Crypto lender Nexo is ahead of regulators with a minority stake in Summit National Bank
Crypto lender Nexo recently acquired a minority stake in Summit National Bank.
It is a traditional US federal bank regulated by the Office of the Comptroller of the Currency, like all US banks. This move will help the company expand its ability to serve the US market, allowing Nexo to offer traditional financial services such as bank accounts, lending and card services for retail and institutional customers. It also allows Nexo to combine these traditional services with crypto services.
This move was described as a cash purchase by Nexo’s co-founder Antoni Trenchev, spoke to The Block, though he did not disclose the size of the deal.
The context: The move is well-timed for Nexo, as it comes immediately after eight US states – California, Kentucky, New York, Maryland, Oklahoma, South Carolina, Washington and Vermont – filed a lawsuit against Nexo, accusing the Web3 lender of offering unregistered interest. with crypto accounts.
The strategic move to buy a stake in Summit National Bank will legitimize the Nexo business in the eyes of the regulators. Nexo appears to be counting on the union to make both parties stronger: Nexo without regulatory entanglements and Summit National as a Web3 pioneer in the traditional banking world.
Nexo stated in a LinkedIn post:
“In a transformative move for the industry, Nexo has acquired a stake in US federally chartered Summit National Bank, becoming its digital asset partner of choice.
The deal further expands our footprint in the US, unlocking more innovative products at the intersection of traditional finance and blockchain technology for our US retail and institutional clients…using Summit National Bank’s regulatory safeguards and payments infrastructure.”
SEC Eyes Crypto Lenders: Nexo stopped offering its yield product to new and existing customers after the Securities and Exchange Commission (SEC) issued an order against BlockFi, a rival crypto lender, in February. BlockFi paid a $100 million penalty to settle state and federal actions.
Nexo said Summit National Bank will continue to operate independently. Keith MethodievCFA, Nexo co-founder and managing partner, has been added to the bank’s board.
Nexo is exploring the purchase of a stake in a European bank and another troubled crypto lender, Vauld. The due diligence period has been extended on Vauld, which means it will not happen at the end of October.
This further blending of traditional finance and decentralized finance, if profitable, could prove a useful template for crypto lenders dealing with tightening SEC standards. Perhaps the Web3 world will finally establish clear regulatory legitimacy – simply by merging with traditional finance.
Photo based on image by Megan Rexazin from Pixabay.
