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Why this crypto lending company is ‘safer for clients’ than other banks

Antoni Trenchev, Nexo Co-Founder and Managing Partner, joins Yahoo Finance Live to break down how the company is transforming the crypto lending space, and potential crypto regulation in the second half of 2021.

Video Transcript


- Welcome back to Yahoo Finance Live. As we've been watching, we've seen the growth of people in crypto turning to lending platforms, BlockFi, of course, one of the ones that we talk about on this show a bit. Celsius we had on earlier this week. But there is another one out there, Nexo, that has been gaining some traction. And for more on what that platform has been seeing as people turn to try and earn yield on their crypto assets, I want to bring on the co-founder and managing partner at Nexo. Antoni Trenchev joins us right now.

And Antoni, when we look at it, it seems like a no-brainer in kind of explaining this, but there are, I guess, nuances that are different than maybe the way you would interact with the bank. But talk to me about what you've seen here in terms of the growth on your platform and how much money per user might be coming in now.

ANTONI TRENCHEV: Well, the growth has been spectacular. Last year this time around we had closer to $2 billion of assets under management. Right now, we're sitting on $15 billion. So that's a 700%, 800% growth, which is, obviously, in line with the growth that crypto has itself experienced. But we are seeing people who previously were not native to the space come in, experiment with crypto.

The Elon Musk's, Paul Tudor Jones's, and Michael Saylor's of the world have had their effect on bringing people in. And quite frankly, in the macroeconomic environment further exacerbated by the response the governments and central banks have had to the COVID predicament, all port in favor of companies such as Nexo and the crypto space overall.

- Yeah and on your platform you pay up to 12%, in terms of yield, on a crypto assets. It's a bit of an apples and oranges comparison I suppose, if you were comparing it to an interest rate at a bank, since there's added volatility in crypto. But I mean, when you look at that, how has it changed, maybe, as people pip a toe and get comfortable?

We were talking with BlockFi earlier on. And obviously, there are counterparty risks and risks around centralized lending platforms that people need to consider here. So they were saying that there's a small number that people might actually deposit to start out with. But on average, what do you see, as people kind of test out your platform and maybe grow what they feel comfortable risking?

ANTONI TRENCHEV: Well, we are the lender that has historically predominantly been focused on the retail. Some of the other companies that you mentioned, they were more, initially, into the institutional space. So right now we have all sorts of clients. We have somebody who deposits as little as $1,000. That's just the minimum that we have. We have-- and our young entrepreneurs, who sit on a bunch of crypto wells, so several hundred thousand. Then we have the whales, who are sitting on millions and hundreds of millions worth of crypto.

But I think you mentioned a very interesting detail here, like how does that compare to a banking product and apples and oranges? Yes, in certain aspects it is, but quite frankly, it functions exactly the same way. You know, we in the Western world have been brought up with this notion that a bank automatically equals safe.

And that might be true for some of the smaller clients or mid-tier clients who are covered by something like the FDIC insurance, up to $250,000, or the ECB equivalent over in Europe, where it's $100,000 a euro. And that is as safe as anything because that's guaranteed by the government. But if you are above that threshold, you have the same counterparty risks that everybody has.

And on our platform, everything we do, whether it's on the borrow or on the lending side, is over collateralized. So I would argue, just from a financial perspective and the way that the business is structured and how it actually makes perfect sense, that we are safer, especially for the larger clients, than your average bank.

- Yeah, even with that said, it feels like you might have a harder time convincing regulators, especially given the environment right now in the crypto space. We saw the latest crackdown on finance not just over in the UK but in Japan as well. How are you looking at all those headlines right now and what it could potentially mean for your business?

ANTONI TRENCHEV: Well, I wish more people read the whole articles than just the headlines because when you actually examine it, what is happening, the regulators are cracking down on a certain aspect of the crypto business, and actually the crypto exchange business, which is leverage, you know, historically leverage. And 100x, 135x leverages have been very negatively received in the United States and elsewhere, in the UK as well.

So I think what we're seeing right now is not an attack on crypto, per se. If you read the article, the press release by the FCA in the United Kingdom, it says, we are going after the derivatives product and the high-risk, high-leverage product. And it's not even our job to oversee and regulate crypto assets, such as bitcoin and Atrium per se. This is almost verbatim from their press release.

So people are stuck with the headlines. So it's a little bit more complicated. My personal feeling from everything I'm seeing, and we interact with regulators throughout the world, crypto as such is here to stay.

- Yeah, it's very interesting to see kind of the different things that they are taking issue with. But for the time being, these lending platforms continue to grow, yours included. Antony Trenchev, Nexo co-founder and managing partner, appreciate you coming on here to chat with us today. Be well.