Crypto lending platform Nexo will gradually cease U.S. operations due to a “dead end” in talks with regulators, the company announced Monday.
Operations will wrap up in the coming months, Nexo said, calling the decision “regrettable but necessary.”
For 18 months, Nexo had been in good-faith talks with U.S. regulators to figure out how the company could comply with American financial laws, the U.K.-based lender said.
"It is now unfortunately clear to us that despite rhetoric to the contrary, the US refuses to provide a path forward for enabling blockchain businesses and we cannot give our customers confidence that regulators are focused on their best interests,” Nexo wrote in Monday’s blog post.
Regulators in eight states including New York, California, Kentucky, Maryland, Oklahoma, South Carolina, Washington and Vermont filed administrative actions against Nexo in September, claiming that Nexo’s Earn Interest Product, which allows customers to lend digital assets in interest-bearing accounts, qualifies as a security and must be registered as such.
The Consumer Financial Protection Bureau disclosed last week that it had launched an investigation into whether Nexo was violating consumer protection laws last year. Last week’s disclosure came when it declined Nexo’s petition to halt the investigation.
Nexo has off-boarded customers from Vermont and New York and has suspended new registrations in the U.S. for its Earn Interest Product to “meet regulators’ expectations,” the company said.
Customers in Indiana, Kentucky, Maryland, Oklahoma, South Carolina, Wisconsin, California and Washington can no longer access the Earn Interest Product as of Tuesday, but they can continue accessing Nexo’s other products for the time being.
Existing U.S. customers in other states will be able to access the product until further notice.
“Although regulators initially encouraged our cooperation and a sustainable path forward appeared viable, the events of recent weeks and months and the subsequent change in regulators’ behavior point to the opposite,” the Nexo team wrote. “We have reached a point where regulators are unwilling to coordinate with one another, and are insistent on taking positions that are inconsistent with one another, creating an impossible environment to operate efficiently and to create the expected value for our clients.”
Nexo blamed its U.S. exit on the CFPB’s decision to continue its investigation into Nexo, as well as on being blindsided by actions filed against the company by “the very state securities regulators we had been cooperating with for several months.”
