UK-based crypto lender Nexo said on Monday it will halt offering its products and services in the US market as of April 1, 2023 after costly clashes with regulators.
The crypto lender says that the decision to cease its business operations is influenced by the regulatory and policy landscape in the United States.
The move comes after Nexo paid $50 million in fines to settle charges from the federal and state regulators for failing to register its crypto asset lending product. Nexo reached a resolution with the Securities and Exchange Commission in January after facing cease-and-desist orders from multiple states over its interest-earning products.
The lender settled the charges without admitting wrongdoing that its Earn Interest Product (EIP) was an unregistered securities offering.
“As you are a US client, we ask that you begin planning the withdrawal of your funds at a convenient time by this date. Between now and April 1, 2023, your balances on Nexo will continue to receive the same interest rate as that of the date of Nexo’s landmark resolution in the US (January 19, 2023). This does not affect Nexo’s other services, which are fully functioning and processing transactions in real time as always, in order to support you in this transitional period,” the company said in a blog post.
Nexo advises customers who believe that their account was wrongfully flagged as US-based to update their verification details.
Eight US state regulators highlighted that Nexo promotes annual interest rates of up to 36% on crypto deposits, which are significantly higher than rates for short-term, investment-grade, fixed-income securities or bank savings accounts.
Nexo replied to these allegations, elaborating that since the SEC guidance on earn products in February 2022, it has voluntarily ceased the onboarding of new US clients for Earn Interest Product as well as stopped the product for new balances for existing clients.
The move comes as US regulators signaled a big change in policing cryptocurrencies and the growing Defi sector after the FTX stunning collapse. The SEC officials have increasingly been talking about a need to crack down on these products, which are essentially unregistered interest-bearing accounts, the agency claims.
SEC’s head Chair Gary Gensler called on Congress to give the agency more authority to better police crypto trading and lending platforms, which pay customers rates higher than most bank savings accounts.