In a recent update, Nexo revealed that its decision to exit the U.S. market resulted from its settlement with the U.S. Securities and Exchange Commission (SEC) and state regulators. It will cease offering all its interest-bearing products on April 1, 2023. For 18 months, Nexo had been in good-faith talks with U.S. regulators to figure out how the company could comply with American financial laws, the U.K.-based lender said.
“It is now unfortunately clear to us that despite rhetoric to the contrary, the US refuses to provide a path forward for enabling blockchain businesses and we cannot give our customers confidence that regulators are focused on their best interests,” Nexo wrote in Monday’s blog post.
Regulators in eight states including New York, California, Kentucky, Maryland, Oklahoma, South Carolina, Washington and Vermont filed administrative actions against Nexo in September, claiming that Nexo’s Earn Interest Product, which allows customers to lend digital assets in interest-bearing accounts, qualifies as a security and must be registered as such.
The Consumer Financial Protection Bureau disclosed last week that it had launched an investigation into whether Nexo was violating consumer protection laws last year. Last week’s disclosure came when it declined Nexo’s petition to halt the investigation.
Nexo has off-boarded customers from Vermont and New York and has suspended new registrations in the U.S. for its Earn Interest Product to “meet regulators’ expectations,” the company said. Customers in Indiana, Kentucky, Maryland, Oklahoma, South Carolina, Wisconsin, California and Washington can no longer access the Earn Interest Product as of Tuesday, but they can continue accessing Nexo’s other products for the time being.
Nexo listed grievances with U.S. regulators throughout the blog post, saying “although regulators initially encouraged our cooperation and a sustainable path forward appeared viable,” recent events – hinting at the turmoil caused by FTX’s collapse – have created “an impossible environment” for the company to continue operating.
“This was made crystal clear by the Consumer Financial Protection Bureau’s (CFPB) decision this past Thursday insisting it has jurisdiction to investigate our Earn Interest Product, which the [Securities and Exchange Commission[ and state regulators have simultaneously insisted is a security subject to their jurisdictions.
It also pointed to enforcement actions brought in September by eight different states, including New York and California, alleging that the company’s Earn product violated state securities laws. Crypto lenders in general have had a tough year in the U.S., with many of Nexo’s largest competitors, including BlockFi, Celsius Network and Voyager Digital, all filing for bankruptcy protection within the past few months.