Green exit signage

Nexo exiting US due to inability to run wild without supervision

U.K.-based Nexo is bidding America a protracted buh-bye due to the digital asset lending platform’s alleged frustration with the slow pace of regulatory acceptance in those ungrateful former colonies.

On Monday, Nexo announced the “regrettable but necessary decision” to begin “phasing out its products and services in the United States in a gradual and orderly fashion over the coming months.” By Tuesday, eight U.S. states—California, Indiana, Kentucky, Maryland, Oklahoma, South Carolina, Wisconsin and Washington—had joined the existing number of states ineligible to partake of Nexo’s Earn Interest Product.

Nexo previously exited Vermont and New York following ‘requests’ by those states to stop offering unauthorized lending products to their residents. In September, New York Attorney General Letitia James joined seven other states in suing Nexo for ignoring her office’s warnings to “register as a securities and commodities broker or dealer” and misrepresenting to investors that Nexo is “a licensed and registered platform.”

Nexo’s Monday announcement cited its New York skedaddle as one of the “actions we have taken in response to U.S. regulatory concerns and developments.” In taking these actions, Nexo claims to have “expended significant costs and efforts to do things the right way.”

Other “good-faith” efforts include registering its NEXO token sale with the U.S. Securities and Exchange Commission (SEC) in 2018, the delisting of the XRP token following the SEC’s legal action against Ripple Labs, and halting acceptance of any new funds from customers into its Earn product following rival BlockFi’s $100 million settlement with the SEC this February.

Nexo went as far as taking a stake in Hulett Bancorp, the parent company of Summit National Bank, just one day after it was sued by those eight states. At the time, Nexo claimed the deal would allow it “to offer its U.S. retail and institutional clients services that include bank accounts, asset-backed loans, card programs, as well as escrow and custodial solutions.”

Nexo claims the final straw came last week when the Consumer Financial Protection Bureau (CFPB) confirmed that it had the authority to investigate whether Nexo had violated federal consumer financial law. The CFPB served Nexo with a civil investigative demand late last year and Nexo tried to argue that, since the SEC had identified digital asset lending programs as securities, the CFPB had no jurisdiction. But the CFPB countered that Nexo was trying to “have it both ways,” since Nexo was continuing to argue with the SEC that its Earn program wasn’t a security subject to SEC oversight. Shrewd…

Ignoring the CFPB’s exposure of its insincerity, Nexo claimed Monday that things had “reached a point where regulators are unwilling to coordinate with one another, and are insistent on taking positions that are inconsistent with one another, creating an impossible environment to operate efficiently and to create the expected value for our clients.”

Nexo whined that “despite rhetoric to the contrary, the U.S. refuses to provide a path forward for enabling blockchain businesses … Given the challenges of the confusing and contradictory U.S. regulatory regime, it is with a heavy heart [and, presumably, a light wallet] that we begin the gradual and orderly departure from the U.S.”

While this exit is in progress, Nexo assured customers that withdrawals will continue to be processed as usual. And, for the time being, Nexo customers outside the aforementioned states will continue to have access to all the other Nexo products that have yet to be prohibited.

Last lender standing?

With respect, Nexo’s put-upon petulance is a bit much given that nearly every one of its major rivals—BlockFi, Celsius, Vauld, Voyager Digital, etc.—are all currently languishing in bankruptcy protection. Some were victims of some ill-advised business decisions, while others were just Ponzi schemes that ran out of fresh suckers. Regardless, these sites’ customers – many of them American—have been hung out to dry with little assurance that they’ll ever recoup even pennies on their dollars.

While there’s no sign to date that Nexo’s books are similarly impaired—and Nexo is reportedly still looking to acquire Vauld—the company’s in-house NEXO token reportedly comprises as much as 10% of its balance sheet. Given that the FTX exchange’s rapid demise was in part based on its over-reliance on its proprietary token, it’s perhaps not surprising that U.S. regulators aren’t eager to give surviving lending platforms the benefit of the doubt.

Sadly, Nexo’s attitude is typical amongst a certain set of ‘crypto bros’ who have convinced themselves that, as masters of a new financial universe, they should be exempt from all existing rules and regulations that govern traditional financial products. And if they can’t have it their way, they’ll take their ball and go home.

Paging Clay Davis

In terms of crafting new digital asset legislation, the U.S. regulatory situation is indeed a mess, but the digital asset firms are part of the problem. Companies like FTX encouraged regulatory in-fighting by lobbying hard to ensure the SEC was sidelined in favor of the Commodity Futures Trading Commission (CFTC), which has a much smaller budget and a lot fewer people, meaning less capacity to actually catch crypto crooks in the act.

In the wake of FTX’s collapse, Rep. Tom Emmer (R-MN), who co-chairs the Congressional Blockchain Caucus and supports legislation that would give the CFTC authority over digital asset exchanges, tweeted (without evidence) that SEC chairman Gary Gensler had been “helping [FTX CEO Sam Bankman-Fried] and FTX work on legal loopholes to obtain a regulatory monopoly.”

And yet Emmer was one of eight members of Congress who sent Gensler a letter in March trying to get him to back off efforts to “gather information from unregulated cryptocurrency and blockchain industry participants” so as not to “overwhelm them with unnecessary or duplicative requests for information.”

FTX was among the companies from which Gensler had sought additional information, and the questions the SEC posed to FTX (that Emmer found so unnecessary) included details on how the exchange handled customer deposits.

Five of the March letter’s eight signatories were recipients of SBF’s lobbying largesse. Emmer received $11,600 from FTX US in the 2021-22 election cycle, ranking the exchange #15 on Emmer’s top donors list. Emmer also headed up the National Republican Congressional Committee (NRCC), and the NRCC’s Congressional Leadership Fund received a total of $2.75 million from FTX-affiliated parties – including $2 million from FTX’s former co-CEO Ryan Salame.

In September 2021, Gensler warned that more enforcement cases were in the works against lending and trading platforms. A few months later, when SBF appeared before the House Committee on Financial Services, a fawning Emmer congratulated him for “doing a lot to make sure there is no fraud or other manipulation.” And yet Gensler is supposed to be the one giving away the store.


Nexo may not have crossed Emmer’s palms with silver but, to quote Michael Corleone, they’re both part of the same hypocrisy. Emmer tried to protect FTX from the SEC, and when this slavish devotion blew up in Emmer’s face, he blamed Gensler for not doing enough to rein in SBF’s excesses.

Nexo, like many digital asset companies before it, tried to employ Mark Zuckerberg’s ‘move fast and break things’ model by launching products and services without first ensuring that legislators and regulators were on board. When forced to retreat, Nexo chose to blame those it previously chose to ignore. 

Many digital asset companies appear frustrated by the slow pace of regulatory change, seemingly ignorant that this is par for the course for many other business sectors as well. But just because you’re impatient to get to your destination doesn’t mean you can simply ignore the posted speed limit, at least, not without consequences. Code isn’t law; law is law. Forget that simple truth and you deserve what you get.

Watch: Head of Unit, Digital Innovation and Blockchain at DG Connect, European Commission Pēteris Zilgalvis on Bitcoin Association’s Blockchain Policy Matters

YouTube video

New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.