Nexo Terminates Interest Payments for US Clients on New Deposits
Crypto lending platform, Nexo, has announced that US citizens will no longer be allowed to earn interest on any new deposits they make to their wallets. This announcement comes after the US Securities and Interest Commission (SEC) fined another crypto lending firm, Blockfi a $100 million for not registering its retail crypto lending product. However, Nexo clarified that its customers from the US will still be able to earn interest on the current balances of their savings wallet that were held before the announcement. After the SEC penalized Blockfi, several regulators from a number of states, such as Texas, Kentucky, Alabama, New Jersey and Vermont had issued warnings to the company about its interest-bearing accounts.
As a matter of fact, cease and desist orders had also been issued by some states and a certain date had been given to Blockfifor removing its Blockfi Interest Accounts (BIA). After the US securities regulator handed down penalties for Blockfi, it drove Nexoto make its own announcement. All US-based customers of the crypto lending firm will see some new changes where the Nexosavings program is concerned, which helps users earn interest. According to Reddit moderator Nexo Josh, the company has decided to implement changes to their earn interest product voluntarily in the United States for complying with the newly-announced guidance.
A representative for Nexo stated that the changes were not applicable to non-US clients because they are not subject to guidance from the SEC. The US-based clients of the crypto lending form will be able to earn interest on the balances they already hold in their wallets, but newly added balances no longer qualify for it. Nexo Josh said that until the restructuring of the earn interest product is complete, new top-ups to the Nexo wallet will not earn any interest. In addition, the representative stated that any balances withdrawn from the wallet will be regarded as new top-ups and not earn any interest, even if returned later.
For new clients based in the US, Nexo’s earn interest product will not be available to them in its current form. The product will be restructured by the company and launched as the 2.0 version of the earn interest product. Nexo Josh stated that their legal advisers and team were working round the clock to come up with solutions for its clientele in the US in order to make the earned interest product 2.0 complaint with new regulatory guidance and widely accessible.
Meanwhile, it is important to note that Blockfi was certainly not the only crypto company that had been targeted by the US securities regulator. Alabama and Kentucky had also issued warnings for interest-bearing accounts to Celsius, which is another crypto lending company. The current opinion of the SEC dictates that crypto savings products that are offering interest cannot offer the same safety as people can expect from credit union deposits and bank deposits. As no proper regulation exists for crypto in the US for now, these problems will continue to pop up for companies operating in this sector.