Nexo Token is a blockchain-based, cryptocurrency-backed loan system created by European FinTech company Credissimo. Users deposit supported cryptocurrency coins and tokens into a Nexo wallet and receive an instant cash loan in either USD or EUR.
Loan details are established by the Nexo Oracle and stored in an Ethereum smart contract. The NEXO token is an ERC-20 interest-bearing security token which the company markets as “SEC-Compliant.”
Loans are a big business. Student loans, for example, account for $1.48 trillion in debt. Mortgages (loans collateralized by real estate) sum up to $14.9 trillion, a large fraction of the US GDP of $19.4 trillion. And Experian reports the average new vehicle loan in the U.S. is $31,099 in 2018.
And then there are payday loans, a $9 billion business with a national average annual percentage rate of nearly 400 percent. Another 2.5 million people every year take out auto title loans, collateralized by the title of their vehicles, according to Pew Research.
New loan types are popping up all the time, like the purchase financing loans offered by Wayfair and Casper to their ecommerce customers through Affirm. Using cryptocurrency assets to collateralize loans is a great way to bypass the tax consequences of selling. SALT Lending and Nexo are first to market.
Nexo supports over 20 cryptocurrencies, including Bitcoin, Ethereum, XRP, Cardano, Monero, Binance Coin, and more. Payments can be made in USD, EUR, BTC, ETH, and NEXO. A variety of loan options are available that we’ll discuss in more detail in a minute.
Nexo is a short-term lending platform that uses cryptocurrency assets to collateralize loans. Over 40 cryptocurrencies are supported, and loans are made instantly in USD or EUR. Nexo requires no credit check and you pay no capital gains taxes for loans made against crypto assets. Nexo’s success hinges on these key factors.
- NEXO is an ERC-20 token that’s traded as a “restricted security” per the SEC registration exemption filed by Nexo.
- Nexo repayments can be made in fiat or crypto currencies. If NEXO is used to repay the loan, a 50 percent interest rate discount is gained.
- Holding NEXO entitles you to higher loan limits and a 30-percent Nexo profit-share payment.
With these pieces in place, Nexo built a profitable business model. Whether these loans will place undue financial strain on consumers remains to be seen. Short-term lending is a great way to make short-term money, but it’s a high-risk industry for everyone involved.