform and maybe develop what they feel comfortable risking?

ANTONY TRENCHEV: Well, we’re the lender that has historically focused primarily on retail. Some of the other companies you mentioned were more, initially, in the institutional space. So right now we have all kinds of customers. We have someone depositing as little as $1,000. It’s just the minimum we have. We have – and our young entrepreneurs, who are sitting on a bunch of crypto pits, so many hundreds of thousands. Then we have the whales, which are sitting on millions and hundreds of millions of crypto.

But I think you mentioned a very interesting detail here, like how does this compare to a banking product and apples and oranges? Yes, in some ways it is, but frankly, it works exactly the same. You know, we in the western world were brought up with this notion that a bank automatically means security.

And that might be true for some of the small customers or mid-level customers who are covered by something like FDIC insurance, up to $250,000, or the ECB equivalent in Europe, where it’s 100 $000 per euro. And it’s as safe as anything because it’s guaranteed by the government. But if you are above this threshold, you have the same counterparty risks as everyone else.

And on our platform, everything we do, whether it’s borrowing or lending, is over-collateralized. So I would say, just from a financial point of view and the way the business is structured and makes perfect sense, that we are safer, especially for large customers, than your average bank.

Yes, even that said, it looks like you might have a harder time convincing regulators, especially given the current environment in the crypto space. We have seen the latest financial crackdown not only in the UK but also in Japan. How do you see all of these headlines right now and what could this potentially mean for your business?

ANTONY TRENCHEV: Well, I wish more people read the full articles than the headlines, because when you actually look at it, what’s going on, regulators are cracking down on some aspect of crypto business, and making it the crypto exchange activity, which is leverage, you know, historically leverage. And the 100x, 135x levers were very poorly received in the US and elsewhere, in the UK as well.

So I think what we’re seeing right now is not an attack on crypto per se. If you read the article, the press release from the FCA in the UK, it says we are going after derivatives and high risk, high leverage products. And it’s not even our job to oversee and regulate crypto assets, such as Bitcoin and Atrium per se. It’s almost verbatim from their press release.

So people are stuck with the headlines. So it’s a bit more complicated. My personal feeling from everything I see, and we interact with regulators around the world, crypto as such is here to stay.

Yes, it’s very interesting to see the different things they disagree with. But for now, these lending platforms continue to grow, including yours. Antony Trenchev, Co-Founder and Managing Partner of Nexo, thanks you for coming here to chat with us today. Be well.

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