Disclaimer: I am not a professional financial advisor, and this should not be considered as professional financial advice. Please do your own research and what you believe is best for you.
The start of my journey down the crypto liquidity rabbit hole was with Nexo, a crypto bank. It was getting late into the night about two months ago, and I was on Coinbase looking at its crypto database. I happened to see Nexo’s listing by chance, and I searched for it online to get more information. I clicked through to its website; I was immediately enthralled. You’ll see this when you go there around the time of this post:
As Nexo’s team intended, the following immediately caught my attention: “Unlock the Power of Your Crypto; Earn Interest: 12% paid out daily; Borrow Instantly: 18 Cryptocurrencies available as collateral”. I quickly realized they were a crypto bank. Interested, I clicked through the Earn tab to see interest was available for crypto and Euros, British Pounds, and US Dollars:
I was hoping Nexo would be able to offer interest on USD Coin and other stablecoins, and they found a way to also offer interest on fiat currency. They’re already beating regular banks at their own game in my opinion, and they and their competition are going to generally improve. We’re only scratching the surface.
Nexo does operate in similar ways to a traditional bank: they offer storage for their depositors’ assets, lend out those assets with interest to business partners, provide some of the interest to their depositors, and provide credit lines to depositors based on their assets’ value. They also have $375 million of insurance through using Ledger’s Vault solutions and BitGo Custody with underwriting provided by Lloyd’s. Funds are stored in cold storage wallets provided by BitGo. That all to me means Nexo is a more ideal bank, traditional or otherwise, and I have put most of my liquid savings there in fiat USD and the USDC stablecoin.
It makes sense especially in this inflationary environment. A traditional bank’s .4% “high-interest” savings account will not cut it. There is only so much of our behaviors that we can change before we really have to start buying higher costing food at grocery stores. Yes, I think we definitely should continue investing part of our incomes also, but if we’re still thoroughly researching as to how we can do that well to have a better chance of beating inflation, then, depending on the amount of Nexo Tokens you own, earning 8% to 12% or more on fiat currency or stablecoins on uninvested savings is good in the meantime. This is particularly for if you are mainly interested in (to use the term broadly because Nexo arguably could be considered as non-traditional CeFi (centralized finance)) the DeFi (decentralized finance) aspect of crypto as it applies to fiat currency. DeFi can benefit both cryptocurrency and fiat currency from what I’ve seen. Nexo does of course provide the ability to earn up to 8% interest on regular crypto depending on the amount of Nexo Tokens you have. In any case, you could do what I did: research and test out Nexo (or other crypto banks) and gradually increase the savings in your account if you like it, as you become more comfortable.
These crypto banks are already good enough that I’d be willing to have my paychecks go to them and be converted to one or more stablecoins if needed. That way, I wouldn’t have to deal as much with the hassle of traditional banks. Moving funds to a crypto bank really only takes considerable time because the regular ones still need to be involved. What depositors like me generally do is transfer fiat currency from a regular bank to Coinbase, Binance, or another crypto exchange, typically convert it to a stablecoin, and transfer it to Nexo or another crypto bank once the exchange has cleared the funds and lifted the holds. This can take up to about 5 to 10 days from what I see, with the ACH or wire transfers and holds accounting for 99% of that time. The blockchain transfers are much quicker in comparison, and it’s not even close.
While I likely will be posting more about Nexo and potentially other crypto banks also, please consider exploring in your own time, as well. My main interest in crypto banks is that they generally offer much higher returns on my savings than even the best traditional banks. I am also in favor of regular cryptocurrencies as potential assets, but I am not that far from neutral being that there is still a lot of uncertainty on the crypto asset class as a whole. I do like the markets they are making and, in particular, expanding. The traditional banks may not entirely realize it yet, but Nexo and other crypto banks are becoming their competition.