Crypto lender Nexo gets American bank charter through acquisition agreement

Cryptocurrency lender Nexo announced on Tuesday that it has taken a stake in a federally regulated US bank, paving the way for the company to offer banking services to Americans as a licensed institution.

Nexo, based in Zug, Switzerland, said it has agreed to buy an undisclosed stake in Hulett Bancorp, which owns a litta well-known bank called Summit National Bank. Through Summit National Bank, which holds a federal bank charter with the Office Comptroller of the Currency, Nexo plans to offer a variety of products, including checking accounts and crypto-backed loans.

The move is a significant development for the nascent crypto industry, which is seeking to win favor with politicians and regulators as investment and use of digital assets grows. The market has been licking its wounds after the collapse of the controversial token terraUSD, which triggered a wave of liquidations and failures from companies such as Celsius and Three Arrows Capital.

Nexo declined to disclose the size of its stake in Summit National Bank. The firm called the deal an “industry-changing transaction.” In addition to the ability to launch new products, Nexo said its banking license would provide users with enhanced legal safeguards. The deal will also help Nexo expand its footprint in the US, the company said.

“We already have a robust offering with regards to our crypto-backed loans, but we always like to have more than one option to offer a particular service,” Antoni Trenchev, co-founder of Nexo, told CNBC.

“The acquisition of a stake in a full-fledged bank enables us to offer our full range of services to US retail and institutional customers, including bank accounts, asset-backed loans, card programs, as well as escrow and custody solutions, and many other future plans for Nexo’s expansion in the United States that will be revealed in the coming months.”

Summit National Bank traces its origins to 1984 in Wyoming, where the firm was originally chartered as Hulett National Bank. The firm later opened locations in Idaho and Montana. According to its website, Summit National Bank’s primary lending is in “commercial, agricultural, real estate, mortgage and construction.”

The news comes just a day after Nexo was hit with a lawsuit from eight US states that alleged the company offered users interest-earning accounts without first registering them as securities and providing required disclosures. Nexo allegedly misled investors into believing it was a licensed and registered platform, according to the filings.

In response to the lawsuit, Nexo said it had been working with US federal and state regulators. The company sought to differentiate itself from other players that have run into financial difficulties, saying it “did not engage in unsecured loans, had no exposure to LUNA/UST, did not need to be bailed out, or had to resort to withdrawal restrictions.”

Nexo, which has over $4 billion in assets under management, is not the first crypto firm to obtain a banking license, although it is a rare phenomenon in the industry. Other fintech companies have previously obtained federal bank charters through mergers and acquisitions, including SoFi, which offers crypto trading on its platform, and LendingClub.