Are you looking for an alternative to traditional banking in the realm of crypto? Do you prefer favorable interest rates and guaranteed loans based on crypto collateral?
This means you can get fiat currency whenever you need it, but also make money off of your idle crypto assets. In this article, we will cover everything you need to know about Nexo, how it works, and what are the pros and cons.
Whenever you're ready to discover the opportunity to bank on crypto, keep reading.
What Is Nexo?
In essence, Nexo is an overdraft based blockchain system that allows crypto lending and makes it very easy for users to access crypto-backed loans instantly.
The company was launched in 2018, but it has started to gain most of its popularity in recent years. The slogan of the company is "Banking on Crypto." They try to replace traditional bank services, but with crypto as the asset.
Nexo attempts and continues to promote the model, in which users can lend their crypto, as well as acquire loans for themselves. Users can earn interest on their crypto, and access instant fiat currency without relying on credit scores.
With Nexo, the user has to deposit the supported crypto into their wallet, and then choose how they want to lend it out. In other words, they choose how to make use of the peer-to-peer market.
The entire system is designed to secure liquidity automatically and with greater flexibility than a traditional bank. The network makes it easy for clients to get fiat if they want it, while still retaining ownership of their digital finances.
At this point, Nexo supports over 17+ cryptocurrencies. They are but are not limited to XRP, Cardano, Bitcoin, Ethereuum, and much more. The platform also supports NEXO token payments in EUR, ETH, BTC, and USD.
The technology that backs the Nexo blockchain supports decisive transparency at the heart of the platform. It facilitates a smooth process through the smart-contract system of Ethereum, and stores all relevant tokenized data for transactions.
Not to mention, the fact that the NEXO crypto is ERC-20, supports the idea of interest-covered securities.
How to Take Nexo Loans?
#1. Deposit Crypto Assets Into Your Nexo Account
To obtain a Nexo loan, the first thing you need to have is a Nexo account. To create your account, sign up. Once you create your account, you’ll have to deposit your crypto assets. The platform keeps on adding popular altcoins to its list.
Some of the major coins that you can readily deposit include BTC, ETH, PAXG, XRP, LTC, XLM, BCH, EOS, LINK, TRX, NEXO, and BNB. However, Nexo does not support wrapped coins that represent coins from another blockchain. Transferring such assets may result in permanent loss.
While depositing crypto assets, you should also remember that taking a fiat loan against stablecoins requires covering at least 50% of the loan with crypto-collaterals such as the BTC or ETH. The requirement is as per the standards mandated in the anti-money laundering statutes.
#2. No Credit Checks and an Instantaneous Credit Line
While there are no credit checks to obtain Nexo loans, and the disbursal is instantaneous, it is important to remember that you will have to undergo a basic/advanced verification in the “My Profile” section. You may also be asked to provide supporting documents that stand as testimony to your stated origin of funds.
#3. Two Asset Class Finance Options are Provided
Now that you have gone through verification, you will have to go to the “Withdrawal Funds From Credit Line” option. Here, you can see the available loan amount. You will get two asset class finance options. The first option is to take the loan in a fiat currency, which requires your bank account address. The second option is to get the disbursal in USDT (Tether) or USDC (USD Coin), which requires you to provide an address for a loan in stablecoins.
If there is not enough collateral in the credit line wallet to support the loan, crypto-assets may get automatically transferred from savings wallet to credit line wallet.
All crypto assets of Nexo are secured by the SEC-approved custodian BitGo trust. The disbursal of the loan is flexible. It is flexible in the sense that you can spend from the credit line at any time with a 5.9% APR per year applicable to the amount used. There are no minimum repayments or hidden fees involved in the process. Your interest will be debited from your available limit, and you can make repayments any time you choose.
The Nexo wallet app is available on both iOS and Android. If you are looking for access to the instant crypto credits and the high-yield ‘Earn Interest’ account any place, anytime, Nexo wallet is the application for you. You can store all your Nexo-approved digital assets in the wallet. The Nexo wallet also provides Nexo transfer service and the Nexo exchange service. With the Nexo transfer service, users can transfer digital assets from one Nexo account to another. Nexo wallet also facilitates the access of any new incentive programs launched by the platform, such as the Nexo loyalty service.
Depositing crypto-assets in a Nexo account makes you eligible to access two core depositing services of the platform. The first one, whose procedural details we have already discussed, is the crypto-backed loan service.
The Crypto-Backed Loan Service
These instant crypto credit lines start from just 5.9% APR, and it is available in fiat currencies or stablecoins. Adding to its credibility as a lending platform, Nexo has processed more than US$ 5 billion in 2 years. More than a million Nexo users have benefitted from this service.
For disbursement, you can choose from any of the more-than-forty fiat currencies available. For collateralization, Nexo also allows choosing from any of the 18 cryptocurrencies. As for the minimum-maximum loan limit, you can obtain loans ranging from US$10 to US$2,000,000 on Nexo. The service also has unquestionable integrity when it comes to providing security of the collateralized assets. The Nexo platform has got $100 million worth of insurance on custodial assets.
The second advantage of depositing crypto-assets in a Nexo account is in the form of the platform’s high-yield interest service.
Who is Eligible for a Nexo Loan?
When it comes to eligibility, there are no strict criteria to become eligible for a Nexo loan. You simply need to follow the signing up process to register an account on the platform and deposit your collateral to it. The platform accepts loans globally without having to pass through any credit checks. But, taking a loan in fiat currency requires you to pass both the basic and advanced verification.
The Caveat to Earn a Higher Yield
You can earn a very high yield with Nexo. But there’s a caveat! To earn a 12% interest rate on your fiat and stablecoins, and a rate of 8% on your crypto savings, Nexo mandates that 10% of your holdings in the savings account should be in NEXO tokens. If this condition is not met, you will only earn the standard interest rate of 8% on fiat and stablecoins and 5% on cryptocurrencies.
Being a beneficiary of Nexo’s high-yield interest service, you can add or withdraw your funds any time you want. The platform does not mandate any minimum contribution threshold and does not charge any fees. Payouts happen daily. Apart from cryptos, you can also earn interest, as high as 12%, on your fiat currencies such as the Euro, Pound-sterling, or the US dollar.
When it comes to the utility of your credit lines, you can leverage them anytime, anywhere in the world through your Nexo card. It can be ordered and managed from the comfort of your Nexo Wallet app. More than 40 million merchants across the globe accept the card. When you swipe your Nexo card, the payment amount gets deducted from the available balance of your instant crypto credit line. Maintenance of the card does not require any monthly or annual fees.
Using the Nexo card, you can make payments in the local currency without incurring any FX fees. The card offers instant cashback of 2% on all purchases. You can choose to receive the rewards in NEXO tokens or BTC before making a transaction.
Automatic Transfer of Assets From Savings Wallet to the Credit Line Wallet
As touched upon earlier, there is a certain threshold where assets from the savings wallet automatically move to the credit line wallet if there are insufficient funds to cover the Loan-to-Value ratio. If it still falls insufficient, the Nexo blockchain oracle starts selling the collateralized assets to bring back the Loan-to-value ratio to perfect balance. The threshold is set at 83.3%. The value implies that if the loan amount is US$5,000, the value of the collateral has to be US$6,000.
Obtaining loans and earning high-interest yields is something that comes as benefits attached to the holding of Nexo tokens. Moreover, Nexo token offers something that any of the other regular crypto tokens hardly does. It is the world’s first dividend-paying asset-backed coin in the sense that 30% of Nexo’s profits are shared with its native token holders in the form of dividends.
Dividends come in two forms: the base dividend and the loyalty dividend. The base dividend is paid out in proportion to the volume of your NEXO holding, whereas the loyalty dividend is paid out based on how long each Nexo token has been in the Nexo Wallet from one ex-dividend date to the next.
All cryptocurrencies are stored with Ledger Vault. Private keys entrusted to Ledger Vault are held in bank-grade cold storage, multi-signature storage custody. The Ledger Vault insures assets up to $150 million backed by Arch and Marsh. According to Nexo, their insurance portfolio is now $375 million. They also state that Nexo's plan is to insure to more than $1 billion in 2021 with a syndicate of insurers. You can read more about their security here. This is arguably the most impressive insurance policy of all crypto lending and borrowing platforms. It's assuring to see them taking this part of their business so seriously.
Is Nexo Safe to Use?
Nexo is designed for security and is driven by trust. They strictly comply with global KYC and AML standards and stringent regulations. Nexo gives utmost priority to security. They have also placed a variety of safeguards to make sure that Nexo remains one of the most secured crypto lending companies. It includes Biometric-Based Identity Verification, Extensive Firewall Server Architecture, Segregated Multi-Signature Cold Wallets, and much more. Nexo also stores user funds in bank-grade Class III vaults through Ledger Vault.
With 2FA authentication, biometric identification, withdrawal confirmations, login alerts, and round the clock support, Nexo ensures that you remain in control over your account.
Is Nexo Regulated?
Nexo is an EU licensed and regulated financial institution. You can read more about that here.
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Frequently asked questions about Nexo
We’ve compiled some answers to questions we often get. Should you have any other questions, feel free to reach out below in the comments.
How Does It Work?
As their slogan suggests, Nexo supports you to bank on crypto. Lending with this platform, you can earn 12% interest that compounds and pays out daily. If you borrow on the platform, you will have a starting APR of 5.9%.
On top of all this, you make your deposits and withdrawals whenever you like without limits. And for automatic approvals, there are no credit checks. The platform supports over 40 fiat currencies in over 200 countries of supported transaction locale.
How to Borrow Cash With Nexo?
You can instantly borrow fiat from Nexo by using crypto as collateral. As mentioned earlier, they support over 40+ currencies, and you can spend it how you like with your method of choice or with a Nexo card.
Once again, to borrow, login to your account. Select supported crypto and "Top Up". Send your crypto to the address and you're set. It's the same process as lending crypto.
Behind the deposit, you will see your credit line, which you can use instantly. You can transfer to a bank or use it with your Nexo card. With the Instant Crypto Credit Line, you can make use of a variety of crypto to back your loan. This ensures that you are less vulnerable to crypto volatility
Nexo provides a 50% discount on the final amount. If your outstanding balance is within the loan limit, you don't need to make monthly payments. Once you fully repay the loan, you can withdraw your assets from the wallet. You can also choose to start a new line of credit with the collateral.
When it comes to loan limits, it's determined by the market value of your assets used as collateral. If your assets increase in value, the Nexo Oracle (Nexo AI) will increase your loan limit automatically.
How to Use Your Crypto On Nexo?
Before you can deposit your digital assets, you have to confirm your personal details. Without verification, you will not be able to borrow or lend fiat or crypto. You will also be able to see the interest rates.
Start by logging in or creating an account on Nexo. After this, choose the crypto that you prefer and "Top Up". Send your digital assets to the secure address and you're all set.
Nexo will display your balance and how much you can earn. You have the ability to withdraw whenever you like without fees and penalties. When you deposit your crypto, you will also see your open credit line.
Is the Nexo debit card available yet?
The Nexo Card is not available to most people just yet. It’s something they’ve been working on for a couple of years now. Some of the features include 2% cash back. What’s best about this is that you can even choose whether you receive it as Bitcoin or Nexo tokens.
What fiat currencies and crypto coins and tokens Nexo support?
How can I deposit funds to Nexo?
Depositing funds to Nexo is quite simple. Select one of the supported cryptocurrencies and it will generate a private deposit address. Copy it & paste the copied address to the "withdraw address" option of the wallet or exchange that you are using to transfer funds to Nexo and click on the withdraw/send button. That's it as soon you will receive the funds in your Nexo wallet/account after the number of network confirmations is reached.
Pros and cons of Nexo
- $375 million insurance and custodied with Ledger Vault
- Easy to use app and website.
- Support for business accounts.
- Nexo’s information security management systems are ISO/IEC 27001:2013 compliant after extensive audits, inspections, and checks by CISQ, a member of IQNet and the world’s largest provider of management system certification.
- Full flexibility — no lock-in periods, withdraw at any time.
- No withdrawal, transaction, or platform fees.
- Earn 30% extra interest when earning with Nexo tokens.
- High levels of asset liquidity.
- Free Nexo card for daily transactions.
- Over 4 billion processed and 1+ million clients.
- No hidden fees.
- No credit score checks.
- Guaranteed approval.
- Nexo's crypto brokerage service offers 75+ crypto & fiat pairs. It also offers zero price fluctuations when user places an order.
- Nexo mandates holding NEXO tokens to receive the best loan and savings rates.
- The $375 million insurance is cumulative for all clients, and it only applies to assets that are kept in cold Ledger Vault wallets.
- Even though Nexo does not mention re-hypothecation anywhere, it seems like it's applicable.
- In some cases, lender interest rates are higher than borrower rates.
The Way Forward with Nexo.io
The growth of Nexo, since its inception, is something that has caught everyone’s attention. With more than four billion dollars in assets under management and more than a million users, it has proved its merit as an excellent platform for borrowing and earning on savings.
With the Nexo card, Nexo has also expanded its utilitarian value as a medium of exchange and payment. The sharing of dividends back with the users has strengthened the community and incentivized long-term participation. With its services expanding both in terms of the number of offerings and the level of convenience, Nexo can be expected to emerge as a standout investment in the crypto space and beyond that makes the most of traditional finance and blockchain technology.