Nexo Group
On September 26, 2022, the California Department of Financial Protection and Innovation (DFPI) joined seven other state regulators in a coordinated enforcement action against Nexo for its Earn Interest Product. The product offered returns of up to 36% on crypto deposits without qualifying or registering as securities under California law. The multi-state action resulted in desist and refrain orders. While Nexo is primarily a crypto lending platform rather than a traditional BaaS sponsor bank, the action is significant for the broader fintech-banking ecosystem as it addresses interest-bearing crypto deposit products that mirror traditional banking services.
Verified from source: On Sept. 26, the DFPI announced it joined seven state securities regulators to bring actions against Nexo Group in connection with its Earn Interest Product accounts, determining that Nexo offered these accounts to California residents without first qualifying them as securities.
- Multi-state coordinated enforcement signals heightened regulatory scrutiny of crypto yield products that resemble bank deposits
- Fintech platforms offering interest-bearing accounts may face securities registration requirements across multiple jurisdictions
- Banks partnering with crypto platforms for deposit-like products should evaluate securities law compliance