After a six-month-long dialogue, Nexo, a provider of crypto-backed loans, recently announced that it had canceled its planned agreement with Vauld, a cryptocurrency lender. This move surprised many in the industry because Nexo and Vauld had previously been seen as strong partners. The cancellation of this agreement is likely to have come; as a result, a severe liquidity crunch.
Major Reasons for Cancellation and Uncertainty of Future
According to Bloomberg news reporters, with the uncertainty of what lies ahead for Vauld and the crypto space, Nexo pulled out of their agreement to avoid potential risk. They also added that, Due to the unpredictable nature of cryptocurrencies and ongoing changes in regulations, Nexo decided it was best to cancel its plans with Vauld as it could not guarantee that it would be able to meet all regulatory requirements in the future.
The Agreement and What Was Planned
According to the CNBC news informers, there are a few reasons why the potential agreement didn’t materialise. Vauld suffered big losses in the defunct Terra ecosystem, Indian authorities seized company assets, money was left on the defunct cryptocurrency exchange FTX, and there were sizable loan receivables from Amber Group. The source noted that the proposed merger did not make sense for Nexo because Vauld has a sizable client base in the United States, and Nexo recently disclosed its intention to depart the nation.
However, The agreement between Nexo and Vauld would have allowed the two companies to collaborate on financial services and products for users of both platforms. According to Trenchev, this collaboration could have opened up new opportunities for customers who use either platform or both. However, he noted that due to the fragile state of Vauld’s finances, it wasn’t feasible for Nexo to move forward with their plans.
How the business model of Nexo is affected
Yahoo Finance reporters have also stated that the planned agreement between Nexo and Vauld was intended to create a mutual partnership that would allow customers of both companies access to expanded loan options. However, this agreement was ultimately terminated due to Vauld’s financial struggles and inability to meet specific criteria set forth by Nexo.
Cancelling this planned partnership will likely have immediate repercussions for Nexo’s business model, as it could limit its customer base and the type of loan services it can provide.
Reaction from Investors
The Coin Republic News reported reactions from some investors. The report cited that Vauld had been in hot water for some time due to its questionable lending practices. However, despite the warnings from financial experts and analysts, many investors were still drawn to the company’s promise of high returns on investment. Now that Nexo has pulled out of their agreement, those same investors feel the sting.
One disgruntled investor said: “This news is a huge disappointment. Vauld seemed like a great opportunity to make some money, and now I’m left with empty promises and uncertainty.” Other investors shared similar sentiments, voicing their outrage over the cancelled agreement and calling for more stringent regulations for companies like Vauld.