While decentralized finance has stolen the show with big-number headlines over the past year — the closely-watched Total Value Locked (TVL) figure notably growing nearly 800%, rising from $20 billion at the start of 2021 to $157 billion at May peaks — centralized crypto financial services have likewise enjoyed explosive growth.
According to Kalin Metodiev, CFA and co-founder at Nexo, the crypto savings account company has grown fourfold to $15 billion in AUM, expanded to 1.7 million clients, and has new features like asset swap functionality built into the platform coming down the pipe.
Nexo and Cointelegraph only crossed paths briefly in Miami via a short conversation in the Nexo-sponsored Bitcoin Art Gallery — one of the highlights of the conference hall. However, we caught up with Metodiev for a written interview shortly after the madness ended to talk over key metrics climbing, the risks DeFi poses to Nexo’s model, and a path forward for institutional adoption.
— alex schaefer (@paintwithalex) June 4, 2021
Adapting to Defi
When it comes to DeFi’s rise, Metodiev sees a clear ceiling in terms of the heights it can reach due to some of its core, permissionless features.
“We are intrigued by the opportunities the DeFi space may offer and find merit in the notions of automation and decentralization,” he said. “However, this is a space that needs to align with institutional policies and standards in order to survive and thrive on a large scale in the long term. Nexo operates in accordance with formal AML/KYC guidance and compliance protocols, which are not currently adopted by the DeFi space.”
Nonetheless, the company still tracks the emerging vertical closely, and is “open to learning and adopting new best practices from any source at any time, the DeFi space included.”
At the moment this takes the form of a handful of initiatives perhaps aimed at making Nexo more attractive to DeFi users. They include governance functionality for the NEXO token — which is down to $1.91 from $4 highs earlier in the year — and a transparency campaign that, while it might not rival on-chain information, Metodiev says he hopes will lead the space.
“Our most recent #NexoTransparency initiative commenced with the shedding of ample light on our custody arrangements and insurance coverage. We employ multiple partners for the completion of Nexo’s institutional framework and we wished to be transparent on the details.”
Compliance and adoption
As institutional adoption seems perpetually hamstrung by legal and regulatory woes, Metodiev argues that Nexo can play a key role in getting big bank money involved in crypto.
“Some people proclaim that Blockchain-based financial services should detach from the traditional banking system and somehow thrive in their own little bubble. We find such opinions to be comical and outright phantasmagorical in the modern financial system of the 21st century.”
He noted that institutional client growth has been “exponential,” and that the sums have been at times extraordinary: Nexo is capable of helping institutions accumulate and borrow upwards of “$1 billion” in cryptoassets.
He notes that the regulatory environment remains murky, saying it’s “difficult to be compliant if a complete set of rules for companies, such as Nexo, are not in place,” but that the company strives to be compliant wherever possible. Moreover, unlike what many DeFi builders think, clear regulation might help the space more than harm.
“We believe that regulations can contribute to more business in the long term, not less, and hope that more companies in the Blockchain industry will follow our lead on compliance, transparency and impeccable service.”