Interview with Nexo co-founder Antoni Trenchev discusses credit card launch and more

Nexo, one of the leading digital lending platforms, have continued to go from strength to strength, now counting over 4 million customers.

Their latest feature was announced recently –  a partnership with Mastercard to launch a crypto-backed credit card. This may sound familiar, but Nexo’s offering is different, as it allows customers to use the card without spending their crypto; instead, their crypto is sued as collateral. Given the implications this will have for crypto customers, it represents a significant development in the space.

It’s just the latest piece of innovation from Nexo in what has become one of the hottest sub-sectors in crypto, as customers look to extract as much yield as possible from their assets. On a wider scale, Mastercard are the latest mainstream payment platform to make inroads into the crypto space.

We interviewed Nexo co-founder and Managing Partner Antoni Trenchev, in order to get his thoughts on the launch, the digital lending industry and cryptocurrency in general.

Invezz.com (IZ): How do you feel the current buyback program is going? Do you feel this creates trust among your users? And are there plans to introduce another one after this round is completed?

Antoni Trenchev (AT): The current Buyback program – also known by our community as the Buyback 2.0 or the $100M Buyback – is going quite well. The market has had quite a few ups and downs, but the NEXO Token has managed to retain relative stability of its price . We’ve repurchased about $85 million in NEXO Tokens at the time of writing (April 22), so we’re just about to reach our target.

And yes, buybacks do build trust among users, they indicate that the company cares about its native asset. In Nexo’s case, we believe our token is undervalued and we’re willing to put our money where our mouth is by buying back tokens. This also isn’t our first rodeo – Nexo already had its first Buyback program in late 2020. While it too was very successful, we’ve learned that our community needs regular detailed updates on the progress of our program. With the Buyback 2.0, we issue a monthly update with all the numbers our users need to know and this has worked to immensely improve users’ trust and confidence in Nexo and our token.

As we close in on the final lap of our second Buyback program, I cannot confirm whether or not we will launch a new one soon after we cross the $100M finish line. But what I can confirm is that Nexo is here to stay, and in the months and years to come there will be future Buybacks.

IZ: Some cryptocurrencies that are available on the platform aren’t eligible for the Earn interest feature, why is this? Is this a liquidity issue? Are you not able to generate revenue here?

AT: Liquidity can be a major factor, yes – we need to be sure that we can pay the yields that we promise and we have developed an advanced system for due diligence in this respect. However, many of the assets on our platform that are not available for our Earn Crypto Interest product are assets on which we haven’t found a way to pay competitive rates in the crypto market consistently. Many of these coins are DeFi tokens and for the time being, we cannot compete with the rates clients are getting via decentralized protocols where rates are generally sky-high (and that’s a great thing in and of itself).  

At Nexo, we are invested in bringing our users top-notch services. If we cannot provide them and maintain them in the long term regardless of market conditions, we refrain from sub-par offerings. This is the main reason we don’t offer yield on some coins on our platform, but there are relatively few such assets compared to the overall currencies we support.

IZ: Since the major update of the Exchange feature last year, it would appear the focus has been on ramping up the number of cryptocurrencies offered, rather than adding new features. What’s next in the roadmap that users can look forward to?

AT: I wouldn’t say the focus has been solely on adding new assets to the platform. We’ve certainly added many and I understand how that may detract focus from some other developments. Nexo is intensely focused on adding new features, capabilities, and even wholly new aspects of our business. Just in the last month, we announced Nexo Ventures – our official investment arm; Nexo Prime – our prime brokerage offering, and the official release of the Nexo Card. As for new features for the Nexo Exchange itself: We haven’t been dormant – in Q1 we launched a leverage feature called the Nexo Booster. 

Overall, we are constantly developing new services, so be on the lookout for more news about the Nexo Card, Exchange, and other products because there are plenty of announcements to come.  

IZ: We understand through sources that users have now begun receiving Nexo cards (my friend got one recently, yet I’m still 6,000 places down the list). How long can users expect to wait before these will be rolled out to everyone?

AT: I’m thrilled to inform you that if you’re registered in Europe, you should be able to receive your Nexo Card promptly. I revealed the official launch of our card for European clients myself at the Paris Blockchain Week Summit last week on April 13. For anyone in Europe, the card is out. As for the US and other countries, we are working on rolling it out there, but I cannot give a specific timeframe as this depends on our partners and various other factors.

IZ: For the cards, what unique functionality will the Nexo cards provide? For example, will you be able to choose which currency you spend?

AT: The Nexo Card is the only card in Europe that does not sell clients’ crypto when they use it. Instead, it is tied to our Instant Crypto Credit Lines. When you use the card at one of the 90+ million merchants where it’s accepted, the platform simply collateralizes the appropriate amount of cryptocurrency from your account and instantly issues you the amount of credit needed for your purchase. With the Nexo Card, clients no longer need to choose between spending their crypto (even through cards that usually just sell the underlying assets) and holding onto their crypto long term.

As for the currency, the current Nexo Card rollout is for Europe and cards can be in EUR or GBP depending on the clients location and what currency they would be spending in. You’re free to spend in any currency around the world though, the only difference is that you would then have an exchange from EUR or GBP to the currency you spend in.
As for the cryptocurrencies that back the fiat spending mentioned above, since all credit on Nexo is denominated in USD it doesn’t matter whether you are using your card to pay in EUR or GBP or another currency. Our system will automatically collateralize the relevant amount of crypto from what’s available in your Savings Wallet. If you have a preference for what currencies you want us to collateralize first, you can ensure they are the ones to back your credit by putting these preferred assets in your Credit Line Wallet in advance. This does not issue you any credit, but ensures that these will be the first assets we collateralize when you spend with your Nexo Card.

Nexo co-founder Antoni Trenchev

IZ: We love Nexo, and whenever we show it to users who aren’t totally into crypto, they ask… “How can I trust it with my GBP/USD/EUR?” – what would you say to these newcomers who need to create trust before they can join the interest-revolution?

AT: I would tell them to have a look at Nexo’s Security page. There is a lot of information about how we keep clients’ funds safe there, including our use of multiple custodians to store clients’ assets, our $375M insurance, and much more. Additionally, it is widely known that Nexo’s finances are under a constant real-time audit by a third party – Armanino LLP. We also hold multiple licenses across the globe and converse proactively with regulators. In this sense, Nexo has made itself known to all the watchdogs and we ensure our users have a way of verifying that the company’s assets always exceed liabilities through the Armanino audit.

IZ: The next question we get back from those curious about Nexo is a noble one. Many users are waking up to the dirty practices and behind-the-scenes investments of banks, and so potential users often say, “So if Nexo is different from a bank, how do they make money in order to give you so much interest?” – How would you respond to this?

AT: First of all, we aren’t a bank. But like banks, our business involves putting investor deposits to work in order to earn a return, which we then share with our customers. That’s how customers and banks are compensated. There is nothing more important in this relationship than trust and integrity, and it’s why we take it so seriously. We deploy market-neutral strategies with strict risk management protocols to generate yields, and we partner with the best in the business – whether Fidelity, BitGo, or others – to make it happen and to keep those assets safe at all times.

IZ: Since loans are based on collateral, people who desperately need a loan but have no assets cannot get a loan; unlike with banks, loan sharks or other options available. Do you have any plans to expand your offering to users without digital assets in the future?

AT: We plan to expand the types of collateral we accept. For example, in December 2021 we launched our NFT Lending Desk. We still only accept a couple of the most popular NFT collections, but it’s a step in the right direction. We hope to accept all sorts of tokenized assets in the future which could help give people more options for borrowing through our platform since all sorts of real-world assets can be tokenized including houses, cars, art, etc.

That said, the reason Nexo has stood the test of time in the volatile crypto market is our no-exceptions overcollateralized lending model. We don’t lend out funds without collateral even to our largest and most trusted partners. As such, we do not have any plans on changing this approach in the near future.

IZ: Some reports have stated that the over-collateralized nature of your service means that it only serves the rich? Seemingly, making the rich richer. What do you have to say to this kind of comment?

AT: I understand where this argument comes from since typically borrowing minimums are so high both in and outside of the crypto space, that anyone who isn’t already wealthy is completely left out of the game. Naturally, Nexo has a solution to this too: Our borrowing minimums start at just $50 – that’s a sum almost anyone in need of a loan could cover with collateral. It’s not a solution to the entire problem – let’s be honest, there are millions of people worldwide without access to a smartphone and internet, let alone the ability to buy digital assets to collateralize a loan, but it’s a good start. Back in 2017-2018 Nexo was the primary crypto lender to focus on retail clients, and we intend to continue creating inclusive and accessible products for everyone.

IZ: High-volatility days when the crypto market crashes often provide huge challenges to firms in your line of business. How has Nexo survived these stress tests in the past (e.g. March 2020, May 2021), and has there ever been fear over the safety of depositors’ funds?

AT: The answer is very simple: Our overcollateralized lending policy has ensured we didn’t lose a cent during the COVID-induced sell-off in March 2020 and the big dip around this time last year. We always have more in collateralized assets than we have issued in loans. Our platform automatically and instantly executes liquidations the minute a client’s assets pass the permitted loan-to-value limits. So, no, there has never been any fear for depositors’ funds.

While we hate liquidating our clients, we are obliged to protect our interest-earning clients’ funds. To aid our borrowing clients we have created many ways in which to help them avoid liquidation at all costs such as:

1) Real-time margin call notifications to let clients know they need to add more collateral.
2) Automatic collateral transfer opt-ins that move more assets into clients’ Credit Line Wallets when a certain LTV level is reached
3) Collateral exchange – the option to swap collateralized assets to others that have a higher permitted LTV on Nexo. This gives users more leeway in a volatile market.

IZ: What proportion of depositors on Nexo elect to earn their interest in your native token, thus exploiting the higher yield on offer? Do these customers generally hold their Nexo long term or sell it once they can?

AT: Presently about a third of clients earning interest on Nexo opt to do so in our native token, and thus receive higher yields. From what we see on the platform most of them hold onto their NEXO Tokens in the longer term. 

IZ: What would you say to a customer who put 100% of their net worth into Nexo in the form of stablecoins, in order to generate as much yield as possible without bearing the price volatility of crypto?

AT: Since stablecoins aren’t volatile like most cryptocurrencies, I’d say that’s probably alright. As long as it’s a reputable stablecoin – like USDT or USDC – then the user is probably fairly safe. I’d say I’m flattered by their trust in Nexo – putting 100% of your net worth on our platform shows a tremendous amount of trust. This person is also probably earning pretty good yields too and they can use the Nexo Card and/or our Instant Crypto Credit Lines to cover any fiat expenses they may have.

IZ: What do you think of the rival firms out there who strive to keep their rates stable (Ledn are one such example), rather than reacting dynamically to the market and to supply and demand? Do you think these platforms pose more risk, and would this be a model you feel your customers would prefer, or that you have considered pursuing?

AT: It depends what rates they are trying to keep stable. If the company keeps to lower rates and makes sure they can still provide them despite the market conditions, then that’s ok. But if they’re offering crazy rates in unfavorable times, then there is risk involved in the background. I’m a firm believer in stable rates, but only if they are actually sustainable. Furthermore, it’s equally damaging to the industry for providers to change their rates more often than every few months.

With Nexo we only offer rates that we can sustain over the next 6-12 months. As I mentioned previously, we definitely try to be among the top yield-providers in the space and so far our team has done a spectacular job of making this possible. But while we have industry-leading rates on many of the assets on our platform, there are some for which we pay out less interest and that’s where our good judgement comes in. Stable rates should never mean risk for the company. Ever.

IZ: For your Nexonians out there, ‘when Nexo token moon to double digits’? Is it just a matter of time? – Understand if you can’t comment on this one :)

AT: First of all, these are things that even I can’t predict! As always, there are no guarantees, and my guess is as good as yours, but if we keep doing right by our customers and we’re successful, you should expect to see that reflected in our token price. When our customers do well – and the market does well – Nexo does well.

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