The crypto market has been battered this year, with nearly $2 trillion wiped from its value since its peak.
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Cryptocurrency lender Nexo announced on Tuesday that it has taken a stake in a federally regulated U.S. bank, paving the way for the company to offer banking services to Americans as a licensed institution.
Nexo, based in Zug, Switzerland, said it had agreed to buy an undisclosed stake in Hulett Bancorp, which owns a bedyouthe best known bank called Summit National Bank. Through Summit National Bank, which holds a federal banking charter with the Office of the Comptroller of the Currency, Nexo plans to offer a range of products including checking accounts and crypto loans.
The move is an important development for the nascent crypto industry, which is seeking to curry favor with politicians and regulators as investment in and adoption of digital assets increases. The market licked its wounds following the collapse of the controversial terraUSD token, which sparked a wave of liquidations and bankruptcies of companies like Celsius and Three Arrows Capital.
Nexo declined to disclose the size of its stake in Summit National Bank. The company called the deal “an industry-changing transaction.” In addition to the ability to launch new products, Nexo said its banking license would provide users with stronger legal safeguards. The deal will also help Nexo expand its presence in the United States, the company said.
“We already have a strong offering when it comes to our crypto lending, but we always like to have more than one option to provide a particular service,” Nexo co-founder Antoni Trenchev told CNBC.
“Acquiring a stake in a fully-fledged bank enables us to offer our full range of services to US retail and institutional customers, including bank accounts, asset-backed lending, card programs, as well as as escrow and custody solutions, and many other future plans for Nexo’s expansion into the United States that will be unveiled in the coming months.”
Summit National Bank traces its origins to 1984 in Wyoming, where the company was originally licensed as Hulett National Bank. The company later opened branches in Idaho and Montana. According to its website, Summit National Bank’s major loans are for “trade, agriculture, real estate, mortgages and construction.”
The news comes just a day after Nexo faced lawsuits from eight US states alleging the company offered users paid accounts without first registering them as securities and providing necessary information. Nexo allegedly misled investors into thinking it was a licensed and registered platform, according to filings.
In response to the lawsuit, Nexo said it worked with US federal and state regulators. The company sought to differentiate itself from other players who have encountered financial difficulties, saying it “did not engage in unsecured loans, had no exposure to LUNA/UST, did not need ‘be bailed out or did not need to resort to withdrawal restrictions.
Nexo, which has over $4 billion in assets under management, is not the first crypto firm to obtain a banking license, although this is a rare occurrence in the industry. Other fintech companies have already obtained federal banking charters through mergers and acquisitions, including SoFi, which offers crypto trading on its platform, and LendingClub.