Antoni Talks Nexo with Scott Melker, The Wolf of All Streets
Last Friday, The Wolf of All Streets himself, Scott Melker, sat down with our Co-founder and Managing Partner Antoni Trenchev for an hour-long AMA session. The community’s questions were as tough as they were interesting, so this interview is definitely worth a watch.
Check out the full recording or read a recap of the AMA below:
How does Nexo offer 12% interest?
There are two ways in which we generate yields for our clients. The first: funds from our Earn product go towards financing our loan portfolio – we lend these funds out to our borrowers. It’s perhaps the oldest business model in the world: you borrow at one rate, then extend credit at a higher rate, profiting off the margin between these two rates.
The second way we generate high yields is what we use when we have more earning clients than borrowing clients. We then engage in market-neutral trading strategies such as basis trading and arbitrage between different asset classes.
When will we be getting 22% interest on USD?
I would like to know that as well, but ultimately our rates are determined by market forces – supply and demand. We are not a greedy bunch, we go as high as we possibly can, but we want to generate yields on our platform sustainably. Nexo does not burn venture capital funds to offer attractive yields for user acquisition. Instead, we offer yields that are sustainable given the current market conditions and forces.
When will the Nexo Card be released?
We have shipped a few thousand cards in Europe already and so far the card is working. No card like ours existed until now, so it took us a while to develop the technological capabilities and explain to MasterCard how exactly it has to work. We originally accepted our partners’ deadlines and that’s why we were a bit off time-wise. I’ve been very cautious with regards to self-prescribed deadlines since then. I’ve learned my lesson. The Nexo Card’s innovation is that instead of selling your crypto as many existing crypto cards do, you are extended an Instant Crypto Credit Line™, so you pay for your latte with the credit that you receive in fiat against your crypto collateral. This does not trigger capital gains tax and you get to keep your assets. It’s essentially what Wall Street and Silicon Valley have been doing for the past thirty years – borrowing against their assets rather than selling them at a profit and thus avoiding capital gains tax.
So that’s why we took a while with the card. After the first thousand cards have been shipped, we’ll be ready for a full-fledged rollout in Europe. The team working on the card has also informed me that we might hit the card market even sooner in the US, so there are some nice announcements around the corner.
When do you expect to announce the banking license acquisition?
I’m limited as to what I can talk about publicly because we are bound by strict confidentiality agreements. I can say that we are in the final stages of the due diligence process and we’re talking to regulators. I’m very optimistic and super excited because this will open the doors for a lot of new products and we will be able to market our platform more aggressively too.
Are there any plans to fight against the usual dump before the dividends date?
Absolutely. We’ve devised a strategy called Nexonomics with which we’ve essentially redesigned our token to add more perks and utilities to the point where its market value has appreciated significantly. It went from 20 cents in October to $3.40 last time I checked. So its pricing is now much less connected to the dividend and I do not expect there to be a dividend dump because there are so many other reasons to hold the NEXO Token now.
We are also going to implement a governance element to the token, so the token holders will have a much larger say in how Nexo is run. This will provide even more utility. We’ll be giving the community exactly what they want and I think that’s as good as it gets in terms of anti-dump measures. One of the questions that will be posed through the new governance vote will be about the dividend distribution, so we’ll see what the community wants when it comes to dividends and we’ll figure out the best way to deliver it.
How is Nexo doing with its whitelisting service for withdrawal addresses?
I don’t have a strict deadline for it, but it will definitely be this quarter. There will be an address book and an option to whitelist addresses. Safety is always a tricky subject, but I think we’ve done a better job than most blockchain companies. Unlike others, we’ve never been hacked even without whitelists, so we’ve done a pretty good job.
Will the US clients be able to earn interest in NEXO Tokens?
As it currently stands we would have to exclude some states. I would have to talk to our legal team about that. It depends on regulations.
Do you offer fixed term rates for different periods of maturity?
We have a fixed term option with which you can earn a higher rate as compared with our flexible terms. So we basically have lock-up periods that give you higher rates. This is fairly new to the platform. With our FLEX Terms, you can withdraw your assets at any time and you get your interest paid out daily. We have the most flexible terms with some of the highest rates even without using our Fixed Term accounts which yield even higher rates.
When will the list of supported coins/tokens be expanded?
We are always looking to onboard new collateral options and add more assets to our Earn suite. It’s a matter of liquidity and market cap for each new asset. We used to make sure assets had a market cap of $1B before but now that’s a pretty low threshold since most of the top 100 coins currently already have a market cap of over $1B. We also need to ensure an asset has sufficient liquidity for us to be able to issue our price-based margin calls during volatile times. Assessing an asset’s liquidity is actually quite complicated and we have a specialized team that tracks assets and determines whether there is enough liquidity for us to be able to integrate them on Nexo.
Are you planning to publish numbers like the number of processed loans, number of users, total assets on the platform?
We are working on auditing our financials so they will soon be publicly accessible and even more detailed and eloquent. Bear with us a little longer, we are in the process of doing this and our accountants are working hard going through millions of crypto-based transactions.
We’ve embarked on a mission to provide more transparency because it was a concern for our users, one that we’re addressing. That’s also why I’ve committed to monthly AMAs like this one, to make sure we’re keeping our community in the loop. So bear with us, we’re on the right track, the road to full transparency is a long one.
Since you asked for numbers…
Nexo currently has $1.5 million users and holds $15 billion in assets under management.
How do loan repayments work?
You can repay your loan in a currency of your choosing. It doesn’t have to be paid back in the same currency you withdrew. For example, if you withdraw Tether against Bitcoin as collateral, your repayment doesn’t have to be in Tether, you can pay off your credit with a bunch of different assets. You can also sell off a portion of your collateral to repay your loan. Thirdly, you can do nothing and if there is a larger correction, the platform will liquidate the necessary amount of collateral automatically.
Antoni is such a handsome genius, how does he stay humble while f*cking crushing it in all aspects of life?
That’s gotta be somebody on the team. Well, thank you so much. I don’t think I’m the most humble guy, but thanks for the compliment. I probably appear more humble than I am because I work all the time and I don’t have the time to brag about success.
When will Nexo incorporate YubiKey onto the platform?
That’s in the pipeline, I don’t have a strict deadline, but we have had two-factor authentication on the platform for a long time now. As for YubiKey, honestly, I don’t know, we’ll see, perhaps soon.
It is definitely coming this quarter. We want to make sure we run all our tests right for the voting, and for different proposals, making sure we can actually implement the suggested changes. We don’t want people to vote for something that we later realize we can’t actually implement, so we want to be realistic about what we vote on and make sure everything checks out before we launch the official Governance Vote.
When do you plan to launch the affiliate program and when do you plan to lower the minimum deposit amount for EUR? (It’s currently 1000 EUR.)
Well, 1000 is not a very high number in my opinion. It’s not imposed by Nexo as such. This minimum is imposed by our banking partners. Unfortunately, we are still reliant on banks, so this is one of the things that we will be able to resolve quicker once we get our banking license. But I don’t have a deadline right now. Overall, we recently raised some of the minimum requirements because of transaction fees on Ethereum. I hope this is a temporary solution while Ethereum figure it out.
The affiliate program is set for this quarter. It has been pending for a while. People sometimes have this antagonistic view of Nexo as if we’re holding back or not working hard enough to bring these features on time, but ultimately these are all products that bring in new business for the company and we just have to prioritize and – since we’re dealing with people’s funds and transactions on the blockchain are irreversible – be extra careful about the software we put out. That’s why some things are taking a little longer.
What happens to the yield when Bitcoin enters a bear market?
I can’t tell you for sure. Ultimately, our interest rates aren’t something we just wake up and randomly come up with, they are a product of market forces, so if something fundamentally shifts and we are no longer able to generate our current yields, we will obviously have to lower them. But that’s why it’s no longer just the loan book we use to sustain our business. We have proprietary trading strategies in place with a phenomenal team executing them so that we remain open to all the possibilities out there for maintaining and improving our yields safely in the constantly shifting market.
During the last AMA you mentioned that you can’t disclose what people are going to vote on? Has anything changed since then? Any hints you can give us now?
Nothing has changed dramatically except that I can say that we will make an announcement soon. Like, real soon.
Will the company sell its own tokens in the future or just utilize its own credit lines to extract value out of NEXO?
Wow, that’s a complicated question. We, as a team, have not sold our tokens. We haven’t even touched them despite the sensational rise in our token’s value, they haven’t been moved from the smart contract – this is publicly visible. I think that speaks volumes about our conviction in our company's success. We don’t need to sell them and we don’t intend to sell them in the future.
We are in a position to finance our business through different mechanisms that allow us to grow the enterprise organically. It’s no secret that in the token terms we have company tokens that are meant as strategic reserves, but with the current dynamics of the business and the markets, we don’t need to use them.
Any plans to add Launchpad or Launchpool on the Nexo platform?
This is not part of our core business so it’s not in the immediate pipeline. We have been talking about allocating some funds to doing something like what Binance does, where we help companies launch. But this is not a fact yet and it’s not a priority for us right now. What is currently a very high priority at Nexo is education for financial literacy. It’s an initiative that we are working on and the community is going to see more of that very soon.
Can Nexo have a stop-loss option to liquidate collateral once a certain price target is reached rather than a certain USD portfolio value?
That’s a good suggestion but it has some challenges when it comes to implementation. When things turn sour in the crypto space and prices start dropping, liquidity dries up extremely quickly which means we can’t guarantee we’ll be able to execute stop-losses on time. Essentially if an asset pierces through the stop-loss price too fast somebody will have to cover the extra losses and Nexo is not in a position to do this, neither do we want to pass on such costs to our clients.
However, we have been piloting products with different options and option strategies that come close to this with some of our institutional clients. To implement this for retail clients might take a long time and a lot more liquidity for us to be able to offer a product that works and makes sense.
What happens if the interest you’ve earned with Nexo covers your principal loan?
Everything with Nexo is dynamic. There is no loan maturity in the traditional sense, we have to have maturity dates in the terms and conditions because of various compliance requirements, but the loans get extended automatically upon maturity unless you pay them off. If you never fall below the required LTV for your particular asset class, you don’t need to take any action, you will simply continue accruing interest on your credit until you decide to repay it.
Canada just released new compliance rules for crypto exchanges and platforms, will Nexo comply?
I’m unaware of the specific regulations this question addresses, but we are registered with FinTrack – the Canadian authority we answer to. So we are compliant, we have explained our model to the regulators and they have signed off on it. If something came out very very recently, I am unaware of it, but that’s why we have our brilliant legal team. They’re probably working to figure out what more we need to comply with – we are the type of company that complies, we’re not some wild cowboys that just hope to slip by regulations.
How many lawyers do you have?
A lot. We operate in 200+ jurisdictions, so for every major one, there’s a law firm we work with. Our internal team is close to 20 people, but the overall number of lawyers is probably in the hundreds.
If you went public, would the NEXO Tokens be converted to equity?
If we were to go public, we are very aware that we have responsibilities to the NEXO Token holders and we will definitely take care of them should we ever decide to take this important step with Nexo.
Do you see the NEXO Token as a security that reflects Nexo’s market valuation?
That’s a tricky question because these queries seem to be very US-centric, but it depends. Being a security means different things in different jurisdictions. If the SEC looks into the NEXO Token, would they find it a security? Probably so, but we have gone through the trouble of actually registering our offering with the SEC. Still, this is dynamic: an asset can be a security and then stop being a security depending on the dynamic and the specific situation.
Where do you see Nexo in five or 10 years?
If we mean the NEXO Token here, then I see it at double digits in the next five to 10 years. I can’t say exactly how high it will go, but I think we have substantial potential. It all depends on market conditions. If Bitcoin were to go back down to $20,000, it would drag everything else down with it. I don’t see much chance of that happening, but it is a possibility.
As a company, I see us growing in a couple of directions. The space will grow, but what it means to be a blockchain company will also expand. So we’ll grow both because the space will grow and because the technology we work with will become more present in day-to-day life. I see us becoming more and more compliant because we will have our banking license. The team will also grow and that will yield more potential for the company. We’re close to 200 people now. It’s a growth story all around.
Are you experiencing growth pains? We’re seeing a lot of complaints about customer support responses being delayed both on Nexo and across the whole space.
Of course. We are always looking for ways to do things better. With regards to delays, to a very large extent, they are due to congestion of networks, gas fees, and mining issues. I don’t think it was a support problem per se, but when people are not getting their money when they want it, we are the punching bag. Can we find a solution to network congestion? Yes, we can, but it takes a while. All these technological solutions take time. So I don’t think we have a problem with the headcount of our support team, all bottlenecks are ultimately in our dev department.
Are your institutional clients subject to the same terms in terms of loan rate, deposit rate, utility of the NEXO Token?
It’s a great question and it’s very simple to answer: yes.
Do you plan to someday offer the possibility to swap between EUR and NEXO directly on the Nexo Exchange?
I don’t know whether that’s planned and it’d take longer, especially in certain jurisdictions. Basically, when you have the platform and various regulations in different countries, the platform has to split, which is difficult to implement, especially on a larger scale. We would have to see where such a feature comes in among our other priorities. I don’t think the demand for it is super high right now because swaps on the exchange are quick and users can simply go through another asset or currency to efficiently get their EUR or NEXO.
Could Nexo implement RBF (raise-by-fee) on Bitcoin to allow users to raise the fee on a withdrawal if it’s taking too long?
This is really not my area of expertise, I would have to talk to the dev guys. But again this would take a lot of resources and if we do it, it would have to be for larger balances.
When will the Nexo platform be linked to a bank account?
Right now you can withdraw to a bank account, but full integrations with particular banks are further along in the future.
If Nexo obtains a banking license, then will we have an IBAN for our Nexo accounts so that we can receive our salaries straight into our accounts?
We’re working on a solution that will allow clients to do that even without a banking license. We may be at the very end of the banking license acquisition process, but we’re still looking for alternative ways to offer this functionality just in case something doesn’t come through.