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Nexo, a cryptocurrency lender, gets a U.S bank charter through an acquisition

A federally regulated U.S. bank has acquired a stake in cryptocurrency lender Nexo, opening the door for the company to provide banking services to Americans as a licenced institution. The announcement was made on Tuesday.

The decision is a big step for the budding cryptocurrency sector, which is trying to gain favour with lawmakers and authorities as use and investment in digital assets rise.

The Zug, Switzerland-based Nexo said that it has reached an agreement to purchase an unknown share in Hulett Bancorp, the owner of the obscure Summit National Bank. Nexo intends to provide a number of products through Summit National Bank, which has a federal bank charter with the Office Comptroller of the Currency. These products will include checking accounts and loans secured by cryptocurrencies.

Following the demise of the contentious token terraUSD, which led to a wave of company liquidations and failures like Celsius and Three Arrows Capital, the market has been nursing its wounds.

According to Antoni Trenchev, co-founder of Nexo, “We currently have a solid offering with regard to our crypto-backed loans, but we always like to have more than one alternative for providing a given service.”

The magnitude of Nexo’s investment in Summit National Bank was not made public. The merger was dubbed a “industry-changing transaction” by the company. In addition to enabling the introduction of new goods, Nexo said that users will benefit from improved legal protections thanks to its bank licence. According to the company, the purchase will also enable Nexo to increase its presence in the country.

“The purchase of a stake in a fully functional bank enables us to offer our full range of services to U.S. retail and institutional clients, including bank accounts, asset-backed loans, card programs, as well as escrow and custodial solutions, and many other future plans for Nexo’s U.S. expansion that will be revealed in the months to come.”

When Hulett National Bank was first incorporated in Wyoming in 1984, it was known as Summit National Bank. Later, the company established branches in Montana and Idaho. Summit National Bank’s website states that “business, agriculture, real estate, mortgages, and construction” are its main lending areas.

The information comes just a day after eight US states filed lawsuits against Nexo, saying that the corporation offered consumers interest-earning accounts without first registering those accounts as securities and making the requisite disclosures. The charges claim that Nexo deceived investors into thinking that it was a licenced and registered platform. Nexo stated that it had been collaborating with federal and state regulators in the United States in response to the legal action. In an effort to set itself apart from other companies that have experienced financial difficulties, the company claimed that it “did not participate in uncollateralized loans, had no exposure to LUNA/UST, did not have to be bailed out, or required to resort to any withdrawal limits.”

Although it’s an unusual occurrence in the sector, Nexo, which has more than $4 billion in assets under management, isn’t the first cryptocurrency company to receive a banking licence. Through mergers and acquisitions, other fintech firms like SoFi and LendingClub, who provide crypto trading on their platforms, also acquired federal banking charters.

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  • Nexo, a cryptocurrency lender, gets a U.S. bank charter through an acquisition
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