Today we are announcing the regrettable but necessary decision that Nexo will be phasing out its products and services in the United States in a gradual and orderly fashion over the coming months.
Our decision comes after more than 18 months of good-faith dialogue with US state and federal regulators which has come to a dead end. Despite inconsistent and changing positions among state and federal regulators, Nexo has engaged in significant ongoing efforts to provide requested information and to proactively modify its business in response to their concerns.
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.
As part of our cooperative approach with regulators, during the course of 2021 and 2022, we have off-boarded clients from the states of New York and Vermont and have suspended new registrations for all US clients for our Earn Interest Product to meet regulators’ expectations.
As of December 6, 2022, our Earn Interest Product will not be available for existing clients in eight additional US states - Indiana, Kentucky, Maryland, Oklahoma, South Carolina, Wisconsin, California, and Washington.
These immediate changes only affect the usability of the Earn Interest Product for citizens and residents of the eight aforementioned states. In the interim and until further notice, these clients will continue to enjoy access to all other Nexo products available in these jurisdictions.
As we effectuate our orderly exit from the US, Nexo’s payment specialists have been informed and will continue processing withdrawals in real-time so that customers as always have uninterrupted access to their assets.
Since its inception in 2018, Nexo has expended significant costs and efforts to do things the right way. The following is a non-exhaustive list of actions we have taken in response to US regulatory concerns and developments:
- SEC-Registered Token Sale - Nexo was among the few digital asset companies to register its token sale with the U.S. Securities and Exchange Commission (SEC) in 2018.
- XRP Delisting - as soon as the SEC brought an enforcement action against Ripple Labs Inc., we made the unpopular and business-detrimental decision to disable the exchange functionality for XRP in the US.
- New York Exit – at the New York Attorney General’s request, Nexo exited New York at the cost of losing market share, as certain competitors continued to offer interest-bearing crypto products there. The same is true of Vermont.
- “The BlockFi Order” - as soon as BlockFi settled with the SEC in February 2022, Nexo ceased accepting any new funds from U.S. customers into its Earn Interest Product.
We have spent innumerable hours engaging with regulators in an effort to achieve two main objectives:
- Historic products – resolving any regulatory concerns with products Nexo historically made available in the US and
- Forging ahead – identifying a path forward where Nexo services, notably our Earn Interest Product, could be made available in the US in a compliant and continuous manner.
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. 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.
This was made crystal clear by the Consumer Financial Protection Bureau’s (CFPB) decision this past Thursday insisting it has jurisdiction to investigate our Earn Interest Product, which the SEC and state regulators have simultaneously insisted is a security subject to their jurisdictions. In addition, a number of the very state securities regulators we had been cooperating with for several months blindsided us by filing actions against us without advance notice.
We firmly believe that the blockchain is a transformative technology and recognizing its importance is akin to recognizing the value of the Internet in the early 2000s - it has immense economic and geo-political importance. For our part, we will dedicate our time and effort to developing products and services for jurisdictions that understand the importance of blockchain technology in a rapidly digitizing world.
Given the challenges of the confusing and contradictory US regulatory regime, it is with a heavy heart that we begin the gradual and orderly departure from the US.
We thank you for your ongoing trust and support.
The Nexo Team