Much has been said about attractive interest rates offered by popular crypto lending platforms like BlockFi, Celsius Network and Nexo. However, there are two sides to every coin. Paying out high interest rates requires charging even higher rates to the borrowers.
Yet, Nexo co-founder Antoni Trenchev disagrees that crypto lending rates are high. In an interview with Cointelegraph, he said that this reflects the “Western” view, where the prevailing interest rates tend to be low. But it is not the case in the developing world, he said:
“But for people in Third World countries or even emerging markets, such as Asia, we get as low as 5.99% APY. So this is still very, very low, no matter how you compare it with the traditional financial sector. And the reason why it is like that is that it again has to do with the risk of the underlying assets and the collateral and the fact that we do not do credit checks on you.”
Everything is relative. Although the rates offered by the lending platforms may look relatively high when compared to bank savings accounts or even money market instruments, they pale in comparison to the yields offered by DeFi projects. When asked if he views DeFi projects as competition, Trenchev said Nexo does not see DeFi as direct competition. He said that though he likes the concept of DeFi, having a traditional finance background, he finds the space too risky for his personal taste. He has not participated in any yield farming either. He added:
“In order for it to be decentralized, it has to be all on blockchain and not fiat related. Right now, Nexo is positioned as a bridge between traditional financial markets and the crypto space. And we just see ourselves doing something slightly different.”
But does this mean most of Nexo’s borrowers come from the developing world? Trenchev did not have precise numbers at his disposal but noticed that they typically see an influx in demand from countries that have experienced inflationary pressure like Turkey.