Nexo Comments on Move to Suspend XRP Trading
3 min read
Nexo, a leading token exchange and lending platform, has commented publicly on issues surrounding the SEC lawsuit against Ripple, and its decision to suspend XRP positions in its exchange, as well as temporary credit lines, and repayments.
Like many companies in the cryptocurrency space, Nexo opted to drop XRP from its product offerings in late 2020.
The Securities and Exchange Commission, the US regulator in charge of financial markets, brought suit against Ripple Labs in 2020, which make the price of XRP plummet on a temporary basis.
Today, the situation looks different – and according to Nexo, the company has been attacked for its move to drop XRP.
In a recent blog post, the exchange went on the record, and stated the following –
- Nexo has been subjected to defamation and aggressive blackmail attacks via various media and communication channels by several former clients liquidated as a result of the December 2020 XRP crash
- As attempts to settle amicably were not accepted by the individuals in question, Nexo is taking legal action to address the matter
- The company asserts that any further attacks upon its reputation, including any meritless lawsuits, will be addressed with equal severity and through the applicable legal instruments and mechanisms
The SEC created a situation where companies that wanted to avoid issues in the Western world had to consider the backlash they may face if they kept dealing in XRP – and Nexo took the safe route, and worked to keep up with a very murky regulatory environment.
Nexo Wasn’t Alone
When the SEC brought suit against Ripple in late 2020, numerous major companies couldn’t dump XRP fast enough.
As the USA has given little in the way of solid guidance on what cryptos actually are from a regulatory standpoint, aside from taxable assets, so we shouldn’t be surprised that when there is legal action – companies will pay attention.
As Nexo stated in the same post –
“To comply with the applicable laws and regulations in the jurisdictions Nexo operates in, we are obliged to consider all events in the blockchain space that may have an adverse effect on our regulatory status and business operations, and expose the company to significant risks, including but not limited to any administrative and court proceedings involving digital assets supported by Nexo.”
This sentiment is undoubtedly true, and any company has a responsibility first and foremost to itself, and anyone who has ownership in it.
While there were no doubt effects within the company’s clients, the exchange itself has suffered no ill effects from its move to drop XRP trading in terms of action taken against it by US regulators.
A Difficult Situation
As a hybrid entity that offers credit with crypto posted as collateral, both Nexo and its clients are subject to a range of risks. Late last year, the Ripple suit showed just how quickly these risks can manifest.
“The liquidations that ensued from users failing to repay their credit lines or post additional collateral as the value of their XRP collateral decreased, however, are different in nature. Liquidations are a procedure laid out in the GTC and are automatically triggered by Nexo should the LTV increase above the maximum permitted threshold of 83.3%. Considering that, as per the GTC, Nexo effectively liquidates collateral backing credit lines from its own accounts when that crypto credit is outstanding, when liquidations occur Nexo disposes of its own digital assets rather than rendering services to its clients, as is the case with repayments and the standard Nexo exchange service.”
As the cryptocurrency ecosystem evolves, these kinds of situations will always manifest on the bleeding edge of the industry.
Losses happen, and when a major token like XRP can be affected by a lawsuit, the ramifications to investors may be huge.
There is little doubt that many people who were on the long side of the XRP market or needed it to maintain value as a form of collateral, were severely hurt financially when the price tanked in late 2020.
It is virtually impossible that the late 2020 XRP move will be the last big move in the crypto markets or a major token.
Consider your risks accordingly.
The post Nexo Comments on Move to Suspend XRP Trading appeared first on Blockonomi.
