Nexo, the Zug, Switzerland-based cryptofinancer, has signed a deal with Singapore’s Terra, agreeing to take deposits in the soon-to-be-introduced, East Asia-focused token.
“We love their approach to stable coins,” said Antoni Trenchev, managing partner of Nexo.
Under the terms of the agreement announced July 1, Nexo will accept Terra’s token for deposit, allowing owners of the coin to borrow fiat currencies against their holdings. The borrowers will be able to gain liquidity without being taxed on a sale of tokens.
Nexo says that Terra’s method of achieving stability is unique. Rather than being linked to an underlying real-world asset or another cryptocurrency, the two dominant methods for achieving a peg, it will instead utilize an algorithm to operate like a central bank, controlling its own coin supply to maintain the desired rate.
A second token, called Luna, will accumulate based on Terra transaction charges. If Terra weakens, it will be bought up using Luna until it returns to a target level.
“Terra is a very different type of stable coin. It is a third type,” said Kiril Nikolov, a sales executive at Nexo.
Terra attracted Nexo for reasons beyond the model. While the company is incorporated in Singapore, as Terraform Labs, it has strong Korean connections. Co-founder Daniel Shin is also the founder of TicketMonster (TMON), one of Korea’s largest ecommerce platforms. Terra has links with Kakao, the Korea Exchange-listed, messaging-to-mobility IT conglomerate. It has signed an MOU with Kakao Mobility, received funding from Kakao Ventures and is working with Klaytn, Kakao’s public blockchain.
Nexo already has a strong following in South Korea and wants to build on that. Many of the buyers of Nexo’s own token are from the country, with the first dividend payment being made in Seoul in December 2018, while it also has a large market for its lending services there.
“South Koreans have a lot of crypto. They are natural customers for Nexo,” Trenchev said. “That market is very important to us.”
Terra has raised a total of $32 million from investors in Korea, Singapore, the U.S., Europe and China. It hopes to grow, in East Asia at first, by acting as a payment system for ecommerce sites. It may also be used as an incentive for purchasers on these sites. Terra already has relationships established with 15 such platforms throughout the region, including TMON, Southeast Asia’s Qoo10 and Singapore’s Carousell.
Trenchev says the initial introduction to Terra came via Michael Arrington, founder of TechCrunch and an investor in Nexo via Arrington XRP Capital.
“He put us into contact, and we instantly clicked,” he said.
Nexo accepts six coins – BTC, ETH, XRP, LTC, BNB and NEXO – and exchanges them for 45 real-world currencies. In addition to adding Terra, it is also committed to taking on Telegram’s gram. To borrow against holdings, no credit check is required. The assets on deposit are the collateral, and customers can take out up to 50 percent of the value of the coins.
More credit is be extended in a dynamic fashion if the value of the assets rise.
Nexo, which was founded in 2017 and raised $52.5 million in March 2018, is connected to, but not owned by, Credissimo, a Sofia, Bulgaria-based financial firm. Credissimo supports Nexo in terms of lending technology and expertise.
The company is currently working on the acquisition of a bank. While such an institution may not be appropriate for holding crypto itself, it does have advantages for working in fiat currency and raising low cost funding with deposits. It also brings with it a degree of respectability.
“You need a bank to do two things: call yourself a bank, which is obviously great, and funding,” said Trenchev.
He adds that Nexo is in the final stages of due diligence on two institutions, one in Europe and one in the U.S.
Image via Shutterstock.