Crypto lender Nexo recently acquired a minority stake in Summit National Bank.
It's a traditional U.S. federal bank regulated by the Office of the Comptroller of the Currency, like all U.S. banks. This move will help it expand its ability to serve the U.S. market, allowing Nexo to offer traditional financial services such as bank accounts, lending and card services for retail and institutional customers. It also allows Nexo to combine these traditional services with crypto services.
This move was described as a cash purchase by Nexo co-founder Antoni Trenchev, speaking to The Block, though he did not disclose the size of the deal.
The Context: The move is well timed for Nexo, as it comes immediately after eight U.S. states — California, Kentucky, New York, Maryland, Oklahoma, South Carolina, Washington and Vermont — brought actions against Nexo, accusing the Web3 lender of offering unregistered, interest-bearing crypto accounts.
The strategic move to buy a stake in Summit National Bank will legitimize Nexo operations in the eyes of regulators. Nexo seems to be relying on the union making both parties stronger: Nexo without the regulatory entanglements and Summit National as a Web3 pioneer in the traditional banking world.
Nexo stated in a LinkedIn post:
“In a transformative move for the industry, Nexo has acquired a stake in US federally chartered Summit National Bank, becoming its preferred digital assets partner.
The deal further expands our US footprint, unlocking more innovative products at the intersection of traditional finance and blockchain technology for our American retail and institutional clients… utilizing Summit National Bank’s regulatory safeguards and payment infrastructure.”
SEC Eyes Crypto Lenders: Nexo stopped offering its yield product to new and existing customers after the Securities and Exchange Commission (SEC) issued an order against BlockFi, a competitive crypto lender, in February. BlockFi paid a $100-million penalty to settle state and federal actions.
Nexo said that Summit National Bank will continue to operate independently. Keith Metodiev, CFA, Nexo co-founder and managing partner, has been added to the bank’s board of directors.
Nexo is exploring the acquisition of a stake in a European bank and of another troubled crypto lender, Vauld. The due diligence period has been extended on Vauld, meaning it won’t happen occur the end of October.
This further blending of traditional finance and decentralized finance, if profitable, could prove a useful template for crypto lenders dealing with tightening SEC standards. Perhaps the Web3 world will finally establish clear regulatory legitimacy — simply by joining forces with traditional finance.
Photo based on image by Megan Rexazin from Pixabay.
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