- Nexo, a leading crypto lender, was surprised by eight government regulators taking public action against security breaches.
- Under regulatory pressure, Nexo pulled nearly 50% of packaged Bitcoin, an Ethereum-based token whose value is tied to BTC.
- Analysts believe wBTC price could fall as lender collapses under pressure and makes big moves at MakerDAO.
Earlier this week, the California Department of Financial Protection and Innovation (DFPI) filed a cease-and-desist order against Nexo’s earn-interest product. The state agency alleged that Nexo was offering a non-state-approved security product for sale in the form of an investment contract. Shut down by regulators, Nexo has taken huge steps by withdrawing 50% of the wBTC held in MakerDAO.
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Hit by regulatory setbacks, Nexo takes big steps
The California Department of Financial Protection and Innovation (DFPI) filed a cease-and-desist order against Nexo’s earn-interest product. The DFPI joined seven other states of Kentucky, New York, Maryland, Oklahoma, South Carolina, Washington and Vermont in taking action against Nexo.
Kalin Metodiev, the co-founder and managing partner of crypto lender Nexo, said his firm was “surprised” by the way regulators publicly cracked down on the firm for securities breaches. Metodiev explained that Nexo tried to take responsibility and engaged in a direct conversion with regulators such as the Securities and Exchange Commission (SEC).
We were a little surprised that this news was made public, you know, because this isn’t a process that just started this week. We have worked with our US legal counsel, whom we have employed over the past few years, to purposefully navigate these waters in these discussions.
As Nexo works with regulators and addresses the looming issues, crypto intelligence tracker Santiment has noted major moves by the crypto lender in Wrapped Bitcoin (wBTC), an Ethereum-based token backed one-to-one with Bitcoin taken.
Santiment analysts identified the big move by Nexo, the crypto lender withdrawing nearly 50% of wBTC held in Maker DAO. As a result, $120 million of wBTC is locked in a Collateralized Debt Position (CDP). A CDP is created when collateral is included in a MakerDAO’s smart contract. It generates the decentralized stablecoin DAI.
Analysts are watching Nexo’s moves to decipher crypto lenders’ plans for their free assets.
wBTC is locked into CDPs
Interestingly, Nexo’s moves pushed wBTC price to its lowest point in 2022. Analysts believe wBTC price is set for further decline as Nexo pulls wrapped bitcoin out of Maker DAO.