Nexo to stop offering card, cashback rewards for UK customers
Crypto platform Nexo is planning to suspend certain products for its U.K. clients in response to new regulations in the country.
Starting from October 8th, the company will begin phasing out cashback payouts for Nexo Exchange and Nexo Card transactions, as well as referral and affiliate programs. The crypto lender says that the decision to cease these operations is influenced by the regulatory and policy landscape in the United Kingdom.
These measures are being implemented to comply with the Financial Conduct Authority’s new rules for cryptocurrency promotions, which include requirements for firms to register to approve their own advertisements and make changes to their systems to enhance customer protection.
These new regulations will extend to crypto companies and impact their ability to engage with local customers, requiring them to be registered or authorized by the FCA when reaching out to U.K. clients. Some firms, like Luno and PayPal, have already adjusted their crypto operations in response to these changes.
Earlier in June, the UK introduced new advertising rules for firms marketing crypto assets to consumers. Citing concern over investor protection, the FCA watchdog suggests that customers should take a brief period to educate themselves further about the risks involved.
Under the new rules, the financial watchdog introduced a 24-hour “cooling-off” period specifically for first-time investors. This pause allows investors to take a step back and reconsider their decision before proceeding with this type of risky investment. Additionally, the practice of offering ‘refer a friend’ bonuses will be prohibited.
The new regulations also require firms promoting crypto products or services to include a clear risk warning in their promotions and verify that individuals have the necessary knowledge and experience to invest in cryptocurrencies.
Nexo also stopped offering its products and services in the US market as of April 1, 2023 after costly clashes with regulators. Nexo paid $50 million in fines to settle charges from the federal and state regulators for failing to register its crypto asset lending product. It reached a resolution with the Securities and Exchange Commission in January after facing cease-and-desist orders from multiple states over its interest-earning products.
The lender settled the charges without admitting wrongdoing that its Earn Interest Product (EIP) was an unregistered securities offering.
US regulators signaled a big change in policing cryptocurrencies and the growing Defi sector after the FTX stunning collapse. The SEC officials have increasingly been talking about a need to crack down on these products, which are essentially unregistered interest-bearing accounts, the agency claims.