Know when to HODL ‘em? Nexo has the crypto card for you

December 1, 2022 | By Vicki Hyman

Of the many memes the crypto economy has spawned, one of the first was HODL. Born of a typo by a crypto investor declaring his intention to ride out a 2013 plunge — “I AM HODLING” — the acronym now stands for “hold on for dear life.” It’s an investment principle that many crypto enthusiasts continue to hold dear.

HODLers are who Antoni Trenchev had in mind when he and his co-founders Kosta Kantchev and Kalin Metodiev launched Nexo in 2018 to offer instant lines of credit, with borrowers putting up their own crypto as collateral — keeping it while still benefiting from its upward potential. 

Fast-forward to today and London-based Nexo is a regulated institution for digital assets for more than five million users, with services including savings accounts, an advanced trading platform, and an institutional prime brokerage. In April, Nexo, Mastercard and payment service provider DiPocket launched the Nexo Card, a first-of-its-kind credit card based on the same founding principle: Crypto owners can tap into their liquidity without actually selling their crypto. The cards are currently available in Europe, with plans to expand and new features coming soon.

“Because we are a company of crypto HODLers, the biggest benefit for cardholders is being able to enjoy the total financial freedom that cryptocurrencies allow and spend without selling by borrowing against your assets,” says Trenchev, a former fintech executive and longtime crypto enthusiast who, as a member of Bulgaria’s Parliament, sponsored legislation supporting blockchain for e-government services. “It’s an exponential step, as it makes crypto not only accessible but, more importantly, proves its use case on an everyday level.”

The Nexo Card lets cardholders use more than 40 leading digital currencies and stablecoins as collateral, with the ability to adjust amount and asset type to manage their portfolios. There is no credit check to apply, flexible repayment options are available, and cardholders can spend up to 90% of the value of their crypto collateral.

It’s one of a growing number of crypto-related cards Mastercard has helped launch, bridging the gap between traditional financial services and the growing crypto ecosystem, making it easier and safer for crypto enthusiasts to use their assets and benefit from them, says Jorn Lambert, Mastercard’s chief digital officer.

“The best kind of innovation makes technology accessible to more people, and that’s what makes the crypto space so exciting,” he says. “The Nexo Card delivers an entirely new way of helping people harness the power of their crypto to boost their spending power.” 

In a recent interview with the Mastercard Newsroom, Trenchev discussed the challenges in getting Nexo off the ground, the company’s approach to regulation and its expansion plans for its new payment card.

How did you get into the crypto lending space?

Trenchev: Nexo was formed because of — and in spite of — the vacuum in the blockchain finance and lending space. At the time there wasn’t anyone offering access to liquidity in the same way that Nexo does, without selling the underlying cryptocurrencies, so the team and I brought our 15-plus years of expertise in financial services to create a solution that would deliver for it innovatively and practically. We knew the business case was there for Nexo, with a sizable niche to cater to at the time, but we didn’t fully anticipate for it to expand as much or as quickly.

What were some of the obstacles you faced in getting Nexo off the ground?

Trenchev: From a technical perspective, we faced challenges in scaling the platform, but also scaling our products to meet demand. Sourcing liquidity for our in-demand collateralized loans was among the very first obstacles in our path, propelling us to create the Earn Crypto Interest product, which allowed us to sustainably offer borrowers credit even in times of high demand.

We always knew that in order to achieve sustainability and eliminate human errors, a substantial degree of automation was needed, so we worked incredibly hard to carry that out, and there were more than a few obstacles on the way. We’ve made serious progress in that regard, as all of Nexo’s products are fully automated and generally need close to zero human input.

Was a crypto-backed card always part of your roadmap?

Trenchev: It kind of has been due to the nature of our products. It’s only natural to have a payment card as an extension to your account, where your digital assets are securely stored. Mainstream adoption of cryptocurrencies was on the road map too, and one of the more constructive ways to achieve this is by offering the public familiar tools, but powered by a new underlying technology. The Nexo Card is a big step for us in terms of adoption.  

How might you be looking to expand Nexo Card services?

Trenchev: We’d like for the Nexo Card to be so much more than a payment card, but rather a gateway to a new lifestyle and financial freedom powered by crypto. This is where we’re looking to expand.

We look to make the Nexo Card available and compliant outside of Europe. Our internal teams constantly look at how to enhance the card with new assets and dedicated promotions. We receive a lot of questions from our community for a debit card-like functionality, and this, too, is in our immediate road map. From a usability perspective, we’re working on collaborating with some of the biggest brands globally to provide more enjoyable and accessible experiences for Nexo Card adopters, and, of course, we plan to release metal cards to satisfy customers’ lifestyle needs.

Crypto is notoriously volatile. What are the risks in crypto lending and how do you manage them for customers?

Trenchev: It’s prudent risk management that will let a company thrive in growing markets and ultimately sustain a prolonged downturn like the one we’re seeing now in the crypto winter of 2022. We also cannot stress enough how important overcollateralization [a requirement that collateral must be worth more than a loan to cover potential losses in case of default] is, as we’ve seen the trickling-down effects large, unsecured loans have on major participants in the industry.

We go the extra mile in all matters concerning regulatory compliance and licenses, as in our experience it is that proactive, engaged attitude that helps the entire space develop in a secure manner.

We’ve also partnered with a top 20 U.S. accounting firm for our industry-first, real-time reserves attestation. This allows anyone to confirm that the value of the assets we manage is at least 100% greater than our liabilities to clients, and offers an unprecedented level of transparency into a company’s reserves. We are glad to see reserves attestations, also known as Proof of Reserves, finally get the attention they deserve, and we were among the first companies to set an example with this practice.

Vicki Hyman, director, communications, Mastercard