Nexo resumes UK client registrations after upgrade to meet FCA compliance guidelines

Centralized crypto lender Nexo resumed accepting UK client registrations on Tuesday following a series of upgrades to meet the compliance requirements of the country’s financial regulator, The Financial Conduct Authority.

The upgrades were implemented in collaboration with Gateway 21 — an FCA-authorized and regulated financial promotion approver — with such providers increasingly used by crypto firms to ensure UK compliance.

Changes include cool-off periods and specialized risk warnings for UK clients. Users also need to complete an investor categorization questionnaire and appropriateness assessment before using the platform — in what has become a standard practice for crypto firms serving UK clients.

"The UK has long been a cornerstone market for Nexo, and our commitment to our clients here remains resolute. When faced with rigorous yet necessary regulation, we chose to stand firm, diligently adapting our platform to meet these stringent requirements,” Nexo CPO Elitsa Taskova said in a statement shared with The Block. “We are deeply invested in cultivating and strengthening our relationships here, empowering our clients to make well-informed decisions with unparalleled access to expert knowledge and support."

Alongside the resumption, Nexo also plans to introduce tailored educational resources and dedicated support to help UK clients navigate the FCA’s guidelines, explaining that as the crypto industry becomes increasingly complex, providing a functional onboarding process alone is no longer sufficient. “Nexo believes it has a responsibility to clarify the regulatory framework for clients, highlight the roles of relevant authorities, and ensure clients understand both their obligations and ours,” the firm said.

“Through an array of educational resources and tailored materials, we aim to equip them to navigate the intricacies of the digital asset space and our newly enhanced UK-specific onboarding process with confidence and clarity," Taskova added.

Nexo paused onboarding in late 2023 following the FCA’s implementation of new crypto asset financial promotion regulations. However, its existing clients were allowed to continue using the platform, subject to passing investor categorization and appropriateness assessments, while the compliance upgrades were worked through to align with the FCA’s guidelines.

The changes are primarily aimed at risk awareness and management, designed to ensure that users fully understand the risks associated with cryptocurrencies and the products on offer before engaging with the platform, a Nexo spokesperson told The Block.

The UK's new crypto promotions rules

The FCA's new regime for crypto asset financial promotions took effect on Oct. 8, 2023, with the regulator subsequently issuing 450 alerts against illegal crypto promotions that year alone and warning that even crypto memes posted on social media could breach the rules. Crypto exchanges like Coinbase and Binance even went as far as removing news feeds for UK residents to avoid being caught foul of the new regulations.

The regulator said at the time that unregistered crypto asset firms who fail to comply with the new financial promotions guidelines are likely to breach section 21 of the UK's Financial Services and Markets Act 2000. This would be a criminal offense, punishable by up to two years imprisonment, an unlimited fine, or both.

The new rules were rolled out in the hope they would make the marketing of crypto products more transparent and accurate. However, several firms, including payments giant PayPal and fintech app Revolut , found them challenging, with crypto exchange Bybit going so far as to exit the UK market altogether.

Meanwhile, others such as Coinbase, OKX and Binance turned to third parties for compliance, with entities already registered or authorized by the FCA able to approve financial promotions on behalf of unregulated firms.

The FCA has taken a cautious stance toward the crypto space in an attempt to ensure investor protection while trying to foster innovation. In 2021, it banned the sale of derivatives and exchange-traded products to retail investors. However, the UK's stance on cryptocurrency regulation has subsequently been evolving, allowing crypto ETNs for professional investors to launch in March this year.

The UK is not the only challenging jurisdiction for the crypto lender, with Nexo phasing out its services in the U.S. from December 2022, citing “dead end” talks with regulators. The following month, Nexo agreed to pay $45 million to federal and state agencies after being charged by the Securities and Exchange Commission for failing to register the offer and sale of its retail crypto asset lending product.

However, Nexo is one of the few centralized lenders that survived the crypto niche’s troubles in 2022 — with the collapse into bankruptcy of firms like Celsius and BlockFi  making it unclear the extent to which users would trust such services going forward.

Nexo survived the period by implementing a business model built on core financial and blockchain principles such as collateralized lending, automated processes, global compliance, product innovation and prudent risk management, the spokesperson said.