Earlier this month, the BlockSocial’s Eric Jansen interviewed Nеxo’s managing partner and co-founder, Antoni Trenchev. Antoni and Eric discussed a few interesting perspectives on the future of Nexo in the blockchain industry and in the wider financial sector.
Here are some interesting points of the interview:
Nexo, the digital assets institution that provides banking services for the blockchain space, is quickly evolving to encompass much more than just digital assets and cryptocurrency.
The company is currently aiming to create a “Nexo 360 degrees” service that can cater to every need a crypto user might have from purchasing their first hundred dollars worth of Bitcoin to storing their assets, making payments, and borrowing against their crypto.
While insurance for digital assets is still a nascent industry, in a few year’s time, the blockchain space will likely have a cryptocurrency equivalent of FDIC insurance, if not something better.
During DAS: London 2020, Nexo signed a deal with digital asset security platform Fireblocks to facilitate the seamless execution of trustless block trade settlements.
The NEXO Token has performed very well over the past months with an ROI over 87%. For the future, Nexo is already preparing a NEXO Utility Features 2.0 upgrade that will bring many new benefits to token holders.
In 2–10 years traditional banks will most likely be very connected to the blockchain ecosystem.
Nexo is currently hard at work acquiring commercial banking capabilities in multiple jurisdictions.
For the full details on the topics above check out Antoni’s BlockSocial interview or have a read of the transcript below.
Eric: All right this is Eric Jansen I’m sitting with Antoni Trenchev at DAS: London and we’re gonna talk to Antoni today about Nexo and a little bit about what they have going on over there. Antoni’s the co-founder of Nexo. But before we get into Nexo maybe talk about yourself your background how you got into crypto.
Antoni: I have an interesting and mixed background. I actually studied law, believe it or not, in London of all places. Then I was in the hedge fund industry. I had a small hedge fund that I was running with a couple of friends and couple employees, mostly managing our own funds and some of our friends’ and families’. It was a few tens of millions. We had, you know, very good years but at a certain point, I decided that the stress was just too much for me with trading and equities and bonds, commodities etc. So, I ran for office and I was in Parliament back in Bulgaria, my home country, for two years something and interestingly, you know in 2014, we passed a bill which was supposed to allow the Bulgarian population to vote online and it was partially based on blockchain technology.
Eric: It was e-voting, right?
Antoni: E-voting but you know the piece of legislation had the technological implementation on blockchain technology which from the distance of time, is an interesting thing. Nobody knew what Bitcoin is back then. And then a friend of mine, the other co-founder of Nexo, he had been thinking about the idea of crypto-backed lending for some time and he invited me on board. I was instantly sold on the idea and two years in we’re here at DAS talking about various aspects of how this could be phenomenal.
Eric: Yeah so tell me about Nexo. What does Nexo do?
Antoni: Right well, Nexo is a digital assets institution which provides banking services for the blockchain space but it’s quickly going to be much more than just blockchain and digital assets. Our bread and butter right now is obviously lending. If you have ten thousand dollars worth of Bitcoin you come to us, you deposit that into a third-party custodian wallet and we extend you an instant credit line which gives you access to the value of your crypto without having to sell it. It’s great for all sorts of reasons. If you believe Bitcoin is going to go up, it’s a no-brainer for you. It’s very tax-efficient; it’s what the billionaires of this world have been doing for the past thirty years where they keep on borrowing against their stocks rather than selling which is a taxable event. It’s colloquially known as the Zuckerberg tax. Out of the necessity of us funding ourselves, we developed the ‘Earn’ product which allows you to earn, currently, 8% annually on your stablecoins, on your crypto very soon, also on a plethora of different fiat currencies.
Eric: So you’re really doing two main things right now.
Antoni: The goal is to ultimately have “Nexo 360 degrees,” that is the name of it, the name in progress. We want to capture every need that a crypto user might have all the way from purchasing the first hundred dollars worth of Bitcoin with your credit card to storing, paying other people, borrowing against it, tokenization as it progresses. So you know just like meeting all your demands all in one place so that you don’t have to worry about other providers and go elsewhere. It’s just convenient and user-friendly.
Eric: Yeah and the way that you access your loan is through a debit MasterCard, I think, right?
Antoni: Exactly we have a partnership with one of the issuing partners for MasterCard. So the Nexo MasterCard is unique in the sense that you had a bunch of credit cards which when you swipe it on the terminal, it automatically sells your Bitcoin for fiat currencies and pays on the spot which is great, it’s useful, but not if you want to HODL on to your Bitcoin or belief it’s going to fifty hundred K or whatever.
Eric: Right, nobody wants to spend their Bitcoin.
Antoni: Nobody wants to sell their Bitcoin. And another thing that people don’t necessarily assess accurately or even think about is that if you are at a profit, that your Bitcoin position and you do that, that’s a taxable event. So the Starbucks that you just paid for gets like forty, forty-four percent. If you live in New York or whatever, more expensive. That’s quite a number.
Eric: Yeah and then on the earning interest, I think what’s fascinating about is that I don’t think a lot of people realize that has to do with stablecoins which I always kind of relate to a CD alternative or a Savings Bank alternative which in the U.S. is paying very little interest. But I don’t think that’s something that a lot of people consider as a savings alternative yet and maybe some of that has to do with insurance in the US. That’s FDIC, right. Is my money insured? But in some ways, there is insurance on the Nexo platform. Tell me about that. How does that work?
Antoni: Well, FDIC insurance is great. It is great for the first 250K that you got. If you’re lucky enough to drive north of that, you’re no longer insured. So it’s not a perfect system either. What we have right now with Nexo is insurance on custodial assets. We have a third-party custodian that we store 90 percent of the assets there in cold storage. And that is insured up to 100 million against a number of things, almost any possible scenario really. It’s just the hot wallets obviously we have to keep some of the assets in the hot wallets. But you know it’s a nascent thing, insurance for crypto but we’re getting there. Here this morning we signed a deal with Fireblocks which is another custodian, great guys, and they are working on an insurance product that if both our wallets are within their ecosystem, even if I send it to you, it still gets covered by the insurance which is great. And not that many providers have that, so I think we’re getting there slowly but surely. It has to do with the fact that the insurance companies have to figure it out for themselves first. It’s a new industry. It’s highly volatile. I understand they’re scared or used to be scared. But we’re making good progress and more likely than not in a couple of years we will have FDIC insurance equivalents if not better because, I mean, that’s the future.
Eric: Yeah well, I think the other fascinating thing is that you know the old complaint about gold, right? — That you don’t earn any interest on it. That was certainly something that Warren Buffett would always say. You’re not gonna buy gold because it just sits there and doesn’t do anything but now we have the Paxos token and there are other tokens like it but I think Paxos is one of the tokens that you can deposit at Nexo right and so today you can potentially earn interest on your gold using Nexo.
Antoni: Yes, a couple of things. If I was Warren Buffet and I could see all the potential in stocks maybe I wouldn’t invest in gold either. He’s talking obviously from his point of view. But gold has, historically, not paid very much dividends but if you go back in history like in the 50s with a kilo of gold you can buy a Volkswagen car, mid-range and now for the exact same thing you can still buy that level of a car. So it is quite fascinating from that perspective. What we did with Nexo is we essentially developed a product that, up to very recently, was accessible to the ultra ultra-wealthy, like the ones with the private bank accounts in Switzerland and assets under management 25 million or more. It’s like they could buy physical gold deposit it with their bank and then get a loan on it 60–70 cents on the dollar. Now with Paxos they have tokenized gold, it sits in a vault here in London somewhere, I don’t know exactly where, but now you could invest as little as $1,000 and take out a loan. You get your gold and it can outperform, it can underperform or whatever but you have access to that the liquidity and it’s available to just about anyone. It’s truly phenomenal.
Eric: So it’s a work in progress.
Eric: And what about the NEXO Token. So tell me about that and what the utility of the token is on the platform and just how that all works?
Antoni: Yeah well the NEXO Token has been performing very well these past months. We are at an all-time, no not an all-time but about a multi-year high, I would say. It’s got an ROI (return on investment) of about 87 percent which is decent. In the meantime, Bitcoin dropped more than half in price, so we’re doing okay. In terms of utilities, NEXO Token entitles you to 30% of the company profits in the form of dividends. Over the past 18 months, we paid out two token distributions. One was a million and the second was two million so investors are quite happy. So this is sort of on the participation in the success of the company. And then we have some great utilities where having NEXO Tokens allows you to bring down the interest rates for our loans. The maximum you would pay with Nexo right now is just below 12% a year and with the NEXO Token, you can bring that down to less than 6%, so pretty much 50%. And we’re looking to launch a lot more utilities like with the card we have the different tiers where you have gold, platinum giving you certain benefits and perks. This is going to be tied to the staking of NEXO Tokens which will also affect the tokenomics.
Eric: So the more tokens you have, NEXO Tokens, the different maybe levels — the gold platinum and all that stuff. And so and this is really a form of DeFi, right and so Nexo is a DeFi platform, decentralized finance. What’re your thoughts on DeFi and kind of the future DeFi compared to traditional finance?
Antoni: Well, DeFi is great. I mean like we work with some of the DeFi projects, with Maker DAO. We have a good arrangement you know like once dates. I don’t know if your listeners and the viewers are going to know all the ins and outs of it but when they launched, it started with very modest interest rates MakerDAO, like 1–2% per year. Then it skyrocketed to 25%+ so we came in then and said we’re gonna refinance that until they figure out how to deal with it. We brought loans at 8% which was more acceptable to people. So we work with them we love the space, there’s a lot of opportunities. It’s just that you know there’s certain aspects of the financial system as it is today that, they are inherently off-chain. If you want a loan in Japanese yen right now, sorry to say we need a banking partner to facilitate that. Whether this is going to be the case in 2,3, 5, 10 years, probably not, but as it is there are certain aspects that remain inherently off-chain and this is connected to the evolution of Nexo. We want to be more decentralized but we want to do it the right way, the smart way. And with smart contracts the longer the code is, the more vulnerability it potentially has. Right now we’re putting safety first, the safety of the funds of our clients. Hopefully, we can progress towards that direction where it could be more trustless but for the time being, we are in a very good spot.
Eric: Yeah, well, you’re not alone that seems to be the pattern, I guess, for a lot of firms and so I guess the last question is where do you see things going not only with Nexo but just that whole, I don’t if you would call it a crypto bank or, how you would describe Nexo, but what do you see in the next few months, next few years?
Antoni: We have been hard at work for some time now at acquiring commercial banking capabilities so this is in a couple of directions. We’re working in a couple of jurisdictions to get a banking license from scratch. It’s a hefty process but we are also examining and doing due diligence on a couple of banks for stakes which can vary from a few percent all the way to majority shareholder package so definitely sooner rather than later we will have a banking license which is going to be quite exciting because then you can offer a bunch of different things: even more efficient products, compliant with every aspect of the regulatory framework so that is pretty exciting. I’m generally very bullish about the space and especially Bitcoin. I have a prediction that it’s going to reach 50K this year.
Eric: Yeah, I saw that was a Bloomberg interview, right. You’re still holding by that prediction?
Antoni: Well, I mean, we’re absolutely certainly going to see 50K. Whether we gonna make it until the end of the year we’ll see. It won’t be surprising that’s for sure but you know the ecosystem is developing everything around derivatives and options and stock and different products. We’re going to see a lot of development this year which will bring in a lot of the institutions which is great because 10 years from now we won’t have a bank that somehow is not connected to blockchain as a technology and the ecosystem as such is going to intertwine and be one and the same in my opinion.
Eric: Well, that’s certainly what they’re talking about at the conference today. And all the institutional things that are going on behind the scenes. Well, this has been great I appreciate you spending time with us and learning more about Nexo and what the future plans are and best of luck to you and I’m sure we’ll be chatting more again