Switzerland-based Nexo is one of the first to provide crypto-backed loans
Launched in April 2018, and backed and advised by TechCrunch founder Michael Arrington, Nexo is one of the first companies in the world to provide fiat loans and accept cryptocurrencies as collateral.
The concept is simple. Borrowers deposit cryptocurrencies as collateral and get fiat money for it. It is handy for those who need cash but don’t want to sell their crypto holdings.
The company is backed by Credissimo and provides more than 45 currencies in more than 200 jurisdictions.
Credissimo is a leading European fintech company that has been providing innovative fintech since 2007. The company helped to shape Nexo’s crypto lending model. Several of Credissimo founders brought its expertise in instant online lending to Nexo and adapted Credissimo’s successful operating model to the blockchain space.
How to get a loan
To take out a Nexo loan, a borrower can deposit Bitcoin, Ether, Ripple, or some other cryptocurrency out of 45+ currencies accepted as collateral. This summer, the firm announced it would also accept Telegram’s Gram token.
Nexo borrowers retain the full ownership of their digital assets throughout the lifespan of the credit line. The funds can be either transferred into their bank account or they can use a Nexo Card to withdraw the funds to their bank account or spend directly.
There’s an annual percentage rate (APR) charged on the amount of credit the borrower has actually used. It starts at 8%.
Nexo keeps the collateral with BitGo who provides multi-signature wallets. The borrower and the lender get their key to the wallet, and if the borrower defaults, Nexo will take out the crypto funds to cover the loan and interest accrued.
One more thing. Because of the volatility of the cryptocurrencies, Nexo sets a 50% loan-to-value ratio — to borrow $10,000, you would have to deposit $20,000 in the respective cryptocurrency.
“This is the first buffer and protection for both the company and for the customer against overleveraging and being put in a position where they have to repay part of the loan or get some of their collateral liquidated [in case the value of the cryptocurrency falls],” explains Nexo co-founder Antoni Trenchev.