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2023-11-28 04:59:00

Nexo Review 2023: The Lack of Proof of Reserves Makes It Risky!

  • Is Nexo Trustworthy?
  • Does Nexo pay daily interest?
  • What are the features of Nexo?

The financial industry is almost more than 200 years old now. It allows us to buy, sell, lend or take credit on our assets. However, there was one asset class that was missing from this industry.

Digital Currencies!

Digital currencies have picked up a lot of adoption in the last fourteen years. But primarily, they run parallel to the existing financial industry. So, integration was needed to bring more synergy between the Traditional and Digital Finance industries.

Few innovative projects in the crypto market are trying to integrate digital currencies with the traditional financial industry. Thus, helping to bridge the gap. This means that you can lend your digital assets to earn interest on them or borrow fiat currency against these crypto assets.

Nexo is one of the biggest centralized platforms that allows you to use your crypto assets for lending and borrowing like traditional finance. Therefore, today’s review focuses on Nexo as we dive deep into its features and use cases.

What is Nexo?

2. Nexo
Nexo

As stated above, Nexo is one of the most prominent crypto lending and borrowing platform.

Following are the primary services provided by Nexo:
1. Earn Crypto – You can lend your crypto tokens on the platform and earn interest on it.

2. Borrow Fiat Currency and Stablecoins – You can borrow fiat currency or stablecoins against your crypto holdings on the platform.

3. Nexo Credit Card – You can use this card for paying in fiat currency. Your crypto holding with the platform would work as the collateral for this credit.

4. Trade cryptocurrency – This is something new that Nexo has ordered in the recent times. It aggregate liquidity from multiple exchanges and let you trade cryptocurrencies on their platform.

It has more than 4 million users and is available in more than 200 jurisdictions. The platform offers its services around 40 different crypto assets in more than 300 different pairs.

However, now the platform is evolving from just being a lending and borrowing platform to providing a complete financial solution for crypto assets. This means that you can now buy or sell crypto with fiat currency, swap your crypto assets with other crypto tokens, use your Nexo card for shopping, and many more.

Who are the Founders of Nexo?

3. Antoni Trenchev

Antoni Trenchev – Linkedin
Co-Founder and Managing Partner

Antoni is based out of the United Kingdom. He has a bachelor’s in law from King’s College, London, and did his master’s from Humboldt University, Berlin.

From 2014 to 2016, he was a Member of Parliament of the Republic of Bulgaria. Simultaneously from 2010 to 2017, he worked as a legal advisor for six years in a fashion retail company MDL Ltd. In 2017, he co-founded Nexo with his other partners.

4. Kosta Kantchev

Kosta Kantchev – Linkedin
Co-Founder and Executive Chairman

Back in 2007, Kosta co-founded Credissimo, a significant contributor to the Nexo platform.

He did his bachelor’s from Richmond University, London. Further, he did his master’s in Finance from Webster University. In addition to this, Kosta is also a certified Anti Money Laundering Specialist.

5. Georgi Shulev

Georgi Shulev – Linkedin
Co-Founder

Georgi is based out of Bulgaria. He has a bachelor’s in business management from the University of Bath, England, and did his master’s from Aston Business School, England.

He worked full-time on Nexo from 2017 to 2019. Post that; he co-founded another crypto project named Axon.

6. Vasil Petrov

Vasil Petrov – Linkedin
Chief Technical Officer

Vasil is also based out of Bulgaria. He completed his IT (Information Technology) education at New Bulgaria University.

Before joining Nexo as the CTO, he also co-founded a few startups. But since 2017, he has been completely devoted to the Nexo Platform.

What are the Features of the Nexo platform?

The various features of Nexo platform are as follows:

1. Earn Crypto

7. Nexo Earn Crypto
Nexo Earn Crypto

Nexo allows you to earn passive income on your crypto assets. You can simply deposit your assets on the platform and start earning interest on more than 30 crypto assets.

You have the option to deposit your assets under two different terms:

  1. FLEX Terms – No lock-in period
  2. Fixed Term – Fixed lock-in period

In the case of FLEX terms, interest will be received in your savings account on a daily basis. In the Fixed-term, interest will be credited to your account at the end of the period.

You have the option to receive your interest in kind or NEXO token. Interest earned in kind will be compounded automatically. However, if you decide to receive your interest in NEXO tokens, it will not be automatically compounded.

The platform does not charge any fees on its Earn feature. Further, to safeguard from a hack, theft, or loss of private keys, combined user funds are insured for up to $ 375 Million.

Nexo Earn Crypto

The Earn product is not available for the US, Bulgaria, and Estonia citizens.

To know more about the Terms and Conditions of Earn feature on Nexo, Click here.

2. Borrow Crypto on Nexo

9. Nexo Borrow Crypto
Nexo Borrow Crypto

Nexo allows you to borrow fiat currencies and stablecoins against your crypto assets. In the case of a bank loan, you need to provide an extensive list of documents and your credit scores. That’s not the case with Nexo. Nexo enables you to borrow instantly by receiving your crypto assets as collateral.

Currently, you can choose to borrow amongst 40+ different fiat currencies directly in your bank account. Further, you can also borrow stablecoins such as USDT and USDC.

Nexo processes your loan requests within a business day. To receive funds in your account, it may take upto one business day in local transfers and 3 to 5 business days in case of international transfers.

10. Nexo Borrow Crypto 2
Nexo Borrow Crypto

To borrow from Nexo, a user needs to maintain an LTV (Loan to Value) Ratio.

If the value of your collateral changes, the LTV ratio will also change. This means that if there is a sharp fall in the market value of your collateral, then Nexo would give you margin calls. In this case, you would either need to repay your borrowed amount or increase your collateral to avoid any liquidations.

11. Nexo Borrow Crypto 3
Nexo Borrow Crypto

You can read Nexo terms and conditions for the Borrow feature here.

3. Nexo Booster

12. Nexo Booster
Nexo Booster

Nexo Booster is a margin trading feature through which you can increase your position in a crypto asset. Nexo allows a leverage of up to 3 Times.

Suppose you have $100 in your account. Then you can buy crypto tokens worth $300. Here Nexo platform will lend you $200. This allows you to buy more with less investment. The platform lends you to increase your position in a particular crypto asset.

To know more about Margin Trading, you can look at our Beginner’s Guide for Margin Trading.

13. Nexo Booster 2
Nexo Booster

Note: Leverage or margin trading is very risky. You should not use it unless you have substantial knowledge and experience.

To know more about Nexo Booster, click here.

4. Buy Crypto with Fiat Currency

14. Nexo Buy Crypto
Nexo Buy Crypto

On Nexo, a user can directly purchase crypto assets with fiat from their bank accounts. More than 38 crypto-assets can be purchased through fiat transactions.

You can buy crypto tokens instantly with your Visa or Mastercard. Further, Nexo has direct on-ramps for fiat currencies such as USD (US Dollar), GBP (Sterling Pound), and EUR (Euro).

15. Nexo Buy Crypto 2
Nexo Buy Crypto

The platform offers around 38 crypto assets in more than 300 different pairs.

Based on your loyalty tier on Nexo, you are eligible for a cashback of upto 0.5% on every crypto purchase. To receive this cashback, at least 1% of your portfolio balance should be in NEXO tokens (in-house tokens of Nexo Platform).

  • For more information on fiat purchases on Nexo, click here.
  • To check the updated list of supported assets on Nexo, click here.

5. Swap Crypto Tokens

16. Nexo Swap Crypto
Nexo Swap Crypto

In addition to buying crypto with fiat currency, you can also swap your crypto tokens with each other. Nexo offers more than 300 different token pairs.

Based on your loyalty tier on Nexo, you are eligible for a cashback of upto 0.5% on every crypto swap. To receive this cashback, atleast 1% of your portfolio balance should be in NEXO tokens (in-house tokens of Nexo Platform).

Click here for more information on swapping crypto tokens on the Nexo platform.

6. Nexo Card

Nexo Card

Nexo Card is a credit card you can use to buy goods and services from the market. The card is an extension of Nexo’s Borrow feature. Through this card, you can make payments in fiat currencies. Further, your crypto assets with Nexo are treated as collateral against this credit line.

Nexo rewards its users in BTC (Bitcoin) or NEXO tokens for every purchase or ATM withdrawal. Further, you can also link your Nexo Cards with Apple Pay or Google Pay.

To know more about Nexo Card, click here.

What is NEXO Token?

NEXO is the in-house utility token of the Nexo Platform. Users of the Nexo platform are rewarded in several ways for holding NEXO tokens.

1. Use Cases of NEXO Token

The use cases of the NEXO token are as follows:

  • High Yields on Earn products
  • Discounts on Borrow products
  • Cashbacks for crypto exchange
  • Cashbacks for Nexo Card purchases
  • Daily interest on NEXO Tokens

You can read more about NEXO tokens here.

2. Token Economy of NEXO

TokenomicsAmount
Maximum Supply (Source)1 Billion
Total Supply1 Billion
Circulating Supply560 Million
(56% of Maximum Supply)
Token Price (As of 23 May 2022)$1.36
Market Cap ($)$760 Million
24 Hour Trading Volume ($)$5.6 Million
Fully Diluted Value ($)$1.36 Billion

NEXO token has a maximum supply of 1 Billion with a circulating supply of 560 million, 56% of the maximum supply.

As of 23 May 2022, the token price is $1.36, making the market cap $ 760 Million. Further, the 24-hour trading volume of NEXO is $ 5.6 Million.

Further, the NEXO token’s emission schedule is as follows:

18. NEXO Supply Schedule
NEXO Supply Schedule

3. Where can you buy NEXO Token?

You can buy NEXO tokens on the following centralized and decentralized crypto exchanges.

Centralized ExchangesRemarks
Binance ExchangeAvailable for all parts of the world except the US and sanctioned countries. US Residents should use Binance.US
Bybit ExchangeNot available in the US and Singapore
Decentralized ExchangesRemarks
UniswapA gas fee will be charged in addition to the trading fee.
QuickSwapA gas fee will be charged in addition to the trading fee.

4. Best NEXO Wallets

Crypto wallets where you can keep your NEXO tokens safely are as follows:

Type of WalletName of Wallet
Hardware WalletLedger
Hardware WalletTrezor
Mobile WalletMetamask
Mobile WalletTrust Wallet

For more information on Crypto wallets, you can refer to our Crypto Wallet Guides as follows:

  • Crypto Wallets For Beginners: Best Crypto Wallets Guide
  • Best Crypto Hardware Wallets
  • Best Bitcoin Wallets
  • Best Ethereum Wallets

Revenue Source of Nexo

‼This is where we could not find sufficient information. Currently, Nexo pays almost equal or more on it’s Earn product than it charges on its user borrowings. We tried to dive deep into this to understand how is Nexo earning to pay its Earn product users. 🚨

We asked the following question to Nexo Team.

Dear Team,

I am a part of a crypto research firm CoinSutra. I have a query regarding high APY paid by Nexo on its lending product.

The report mentioned in the following link only talks about how much is borrowed from the platform.
The amount borrowed from Nexo – $7.4 Billion
Interest Charged on these borrowings – 0-13% per annum

However, there is no clarity on how Nexo pays such high returns on its earn product.

Amount deposited by customers in Earn Product – No Data Available
How Nexo is Paying 10-16% APY on Earn Products.- No Data Available

Request you to please help me answer this query.

Thank You

The Nexo Team responded to us as follows:

Dear CoinSutra,

Allow me to provide a brief explanation of how we can keep paying a high-interest rate on our clients savings that remains unmatched in the Eurozone, while at the same time reducing the interest on our credit line to just 6.9%.

Firstly, it is important to understand that our Earn product is used to finance only a small part of our loans. Recently our business managed to secure long-term cost-efficient financing which allowed us to keep the unmatched high-yielding interest rate on our clients’ idle savings and lower our credit rates.

We achieved this new long-term funding through our ongoing effort to bring down costs by utilizing our extensive network of financial partners and by obtaining access to institutional liquidity. The benefits of such long-term financing can be best determined by how they align with different needs. After a company gains scale and establishes a track record, as Nexo did, they may access either cash-flow or asset-based, long-term financing, which has several strategic benefits. Long-term, fixed-rate financing minimizes the refinancing risk that comes with shorter-term debt maturities, hence decreasing a company’s interest rate and balance sheet risk. Thus Nexo’s securing of long-term cost-efficient finance alone was a significant factor in determining our loan and earn interest rates.

Allow me one minute to simplify this for you.

Simply the answer to how Nexo is making money and paying interest on its Earn product was not answered.

Nexo has taken long-term finance at low-interest rates which it is probably using to pay off the interest on its Earn product. But, that long-term finance would be required to be repaid at some point. We are not clear how Nexo plans to do that.

In our understanding, if a platform is not making money, it won’t be able to sustain its services for the long term.

Therefore, we would need Nexo to be more transparent about its business model.

We will update this section as we get more clarity. For now, we would be cautious when using Nexo.

Who are the Competitors of Nexo Platform?

The primary competitors of Nexo Platform are as follows:

1BinanceRead our complete Binance review here
3BybitBybit offers an Earn product which is simple and easy to use.

You can refer to our list of top crypto lending platforms here.

Benefits and Limitations of Nexo

The benefits and limitations of the Nexo platform can be as follows:

What are the Benefits of the Nexo Platform?

The benefits of the Nexo platform are as follows:

1. Licenses & Registrations

As per Nexo website, I could find following info related to Nexo financial regulations registration.

19. Nexo - Licenses and Registrations
Nexo – Licenses and Registrations

To ensure compliance with the local and international regulations, Nexo has obtained several registrations and licenses globally. This improves the overall reliability of the platform.

You can refer to the various licenses and registrations obtained by Nexo here.

Do note, that Nexo has officially announced the departure from US market.

2. Security

From a security point of view, Nexo is a reasonably secure platform.

a) The funds are kept in segregated multi-signature wallets.
b) The platform has extensive firewall server architecture.
c) User identity is verified through biometrics.
d) Further, a user can enable 2 Factor authentication on the platform.
e) Funds on the platform are insured for up to $375 Million.

To read more about Nexo Security, click here.

3. Web interface and mobile application

Nexo has a very interactive user interface. It’s fast and easy to use. You can either use the web interface or have an option to use the Mobile application. This application is available for both iOS and Android devices.

4. Customer Reviews and Social Media Presence

The platform has a substantial social media presence and positive reviews on Trustpilot.

  • Twitter – 209K Followers
  • Telegram – 38K Members
  • Reddit – 33K Members

However, the platform has a few possible limitations as well.

What are the Limitations of the Nexo Platform?

The limitations of the Nexo platform are as follows:

1. Proof of reserves is gone

Don’t Trust, Verify!

That’s how you navigate platforms in the crypto world. The biggest red flag for Nexo is, that they used to publish proof of reserve, and not it is gone for almost 11+ months. The lack of proof of reserve makes me avoid Nexo by a distance, and I suggest the same for CoinSutra users to avoid Nexo too.

The Nexo official Reddit is full of thread enquiring about when Nexo Proof of Reserves is coming back

For Nexo team, if you re-publish your proof of reserve, kindly reach out to us and we will update this section.

2. Price Spread

Although Nexo does not charge any fees for buying or selling crypto tokens, it charges a 1.5% – 2% price spread. This means that the buy prices quoted on the Nexo platform are 1.5%-2% higher than the rest of the market. This makes the price of crypto assets on the platform relatively expensive to its competitors.

3. A limited number of Crypto tokens

The variety of crypto tokens offered by Nexo is on the lower side. This could reduce the potential market size of the platform.

4. Counter Party Risk

As discussed above in the “Revenue Source” section, there is no clear information about how Nexo is making money and paying it to its Earn product users. This creates a counter-party risk for the users. This means that the Nexo may not be able to sustain the interest payments or worse repay the amount deposited by the Earn users.

Conclusion – Nexo Review 2023

In our understanding, Nexo has been out there for a really long time in the lending and borrowing your crypto tokens business. For lenders, it provides a lucrative way to earn passive income on your assets. And for borrowers, it provides an instant line of credit without extensive documentation or formalities.

However, transparency is a big risk for an investor like you or me. Due to implosion of similar platforms like Celsius, BlockFi, trust on these centralized lending platform is pretty low, and for a good reason as well. We feel that the platform could have a counter-party risk for its users. Further, the response we received from the Nexo team was not satisfactory. We are open to hearing more from the Nexo Team and updating our review accordingly.

The lack of proof of reserve (They had it and its removed now) is a major red flag and something you should take in account before you plan to use Nexo.

Have you ever used the Nexo platform to lend or borrow cryptocurrency? What are your thoughts on the service? Would you be comfortable using Nexo even with its transparency issues? Let us know in the comments section.

If you want to explore other crypto lending platforms in the market, you can refer to our list of Best Crypto Loan Platforms.

Please note that nothing written in this post is a financial advice. Please DYOR (Do Your Own Research) and consult your financial advisor before making any financial decision.

That’s it for this post. I hope with this review of Nexo we could help you identify whether the Nexo platform is worth your time or not. Do share your comments and feedback with us. Lastly, subscribe to Coinsutra Newsletter to get your FREE crypto trading E-book.

Resources

  • Website
  • Blog
  • Facebook
  • Twitter
  • Telegram
  • Reddit

Frequently Asked Questions about Nexo (FAQs)

Does Nexo pay daily interest?

Yes, daily interest applies to flexible deposits. Not on fixed deposits.

Is Nexo Earn available for US citizens?

No, Nexo Earn is not available for US citizens.

News appeared first on: Coinsutra.com

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