Nexo Review Key Takeaways
- Earn compounding interest of between 6% and 12% on a selection of top cryptocurrencies, stablecoins and fiat currency. Recieve daily compounding interest which paid out every day.
- Use your crypto as collateral to take out loans in 40+ different fiat currencies, with no early repayment fees, you only pay interest as low as 5.9% APR for the time you take out the loan. This is tax efficient, and means that you keep the underlying asset. However, over leveraged positions could be at risk of margin calls, which could see part of your assets liquidated.
- The new Nexo exchange is easy to use, with low fees and easy fiat onboarding. Though, it does lack advanced trading features.
- To get the best rates and benefits, you need to hold NEXO, their native token. Your loyalty level (base, silver, gold or platinum) is determined by how much NEXO tokens you hold in your wallet. To earn the best interest, and get the best APR on loans, you will need to hold as much as 10% of your portfolio on NEXO. Users also earn a bonus 2% interest if your interest is paid in the token. NEXO holders will also receive a dividend for holding the token 30% profit share for holding.
- Nexo has some questionable business practice, with claims of regulation not being proven or substantiated, removing claims of Big 4 audits from their whitepaper, and changing product offerings for the worse without notice.
What is Nexo? An Overview
Founded in 2017 by the team behind Credissimo, Nexo describes its company as “Banking on Crypto“. They’re a financial institution that introduces traditional financial products such as savings, loans and credit cards to the cryptocurrency space. After a successful ICO in 2018, they were one of the first companies to offer over collateralized loans, which allow customers to use 12 cryptocurrencies and 2 stablecoins as collateral to take out instant loans without credit checks, which can be paid out in up to 40+ fiat currencies. They also offer a savings account, which allows users to earn interest on a growing number of cryptocurrencies, stablecoins and fiat currencies. It’s similar to a bank but with a much better APR of up to 12% compounding daily interest. In 2021, Nexo rolled out their in-app exchange, and we are also hoping to see a Nexo credit card (which has been long in the waiting!) Uniquely for a crypto card, it is expected to work like a credit card, rather than a debit or prepaid card.
This in-depth Nexo review dives into each of their products in detail individually and compares their products and company conduct with similar options available in 2021. We also highlight some Nexo red flags, and things to consider before you decide on Nexo as a company.
Nexonomics and the NEXO Token explained
Nexo has its own native dividend paying utility token called NEXO. This is the cornerstone of ‘Nexonomics‘. This is a term used to describe the NEXO tokens utility both now and in the future:
The main benefits for customers of the Nexo token are as follows:
- Better rates: The NEXO token is used for staking different loyalty levels to get better interest rates on savings and loans (more on this below).
- Bonus interest: Nexo users also get +2% bonus interest on their savings if they get paid in NEXO tokens.
- Dividend: 30% of Nexo’s net profit is shared with token holders as dividends, with the longer-term holders receiving a loyalty benefit. You can read more about the Nexo dividend here.
Nexo also announced a token buyback in December 2020 of $12M over an undisclosed date. The buyback is transparent with all tokens being purchased from the open market, you can actually see all purchases at this ETH address. The purpose of the buyback is quoted to:
“The buyback program is yet another step to bolster the NEXO Token’s stability and growth potential, ultimately rewarding token holders for their investment and loyalty.”
In other words, the buyback reduces the supply of NEXO tokens on the open market, whilst aggressive advertising campaigns for their financial products drive up demand. This is good for long term token holders, who have seen a +2000% increase in the last year. What it means for recently onboarded token holders is unclear, but certainly risker in terms of price volatility.
Nexo Loyalty Levels
Nexo has 3 different loyalty levels, which are essentially staking levels that require you to hold a certain percentage of NEXO tokens in your portfolio in order to receive preferential interest rates on savings and loans. They range from the Base Loyalty Level which assumes you hold < 1% NEXO in your portfolio, to the Platinum Loyalty Level which requires > 10% NEXO tokens held in your portfolio. A comparison of interest rates can be seen below.
Verification, deposit and withdrawals
Verification and KYC
In order to use any of Nexo’s products, the first thing you will need to do is signup, there are 3 levels of verification:
- Starter verification: only email verification is required. You will be able to earn interest in cryptocurrency and stablecoins, and also take out loans which is great if you want to keep your anonymity. Withdrawals and available credit line limit are capped at $20,000 per day.
- Basic verification: this requires users to submit their full legal name, address and phone number. The phone number is used for text message verification. Withdrawals are still capped t $20,000 per day, but your credit line is increased to $2,000,000.00 per day.
- Advanced verification: This requires you to submit a government ID through their website which uses the third-party software, Jumio. Your account is usually verified in under 5 minutes. Once complete, users will be able to withdraw up to $500,000.00 per day in cryptocurrency, as well as deposit up to $2,000,000.00 in fiat currencies into savings accounts. It also allows you to use fiat currency as loan collateral, though I am unsure why this would be useful since you could only borrow 50% of your deposit which would be paid in fait currency anyway.
Once you are verified by one of the three levels above, you will need to deposit funds. By clicking one of the blue top up buttons, you will be given the address, or bank details required to make the payment. Please note that not all banks support sending to Nexo’s bank details. Transferwise, now Wise (which is actually not technically a bank) does not support sending fiat funds to Nexo:
For cryptocurrencies and stablecoins, the process is very quick. There are no fees involved, and depending on your loyalty level, even network fees are covered by Nexo! Up until recently, all network and gas fees for withdrawals on all loyalty levels were covered by Nexo, but with skyrocketing gas and network fees in light of the recent bull run, it’s no surprise that they have introduced free withdrawal limits. It is important to note that these are not Nexos own fees, but standard network fees.
Fiat withdrawals are a little slower and can take up to 2 – 5 days. In my experience though, the money was in my £GBP account within 24 hours.
Nexo takes security very seriously and since 2018 have partnered with BitGo as their wallet custodian who holds the majority of customer assets in cold storage. They have a solid history and are regarded as one of, if not the most trusted custodian, with no security breaches.
Insurance & cold storage
Nexo has a combined $375m insurance with Ledger and Bitgo, their cold wallet custodians. i.e. the company that holds customer funds in cold wallets. This insurance is for all funds, not per wallet – the Nexo website can seem a bit misleading in that sense. At the time of writing, Nexo has $5B+ assets under management, so this insurance obviously isn’t sufficient to cover all funds. That said, funds are stored in multiple cold storage wallets, and the likelihood of the entire funds being lost to a security breach is close to zero.
It is important to note that insurance only covers security breaches. This wouldn’t cover you in the event that Nexo became insolvent, or any other reason that customer funds are lost.
It is also important to note that there are is currently no insurance for fiat currencies.
Accounts have 2FA setup as standard with either an authenticator app like Google Authenticator (recommended) or SMS. Biometric login is also supported for mobile applications, and a second 2FA is required when transferring funds.
How do Nexo loans work?
Nexo provides over collateralized loans which are approved instantly. That means if you want to take out a Nexo loan, you will need to deposit funds in supported collateral currencies. For example:
- You deposit $1000 in Bitcoin into your Nexo wallet.
- You can then take a loan with up to 50% loan to value ratio (LTV) which in this case $500. These funds are transferred (very quickly) to a bank of your choosing, or instantly to your Nexo account if you choose to be paid out in stablecoins. Your assets are held in your Nexo loan wallet until the loan is repaid.
- Once the loan is repaid, your assets are instantly released.
Nexo margin calls: What happens if the value of your assets decreases?
If you take out a loan and the price of your collateral assets, e.g. Bitcoin decreases, that means your loan to value ratio increases. If your LTV reaches 83%, Nexo has a built-in feature to liquidate part of your assets to make loan repayments, this is called a loan to value (LTV) margin call. Before this happens though, Nexo will send you at least 3 emails notifying you, when your LTV increases to 71.4%, 74,1%, 76.9%. and you will have a chance to add funds to lower your LTV and prevent the liquidation of your assets.
- Loan amount: $500
- The original value of collateral: $1000 in Bitcoin
- Value of collateral after Bitcoin price decreases: $600
- (500/600)*100% = 83%.
In the above example, if your Bitcoin collateral decreases to $600 and your $500 loan is still outstanding, you will either need to repay some of the loan, add more collateral, or Nexo would start liquidating small amounts of your Bitcoin to make loan repayments.
This might sound scary because cryptocurrency can be such a volatile asset class. There are flash drops where we see prices drop be 20% in a day which could leave over leveraged positions at risk of liquidation. The advice is simple: don’t over leverage yourself, and only borrow what you need.
What happens if the value of your assets increases?
The real beauty of Nexo loans is that you still own the underlying asset. If the value of your collateral asset(s) increases during the period you’ve taken out your loan, then the difference belongs to you. What’s more, since Nexo is a dynamic lending platform, if your asset value has increased LTV will have decreased. This means you could take out another loan against the assets! For example:
- You previously took out a loan of $500 against $1000 of Bitcoin in your wallet.
- The price of Bitcoin has gone up, and your Bitcoin asset value is now $1500.
- You’re now able to instantly take out an additional $250 (50% LTV) against the collateral asset!
Taking loans is tax efficient!
If you take a loan, then you don’t have to sell your assets which means it is not a taxable event. This means you can keep your crypto, but release the capital.
What assets are supported as collateral?
The supported collateral assets are Bitcoin, Ethereum, XRP, Bitcoin Cash, Litecoin, BNB, EOS, Chainlink, Stellar, NEXO Token, Tron, PAXG, Tether, USD Coin, PAX, TrueUSD, DAI, HUSD. Don’t see your asset? Check out our loan comparison tool for more information >>
What is the minimum loan amount?
$50 for Stablecoin Transfers and $500 for Bank Transfers.
How long does it take to receive funds?
Receiving stablecoins is instant, they’ll show within your wallet instantly. For bank transfers in fiat, the Nexo website says it can take up to 2-5 days, but in my experience using the platform, it happened much faster and I had my funds within an hour.
How much do Nexo Loans cost?
There are no initiation fees, or in fact, any other fees outside of the Annual Percentage Rate (APR). This is the yearly percentage interest you would pay for taking out the loan, but you can pay back anytime without penalty (more on this below). Borrow rates are 11.9% – 5.9% depending on your loyalty level:
- Base (>1% NEXO tokens in your portfolio): 11.9%
- Silver (1-5% NEXO tokens in your portfolio): 10.9%
- Gold (5-10% NEXO tokens in your portfolio): 8.9%
- Platinum (< 10% NEXO tokens in your portfolio): 5.9%
How much can you borrow with Nexo?
You can borrow up to $2 million with Nexo, which would require you to provide asset collateral of $4 million.
Repaying Nexo Loans
You can pay back all, or part of the loan whenever you want, and you will only pay interest for the period you took the loan (except if the loan is < 30 days). In other words no instalment payments, and no early repayment fees!
There is one exception, however, if your loan is taken out and repaid within 30 days, in which case you would be charged 30 days interest.
Nexo Loan Summary / Verdict
Nexo was one of the first centralised finance (CeFi) loan providers in the crypto space, and their over collateralised loan platform is secure, and extremely popular. Their apps for iOS, Android and web are very user friendly, and if you take a loan you can expect to have the cash in your account in as little as 1 hour. It really is that fast. Their APR rates are very fair, there are no fees for early repayment, so if you’re looking to use your crypto as collateral and take out a loan from a CeFi platform, Nexo is still one of the best options available in 2021.
How to use the Nexo savings account
When you add funds to your Nexo account, they will automatically start receiving interest, which will be added to your account every day. Rates vary based on your loyalty level and the currency you are using.
Flexible savings account (no lockup term)
Up until recently, The only offering from Nexo was a flexible savings account. This was a much better option for customers since they earned higher interest rates that are now only available for fixed-term savings. This change was a bit of a shock, especially since it came with no notice or warning, and left many customers feeling betrayed.
Funds In the flexible savings account can be used as collateral for loans.
Fixed savings account (minimum lockup term)
The Nexo fixed-term savings account is the new offering, which is significantly worse for users than the previous one. To receive the same interest rates that users used to get in the flexible savings account, users must lockup their funds for a minimum of 1 month. Also, funds in the fixed savings wallet cannot be used for collateral. This was sprung on users with no prior warning, which led many to leave the platform for competitors.
Savings loyalty levels
Like Nexo loans, your savings rate will depend on your loyalty level, i.e. the percentage of Nexo tokens you hold in your portfolio. Users of all levels will also receive a bonus +2% interest if they choose to have their interest paid in Nexo tokens.
Compounding daily interest
One unique feature of Nexo is that compounding interest is paid out daily. You can see the interest payments in your in app notifications:
This is an interesting point to compare to other competitors in the space, most of which will pay weekly or monthly.
The Nexo exchange was launched in beta in Q4 of 2020 and released to the public in Q1 of 2021. It’s a simplified trading experience with easy fiat onboarding options in EUR/GBP and supports 75 trading pairs for top cryptocurrencies and stablecoins. This is quite limited for an exchange and does not have any advanced trading features, but it works as an easy way to buy, exchange and sell top currencies. You can see a full breakdown of the exchange features here. You can also compare it side with other exchanges side using our exchange comparison tool.
Nexo claims that users pay no fees when exchanging and the spread applied will be a maximum of 0.75%. Below is a copy from a Nexo support chat:
You pay no fees on your trades on the Nexo Exchange as we cover all expenses related to transferring funds and executing orders on the exchanges used for the trades. The spread applied will be no more than 0.75% of the value you want to exchange.
Digging a little deeper, they tell me that:
We use a Smart Routing system that simultaneously connects to multiple exchanges to identify the best price.
However, they do not disclose what exchanges they use, or how many. They also do not take an average across exchanges, they just say that they take the best price. In other words, since it’s not verifiable, you have to take their word that they’re giving you the “best price”.
Nexo credit card
The long-awaited Nexo Mastercard promises some interesting features 2% cashback in NEXO or BTC. What is unique compared to other cards, is that appears to work as a credit card that loans against your collateral assets in your crypto wallet. It’s unclear whether or not users will pay the same APR as a Nexo loan when making purchases, or whether there will be a more traditional credit card interest-free period but it does sound promising. However, I have personally been on the waiting list for over a year at the time of writing, with no further developments.
When it does launch, they claim that there will be no fees and settlement will be local currencies which would make it suitable for global use. They also show a number of modern in-app features such as freeze/unfreeze your card, instant notifications about transactions, and virtual cards for online purchases.
The Nexo Negatives:
Every company comes with its pros and cons. After using Nexo for some time, and also being a member of their community on Reddit, there are a number of red flags which do need to be considered if you’re evaluating Nexo as a platform.
- Suspension of XRP trading without notice – after the SEC filed a lawsuit against Ripple, XRP started tanking, losing 60% of its price in 24 hours. Without notice, NEXO halted both the trading and repayment of loans in XRP, meaning that XRP holders helplessly watched as some users lost < 90% of their XRP portfolio value, and also as margin calls were triggered on their loans. They did release a response, which claims that the SEC forced their hand, but many other exchanges, including Coinbase, did not halt trading immediately.
- Changed interest rates without notice – up until March 2021, all savings accounts were flexible, with no lock in periods. Without notice, Nexo released Flex and Fixed savings products. Essentially, to get the same interest rates you were receiving before, you have to lock up funds for a minimum of 1 month. These funds can’t be used as collateral either. Nexo does reserve the right to change its product offering, but it seems unfair to change things for the worse for their customers without any notice.
- Promotions for new customers, none for existing – in December 2020, Nexo offered 3X interest for new customers, with nothing for existing customers.
- No card after months of waiting – many people have been on the card waitlist for over a year, with no updates or developments.
- No clear answer on where/if they are regulated – their website clearly says that they are a regulated financial institution, but they have failed several times to clarify where and who by – example. Their responses, when they give them, are vague and do not answer the question.
- Removed audited by a Big 4 regulator from their Whitepaper – Their whitepaper used to claim that they were audited by one of the big 4 accounting firms, you can see a screenshot on Reddit. However, if you look at the Nexo whitepaper on page 26, you’ll notice that this has now been removed without explanation.
Is Nexo legit?
The jury is still out on that. Crypto as an industry is still in its infancy and evolving fast, so on one hand, it is understandable that product offerings change and also that regulation is a complex issue. However, in my opinion, there are some major red flags here, and this was enough for me to move a significant amount of my funds away from Nexo.
Summary: is Nexo a good company?
I have thoroughly reviewed Nexo and used every one of their products, except the card. Their products are well designed and easy to use, their interest rates on savings are good, and their loan rates are very fair. I’ve found their support is generally fast and helpful.
Do I trust them? I cannot say.
Since I have started using Nexo, there have been too many red flags, to many unanswered questions, and not enough focus on doing right by their long term customers. This is a company that handles $5 billion in assets. They should be able to answer basic questions on regulation. This makes me very uneasy.
My verdict, and personal practice, is to keep part of your funds in Nexo. There are a lot of very good CeFi platforms out there with similar offerings, and I would never recommend that anyone keep all their eggs in one basket.
Do I earn interest on my currency if I take out a loan?
Does Nexo have an affiliate or referral program?
Will a Nexo loan show up on my credit history?
What happens if Nexo goes bust?
Do you earn interest on Nexo tokens?
Nexo has some great products, which are suitable for both newbies looking for a good fiat onboarding ramp, to long term holders looking to earn passive interest on their savings or free up capital tax efficiently with Nexo loan products. However, the longer I use Nexo and their products, the more red flags I uncover. I wish I could score Nexo higher on trust.
- Easy loans can be taken out in 40+ fiat currencies. Payouts are received fast, and rates are very reasonable.
- Savings accounts pay very good APY, which compounds daily (unique to Nexo).
- Exchange is very easy to use, with very low fees.
- Live support have always been fast and helpful in my experience.
- Product offerings have changed for the worse without any notice.
- Assets can be suspended from trading without any notice, leaving XRP holders with huge losses.
- Questions on regulation and auditing are left unanswered.
- A much bigger focus on onboarding new customers, than delivering promises to existing ones, e.g. the credit card for which many have been waiting over a year for.