- Nexo, a leading crypto lender, was caught off guard by eight state regulators publicly taking actions on security violations.
- Under regulatory pressure, Nexo pulled nearly 50% of the wrapped Bitcoin, an Ethereum-based token whose value is tied to BTC.
- Analysts believe wBTC price is at risk of decline as the lender crumbles under pressure and makes big moves on MakerDAO.
Earlier this week, the California Department of Financial Protection & Innovation (DFPI) filed a desist and refrain order against Nexo’s Earn Interest Product. The state authority claimed that Nexo was offering a security product that had not been cleared by the government for sale in the form of an investment contract. Nexo has suffered a takedown at the hands of regulators and made big moves, pulling 50% of wBTC held in MakerDAO out.
Also read: Bitcoin mass adoption: Spain's largest telecom company accepts BTC and crypto
Nexo hit by regulatory push back, makes big moves
The California Department of Financial Protection & Innovation (DFPI) filed a desist and refrain order against Nexo’s Earn Interest Product. The DFPI was joined by seven other states Kentucky, New York, Maryland, Oklahoma, South Carolina, Washington and Vermont taking action against Nexo.
Kalin Metodiev, the co-founder and managing partner of crypto lender Nexo, stated his firm was “surprised” by the way in which regulators publicly took action against the firm for securities violations. Metodiev explained that Nexo has tried to take responsibility and engaged in direct conversion with regulators like the Securities and Exchange Commission (SEC).
Metodiev said,
We were a little surprised by this news being thrown out there in public, you know, because this isn’t a process that just started this week. We have worked with our legal advisors in the U.S. that we have used for the last couple of years to navigate us specifically through these waters in these conversations.
While Nexo works with regulators and tackles the looming issues, crypto intelligence tracker Santiment has made note of big moves by the crypto lender in wrapped Bitcoin (wBTC), an Ethereum-based token backed one-to-one with Bitcoin.
Analysts at Santiment identified Nexo’s big move, the crypto lender pulled out nearly 50% of wBTC held in Maker DAO. This has left $120 million in wBTC locked in a Collateralized Debt Position (CDP). A CDP is created when collateral is locked into a MakerDAO’s smart contract. It generates the decentralized stablecoin DAI.
Analysts are monitoring Nexo’s moves to decipher the crypto lenders plans for its free assets.
wBTC locked in CDPs
Interestingly, Nexo’s moves have pushed wBTC price to its lowest value in 2022. Analysts believes wBTC price is at risk of further decline if Nexo pulls wrapped Bitcoin out of Maker DAO.
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