Arrington-Backed Startup Launches Crypto-for-Cash Credit Platform

Apr 30, 2018 at 14:00 UTC
Updated May 1, 2018 at 15:21 UTC
NEWS

Cryptocurrency startup Nexo, which is backed by TechCrunch founder Michael Arrington, has launched a cash-based lending platform.

Announced Monday, Nexo provides loans or extends a line of credit using its own assets, said managing partner Antoni Trenchev.

To that end, the startup raised $50 million from investors, which will be used to provide liquidity to the company’s platform. This departs from existing crypto-backed lending solutions, which instead connect borrowers with other individuals willing to loan out their funds.

This structure allows Nexo to provide instant loans without requiring credit checks or the time delay that manual approval processes require, Trenchev said.

The startup, which was spun off from European fintech firm Credissimo, is using blockchain security firm BitGo’s digital wallet as its custodian, Trenchev told CoinDesk. Further, the company is now looking to team up with a small Federal Deposit Insurance Corporation bank to store assets.

He added:

“All of the software, all of the automation process is something we have developed ourselves, and most of the tools, we have used them for several years. All of our software and automation process are [used by Credissimo]. … We have developed our own models of insuring and protecting our business.”

Notably, the company is backed and advised by TechCrunch founder Michael Arrington, who told CoinDesk that he is one of the startup’s financial backers.

Nexo is acting similarly to a bank with its lending model, according to Arrington.

“I haven’t seen anyone do a good job so far of providing liquidity for people who have cryptocurrencies without forcing them to sell the cryptocurrency, or to put it more succinctly, provide a proper credit line to people who own cryptocurrencies,” he said.

Trenchev said Nexo wants to set a precedent for traditional financial institutions, namely banks, and prove that cryptocurrencies can be trusted as an asset.

“If you look at the trend with cryptocurrencies, volatility is going down, it’s still very volatile … [but] we are pretty confident that volatility is on a downward trend and will continue to do so, which will make our model even more robust than it is,” he said.

Ultimately, Trenchev concluded, Nexo’s benefit comes from the fact that it lets clients “spend the value of [their] crypto without having to sell it.”

Bitcoin and dollars image via Shutterstock