During a recent interview by the Cryptotesters podcast , the Nexo CEO, Antoni Trenchev provided a lot of insight on the Nexo crypto lending platform. Antoni talked about product offering, digitized gold, potential tax benefits, and more. With being a regulated entity, the company continues to position itself as a leading decentralized finance ( DeFi ) organization.
Background Information on Nexo
The Nexo platform provides loans to individuals that are backed by crypto. Their model is quite simple; you give them some of your Bitcoin or Ether and in return, you receive an instant loan. The loan is paid out in Euros, dollars, or any other supported currency. Thus far, the platform has processed over $1.5 billion in loans.
The Nexo lending model is radically different from the one used commercial lending institutions. It could represent the future of lending. Antoni Trenchev also discussed several issues in the industry including fierce competition in the sector, what sets Nexo apart, the future of decentralized finance, and much more.
Expanded Product Offering
The basic concept of the Nexo platform is that you undergo a quick KYC process. After that, you deposit your BTC, and then you receive an instant line of credit. To ensure your BTC is secure, they use a third party custody service such as BitGo. The company is also expanding into the gold sector with tokenized gold.
For tokenized gold, the platform is working with PAX Gold, a platform that has tokenized gold. With the tokens, you have the physical ownership of the gold that is stored in a vault in London. The main benefit is that you have the security offered by gold and the transferability offered by tokens. Once you send the tokenized gold to Nexo, they instantly process a loan for you, and the funds are sent to your local bank. Earlier this year, Visionary Financial outlined how Nexo Finance was “filling the gap” with gold backed lending. At the time, Nexo had purchased more than $5 million in “PAX Gold” , which is a token offered on the Paxos network. This gave Nexo the ability to service the increasing demand it was seeing within its user base for tokenized gold.
A Great Way to Hold Onto Your Gold
The Nexo CEO explained that during the recent halving event, they saw an influx of borrowers. Many of them wanted to liquidate some of the BTC holdings without having to lose their BTC. As a result, they took loans against their BTC, which they can always recover later.
The Tax Benefits
Antoni Trenchev delved into the tax benefits of borrowing against your crypto assets instead of selling them. He explained that if you are a US citizen, the tax obligations of selling the BTC for a profit are 40-44%. However, when you borrow against your BTC, you can write off the repayments as part of your tax obligations. In general, borrowing against BTC instead of selling the assets outright is more tax efficient. With itemized deductions being eliminated from previous tax plans, many individuals continue to search for ways to mitigate their overall tax obligations. This is one method that may be possible for digital asset investors. It's always important to speak with a tax professional to assess the overall situation.
Earning Interest on Your Cash
Besides offering loans, Nexo also allows you to earn interest. The platform allows users to earn interest on USD, EUR, GBP, and many stablecoins. These high yield interest accounts give users the ability to earn 8% interest on their own “cash.” In a recent report by Visionary Financial, it was outlined that the Ethereum network is being fueled by stablecoin growth. More investors across the globe are interested in stablecoins based on the economic uncertainties and the low interest rate environment. As economies push closer to negative interest rate environments, this pushes investors out of traditional cash. With stablecoins nowhere near negative rates, it creates pent up demand as a mechanism to store liquid assets.
The Nexo platform is creating a sustainable model of finance and opening up opportunities to the far-flung parts of the world. As a result, people in remote areas with limited access to financial services can access these services with the click of a button. They currently offer loans in 45 currencies, which is part of their goal to be as inclusive as possible.