Nexo co-founder Antoni Trenchev was recently interviewed on the NASDAQ Marketsite’s ‘Innovators with Jane King’ where he discussed Nexo’s competitive interest rates, customer-driven policies, and expanding role in the quickly tokenizing world.
Here are some of the highlights:
- Nexo has secured long-term cost-efficient financing through a syndicate of global institutional partners, allowing us to cut interest rates for the company’s Instant Crypto Credit Lines to only 5.9% APR — a superior rate when compared to the offers of traditional financial providers whо charge clients between 26% and 76% per annum.
- Consequently, Nexo is now one of the major contributors to the institutionalization of the blockchain space and is on a rigorous license acquisition mission across the globe.
- Nexo’s products are engineered to be customer-centric and to benefit clients directly in a most efficient manner, unlike the incumbent banking institutions. We provide:
- Fully automated, tax-efficient crypto-banking services with guaranteed instant approvals and loans available 24/7 at #ZeroFees
- Inclusive services for the 2+ billion underbanked people in the world, providing access to banking services and the typical western-style wealth-creation to all.
- A user-friendly app for crypto wealth management so clients can store, send, receive, borrow and earn on the go.
- $100 million insurance of all custоdial assets stored with the world’s leading crypto custodian BitGo.
- To offset any potential risks due to volatility in the crypto industry, Nexo encourages underleveraging which in turn protects the interests of clients, and the company itself, ensuring the sustainability of our business model.
- Nexo is constantly expanding its services to suit the new realities of a quickly tokenizing world. With the rapid tokenization of physical assets into the blockchain market (including stocks, fine art, bonds, and even real estate) Nexo’s addressable market will increase into the trillions.
A video of the complete interview and a transcript are below:
Nexo is a crypto-based bank based in Europe that just announced one of the lowest interest rates in the industry. This happened after the company secured long-term cost-efficient financing as part of their agreement to bring down funding costs. Antoni Trenchev is with me to explain more. So, welcome Antoni. It’s great to be talking to you this morning.
Thank you, Jane. Absolutely thrilled to be here.
Tell me about the new interest rate, who does it benefit?
Well, I think that lower interest rates are a net benefit for absolutely everyone, and I mean the borrowers who are the clients of Nexo, the investors and the company itself. Obviously, when people utilize lending products, they like their interest rates to be low and competitive. It’s a no brainer, but I think this is also very good for the Blockchain space and the overall market. Because Nexo is a crypto company, but our ambition is to expand well beyond that. We have been working for more than 6 months on this deal to secure long-term cost-efficient financing. Me and my partner Costa, have been to the financial capitals of the world talking to banks, just about anyone from JP Morgan to Bank of America to Citibank. So, we did the proper leg work to secure that deal. We had a lot of explaining to do as to why banks should get off zero in terms of investments in crypto and exposure to crypto. And I think that this deal is a manifestation of succeeding in that perspective.
Okay. It makes a lot of sense as business owners, and people who operate in the financial world, are always looking for low interest rates, and we’re seeing in some cases negative interest rates in some countries. So, you’re just taking advantage of this macro trend that we’re seeing globally.
Absolutely. We’ve had low interest rates for more than a decade now due to the very expansive and aggressive monetary policies conducted by the central banks of the world. Unfortunately, I think that these interest rates and this monetary policy have not directly benefited the people. It has benefited the institutions because when you go to Charles Schwab or Bank of America, you see interest rates on your accounts at an absolute maximum of 2% per year, which is not a whole lot, it barely covers the inflation rate. But at the same time, it has been an opportunity in disguise for companies like us.
Nexo has been in the Fintech space for more than a decade now, we’re very consumer-focused, very consumer-driven, very consumer-oriented and client-focused. So, we see this as an opportunity for us to offer services that are to the benefit of the consumers. People can earn up to 8% with Nexo on their stablecoins, on their Dollars, Euros & Great British Pounds, which have been rebalancing nicely due to recent talks. So, we deliver a product that is very much in demand. Both in terms of our own product, which gives people interest rates that they haven’t seen in a while, in more than a decade for sure, then also the means to borrow against what in the traditional markets will be their stock portfolios or commodities. We have taken that leverage and that expertise, and now people can borrow against their crypto assets. And it’s a win-win for everyone because of the low interest environment and the interest rates that we can offer the space, which are quite enticing. They also bring the institutions into the space. One of the larger trends that we’re seeing right now is the institutionalization of the blockchain crypto-sphere, which is very, very positive and we’re super excited about that.
I was interested when looking at your website because it says Nexo is better than banks or something like that. There’re a lot of complaints about banks; the low interest rates that they pay on savings, the high interest rates that they charge on credit cards, you have to wait to get a foreign currency a few days in many cases, standing in line, and they treat people with a lot of money better. I mean there’s a whole list of complaints. So, tell me what Nexo is doing better than banks.
At Nexo, we provide banking services for the blockchain space, but also for a quickly tokenizing world, which makes the total addressable market, just like that of the banks, in the trillions. We are not really a modest bunch, but we think we do a very good job at actually challenging the banks, and we think that we are succeeding in providing services in a more efficient way than previously before, from a customer perspective. That’s how we set up the products. Our interfaces are amazingly clean, very simple to use. Also, the efficiency is because every process at Nexo is fully automated, we have been doing this for more than a decade now, so we do have the know-how on how exactly to create customer-driven products and how to develop them.
We are a two-year-startup and we are already live in 200 jurisdictions. We provide instant crypto credit lines in those jurisdictions. You can get your loan on the same or next day, it usually hits your bank account within a few hours, and we deliver the loans in 40+ different fiat currencies, which is practically unheard of. This is due to our extensive network of banking partners that we have dedicated a considerable time developing. Everything is incredibly efficient; we don’t do credit checks, the only thing you have to do is onboard in terms of KYC & AML procedures so that we know exactly who we’re dealing with because we are a fully regulated, serious digital assets institution. But apart from that, if you have the collateral to put up for your credit line and to secure it, there are zero credit checks, there’s no credit base scoring whatsoever, you can get your loan in sometimes less than 15 minutes. We have seen such cases and you can check out the internet, it’s full of testimonials as to the efficiency of the Nexo model.
In that sense, I think it’s fair to say we’re part of the solution, not part of the problem. Delivering our services in the way we do, we intend and, I think, succeed to be very inclusive and to provide services that were previously unavailable to the under-banked people of the world. We have more than 2 billion people who don’t have access to the infrastructure that we have in the West and Nexo has gone a long way in providing services to the most remote corners of the world. So that, we can have a Western-like wealth creation, redistribution and participation in the way we have done business and grown our collective wealth in the West, to parts of the world that might not be that privileged.
So, explain to me how the credit line works. Let’s say I’m a small business owner and I need some money for operating expenses. What do I do? I go to your website and then what?
Small and medium business enterprises are actually one of the most frequent use cases that we see on the platform. Just the other day, we had a client describing his experience with Nexo, of how he generated some serious profits from his Bitcoin investments. I guess he was early on and now he’s starting a business, he has a startup and rather than take his Bitcoin and sell it into the open market, he comes to Nexo to secure an instant credit line against his Bitcoins, which is all the more efficient in a couple of ways. First of all, he believes that Bitcoin is going to be $100,000 a Bitcoin, so he would like to take part and participate in that upswing in price if it comes to be. Secondly, he now has some liquidity needs, so rather than selling them and missing out on all the potential, he can get the instant credit line, which from his perspective, I think he’s a US citizen and business owner, is also very tax-efficient because when you borrow against your assets, you don’t pay the capital gains tax.
This is no secret. This is what the billionaires of this world, the Mark Zuckerbergs & the late Steve Jobs have been doing for decades: they keep on borrowing against their holdings rather than selling them in the open market, which does not allow them to have that asset exposure they used to have and up to 44% might be gone in taxes. So, we see lots & lots of small businesses, medium businesses, and now even hedge funds, pension funds, and hopefully some of the banks utilize Nexo’s services which provides efficiency all across the board.
The way the platform works is really, really simple. You just go to the website, you onboard within two minutes, then you would deposit your crypto, whatever it might be, Bitcoin, for instance, if you’ve got $10,000 worth of Bitcoin, you transfer that to the leading custodian in the space. In our case that will be BitGo, so it’s secured there, and you maintain the beneficial ownership of it during the entire duration of the loan, you get your Dollars, Euros or whatever, on the same day, more likely than not, then you spend it as you see fit.
As mentioned earlier, interest rates are very, very competitive, we charge APRs that start from 5.9%, and just as a means of comparison, the Uber credit card charges you close to 25%, and the Amazon card charges you something in the mid-30s in terms of percentage rates, so we are very, very competitive. Once you repay your loan, you obviously get your Bitcoin back. The beauty of it all is that our credit lines are dynamic meaning that if Bitcoin gains in value, the accessible amount for your instant credit lines gets proportionally extended and you only pay interest on what you actually spend or withdraw to your bank account or spend with your Nexo MasterCard. So, it is efficiency, efficiency, efficiency.
Okay. Well, I was going to ask about that, because Bitcoin is notoriously volatile, so I was wondering how have you guaranteed approvals with that volatility? And also, just in general, how can you guarantee approval of a credit line?
Volatility is what drew people to pay attention to the crypto space, so it has been a blessing. For instance, Bitcoin is the best performing asset over the past decade and it has delivered asymmetric returns on a consistent basis throughout the past 10 years, so it’s really a question of can you afford not to have Bitcoin in your portfolio? Obviously, it has to be done and managed with the proper risk management tools and money management techniques, so that it doesn’t blow up in your face, but just having a small portion of it in your portfolio can generate outsized returns.
So, one of the missions that we have at Nexo is to spread the good word, and that also includes the volatility. I think volatility has been on a downward trajectory for some time now with new products emerging everywhere from the Chicago Mercantile Exchange to ETFs, which are going to be approved sooner rather than later.
But at Nexo, we encourage under-leverage. We give you a loan which is 50 cents on the dollar, which protects the company, which protects the investor, which protects the client. This is very important in the way we can guarantee your approval is the fact that you are pledging collateral. This is the second question. The first question you asked or what I’m answering second, is how we ensure that your approval is guaranteed: by being in the secured lending business and extending loans which are secured through collateral.
Well, another thing that was interesting is that everything is automated, so you can apply 24/7, and there is instant approval too. Do I understand that right?
Yes. Everything with Nexo is instant. It’s happening in real-time. You can log into our website 24/7. You can do so on the go via our very beautiful mobile app. I encourage everyone to check it out, download it, make sure you give it your highest rating. We conduct business in your time zone and on your terms. You can come and construct the product exactly so that it fits your particular needs, and this is what Nexo is ultimately all about, which is having very consumer-centric, very consumer-driven products which serve the needs of our clients and the community.
I think those are the best business models in the world that, first of all, make economic sense and with Nexo, it is precisely the case. Our model is as old as the world’s secured lending, and it’s no secret, this is the point of the interview sharing with the world that we now have abundant cost-efficient liquidity secured for the long run, which will enable us to continuously provide superior services. This brings me to the second point, we live in a digitized world, people have an expectation of everything being instant, and to be as close as possible to a zero-friction situation. And I think that we are doing one of the better jobs in the world of providing services in line with those two premises.
I also saw that you have $100 million custodial insurance. So, how does that help your business model?
Providing financial services and combining that with technology is one of the huge advents of our time. But in that particular space, the most valuable commodity is trust, so we go to a great length to be a serious digital assets institution, and we are regulated as such. We are in a very aggressive mode of license acquisition throughout the world because as I said, we operate in more than 200 jurisdictions, so this is one of the ways that we create trust.
The other thing is precisely what you’re bringing up about this concept of having insurance. The blockchain space is still a nascent industry, that was not something that was easily achieved, and we’re quite proud here because we now have custodial insurance. We’ve had it for a while; custodial insurance on the assets that are held with our custodian BitGo. This is a direct result from their ongoing effort to provide the most secure and efficient services and their arrangement with Lloyd’s of London, which is one of the biggest, if not the biggest, underwriters of such policies in the insurance sector, and that’s for the entire world.
I also saw that Brock Pierce, a well-known crypto entrepreneur, used Nexo to purchase a second home. So, how did that transaction work?
This truly was one of the more spectacular cases we had at Nexo. What we were able to execute with Brock Pierce was the world’s first crypto-backed mortgage and we were quite excited to be part of that deal. Brock was actually able to acquire a property in central Amsterdam in the Netherlands, which is a building that used to be an illegal Catholic chapel. It should be checked out by everyone to see, it’s an amazing building with stunning architecture. During the 1800s, Catholicism was actually outlawed in the Netherlands, so the Catholics had to go underground and they created this amazing building, and Brock secured it. I don’t know how he did it, he is a savvy businessman, but we were part of the deal. He’s a very strong proponent of all things crypto. He holds more than 95% of his personal wealth in crypto, so he’s essentially short fiat.
He came to us and said: “I have this bunch of Bitcoins, I want to secure this incredible property, what can you guys do for me?” We said: “What currency do you need?” He said: “Euro.” We saw the documentation, transferred the Euros to the notary, who received it on the same day and executed the deal for him; there was a secure swap between money and property. That was back in January, I think, when Bitcoin was trading at $3,000, then a few months later, it was trading at $13,000, there’s been more than 4, almost 5x return on his Bitcoins, so this deal essentially financed itself. This is what Nexo is all about; giving you the best of both worlds, holding onto your crypto and then giving you access to liquidity whenever you might need it for whatever reason.
Wow. That is really interesting. And it could be a really early glimpse of how we make purchases and do financial transactions in the future.
Indeed, that’s correct. I think we are living in a very interesting time right now; we’re seeing the tokenization of the world happening as we speak. We see everything from real estate getting tokenized, which has a total value of $200 trillion, with a T. We’re seeing stocks, commodities, bonds, and all sorts of equity getting tokenized, that’s another close to $80 trillion. We’re seeing fine art getting tokenized, then brought on chain to be exchange-traded, fractionally owned and obviously borrowed against. So, super, super exciting times. I think the technology has proven its worth. Blockchain technology’s here to stay, and we’re going to see more things getting on blockchains. So, super interesting times that we’re living in right now. And as the world gets tokenized, Nexo will be there to do lending and much more, like providing banking services for this brave new world.
Well, congratulations on your success and kudos to you for seeing the future and coming up with the company that addresses how things are changing.
Thank you so much, Jane, for your kind words and for having me. It’s always a pleasure to be here.