Mastercard and Nexo release "crypto-backed" credit card

Polycount

Posts: 3,013   +589
Staff member
In brief: Mastercard and Nexo have teamed up to create a new type of credit card: one that doesn't rely on credit scores and credit limits to function. Instead, the card is unique in that it allows you to borrow against the value of your own assets. This removes much of the risk for the lender, allowing Mastercard and Nexo to provide more favorable terms to their users.

For example, the card doesn't require a minimum monthly repayment, nor will you incur usage or inactivity fees. Additionally, there's no set credit limit -- instead, you can spend up to 90 percent of the fiat value of your cryptocurrencies, without actually having to sell said currency. Unless you default on your payments, in which case the crypto value of your loan would be deducted from your coffers.

There is no interest on credit used up to or below the 20 percent "loan-to-value ratio," Reuters reports, and there aren't any spending limits (aside from the 90 percent figure mentioned above). This card could be useful for those looking to hold on to their crypto assets while they manage a temporary lapse in income or a sudden emergency expense. Anyone who holds on to crypto long-term knows how bad it can feel to be forced to sell it off in tough situations; especially since the value of any given coin can fluctuate wildly on a day-to-day basis.

Nexo notes that using their card helps you avoid "taxable events" that might otherwise occur if you spend through a traditional debit crypto card (which converts your crypto to cash when you make a purchase).

As with most modern credit cards, the Nexo card does offer a rewards system. You can earn 0.5 percent in Bitcoin on your purchases, or 2 percent back if you switch your reward currency to "NEXO." Finally, the card can be used either virtually or physically, depending on your preferences.

Permalink to story.

 

yRaz

Posts: 4,523   +5,380
So you use crypto as security, but what I don`t get is if your crypto crashes 50% and you can`t pay the loan, how do they get their money back? Is this a pyramid on top of another?
I'm all for people NOT using crypto, but there seems to be a severe lack of understanding of what a Pyramid scheme is.

Frankly, I think the people who lack a basic understanding of what scams are are the ones most likely to be scammed.
 

PEnnn

Posts: 806   +941
There are so many red flag all over this, you could make a king-sized quilt out of them!!

So, what happens when the wallet is emptied, one way or another (as in another major crypto crash / wallet has been hacked, etc)...?? How will the banks get their money? I am sure there more strings attached in the fine print.

Amazing how many fools will fall for this one!!
 

BuckarooBonzai

Posts: 123   +82
I am sure this credit card contract will have a lot of fine print written, one of them perhaps giving them access authorization to your bank accounts, assets, etc. beside the crypto coffers. You don't get something for nothing.
 

yannus

Posts: 69   +62
I'm not well versed in this topic but what I see here is that they want control over those who flee control. If you can't beat them join them.
 

merikafyeah

Posts: 335   +324
If you sell crypto for fiat, you'll have to pay a capital gains tax, same with stocks. Many wealthy shareholders avoid paying high income taxes by taking out loans backed by the value of their stocks. Debt is not income, therefore no income tax. This Nexo card provides an easy way to do the same but with crypto.

This is a big win because now you won't be double-taxed simply because the Fed considers crypto an "asset" instead of (foreign) currency.
 

emmzo

Posts: 633   +833
I'm all for people NOT using crypto, but there seems to be a severe lack of understanding of what a Pyramid scheme is.

Frankly, I think the people who lack a basic understanding of what scams are are the ones most likely to be scammed.
So, overcautious people that suspect scams even if it's not the case are most likely to be scammed? Great logic! In other news, people that don't go over the speed limit are most likely to cause crashes. Also, I know it's not technically a classic pyramid, but I still call it that, because price is driven solely by more people buying without correlation to intrinsic value, which in this case is zero.
 
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merikafyeah

Posts: 335   +324
So, overcautious people that suspect scams even if it's not the case are most likely to be scammed? Great logic! In other news, people that don't go over the speed limit are most likely to cause crashes.
The point was not that many people are 'overcautious' but misinformed. He's saying misinformed people are more likely to be scammed.
 

emmzo

Posts: 633   +833
The point was not that many people are 'overcautious' but misinformed. He's saying misinformed people are more likely to be scammed.
Maybe I used a hyperbole to prove my point. And I'm not that far off. But, immediately, I'm called an ignorant ready to be scammed. Pretentious much? Besides, if misinformation works as a deterrent, how will you get scammed?
 
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merikafyeah

Posts: 335   +324
Maybe I used a hyperbole to prove my point. And I'm not that far off. But, immediately, I'm called an ignorant ready to be scammed. Pretentious much? Besides, if misinformation works as a deterrent, how will you get scammed?
Neither my post nor the original post you first replied to were referring to you specifically, so no need to take it personally.

I was merely correcting your misinterpretation of the original point, which you're still doing. The exact words were "people who lack a basic understanding of what scams are are the ones most likely to be scammed". The meaning is "if you don't understand how scams work, you are more likely to be scammed".

One demonstrates that he does not understand what a scam is by calling something that isn't a scam, a scam. Again this is not a matter of caution but comprehension.

Many called Bitcoin a ponzi scheme without realizing that the biggest ponzi scheme is still going on right under their noses:

(The part at 22:20 is especially important, particularly for those who think all crypto has zero intrinsic value.)
 

emmzo

Posts: 633   +833
Neither my post nor the original post you first replied to were referring to you specifically, so no need to take it personally.

I was merely correcting your misinterpretation of the original point, which you're still doing. The exact words were "people who lack a basic understanding of what scams are are the ones most likely to be scammed". The meaning is "if you don't understand how scams work, you are more likely to be scammed".

One demonstrates that he does not understand what a scam is by calling something that isn't a scam, a scam. Again this is not a matter of caution but comprehension.

Many called Bitcoin a ponzi scheme without realizing that the biggest ponzi scheme is still going on right under their noses:

(The part at 22:20 is especially important, particularly for those who think all crypto has zero intrinsic value.)
22:20 The FED system could be the biggest Ponzi scheme of all time. Yes, I get it, but I don't get the connection with crypto intrinsic value not being zero. While the FED has, simply put, the whole US power as intrinsic value, Bitcoin has ... what? Also, high returns and low risk, which proponents of crypto advocate is always some form of Ponzi. And this is exactly what the documentary says later.
 

merikafyeah

Posts: 335   +324
22:20 The FED system could be the biggest Ponzi scheme of all time. Yes, I get it, but I don't get the connection with crypto intrinsic value not being zero. While the FED has, simply put, the whole US power as intrinsic value, Bitcoin has ... what? Also, high returns and low risk, which proponents of crypto advocate is always some form of Ponzi. And this is exactly what the documentary says later.
The core implication is that fiat itself has no intrinsic value outside of the same exact thing that gives crypto its value: Faith.

What does it look like when people lose faith in the US dollar? Fewer and fewer people buying treasury bonds and more and more buying hard assets like gold, silver, and yes, even crypto. What gives the dollar any value at all is the trust people have that it will give them a predictable amount of purchasing power. What disrupts this trust? High inflation. When 80% of all US dollars that have ever existed in the U.S.' entire history were printed in the last few years it should become very clear that it's not just prices going up, it's the dollar value going down, I.e. your purchasing power is decreasing despite your amount of labor being the same.

Why should "backed by the US government" be a reason to trust the dollar when it's the same government that is responsible for devaluing it in the first place? Bitcoin has value because it cannot be manipulated or devalued by a single entity or group of entities. It doesn't belong to any nation, but to everyone. Monero has value because it enforces privacy by design, even more so than cash. And unlike cash, crypto cannot be stolen or seized during unlawful vehicle searches and your funds cannot be frozen for simply donating to a protest your government does not like. That in itself holds immense value, which I predict in the coming years will become even more apparent.

True proponents of crypto understand its natural volatility as the function of a truly free market and have never pushed the notion of "high returns and low risk". That is the language of opportunistic grifters and actual scammers. The same that are now trying to get a quick buck with NFTs cuz that's the latest buzzword that's being used to con yet more misinformed suckers with a case of FOMO. Needing to get more money from new "investors" to appease older investors is a ponzi scheme. Designing a currency to be resistant to government censorship, seizure, or manipulation is anything but a scam. In fact it's revealing the true scam underneath, which is why governments are trying to regulate it, or outright ban it like in China.
 

emmzo

Posts: 633   +833
The core implication is that fiat itself has no intrinsic value outside of the same exact thing that gives crypto its value: Faith.

What does it look like when people lose faith in the US dollar? Fewer and fewer people buying treasury bonds and more and more buying hard assets like gold, silver, and yes, even crypto. What gives the dollar any value at all is the trust people have that it will give them a predictable amount of purchasing power. What disrupts this trust? High inflation. When 80% of all US dollars that have ever existed in the U.S.' entire history were printed in the last few years it should become very clear that it's not just prices going up, it's the dollar value going down, I.e. your purchasing power is decreasing despite your amount of labor being the same.

Why should "backed by the US government" be a reason to trust the dollar when it's the same government that is responsible for devaluing it in the first place? Bitcoin has value because it cannot be manipulated or devalued by a single entity or group of entities. It doesn't belong to any nation, but to everyone. Monero has value because it enforces privacy by design, even more so than cash. And unlike cash, crypto cannot be stolen or seized during unlawful vehicle searches and your funds cannot be frozen for simply donating to a protest your government does not like. That in itself holds immense value, which I predict in the coming years will become even more apparent.

True proponents of crypto understand its natural volatility as the function of a truly free market and have never pushed the notion of "high returns and low risk". That is the language of opportunistic grifters and actual scammers. The same that are now trying to get a quick buck with NFTs cuz that's the latest buzzword that's being used to con yet more misinformed suckers with a case of FOMO. Needing to get more money from new "investors" to appease older investors is a ponzi scheme. Designing a currency to be resistant to government censorship, seizure, or manipulation is anything but a scam. In fact it's revealing the true scam underneath, which is why governments are trying to regulate it, or outright ban it like in China.
I don't disagree on some points, however you keep calling it a currency, when, in fact, is a high risk type of asset, that's why the high rewards btw. But don't believe me, in a recent interview on CNN, the CEO of Binance, Changpeng Zhao, was asked the very same question and he said crypto is not a currency, but a new type of asset. Ofc he went on to say the benefits of using crypto, but whether you believe more and I believe less doesn't change the nature of it. Also, most investors are enticed to believe Bitcoin will go to 1mil and beyond, so, low risk, high reward forever, when, in fact, crypto market could crash and will crash, just as any market does. Another advice from your documentary, never believe an asset is not linked to a traditional market, that is just is, is the better, and will never fail.
 
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MaXtor

Posts: 411   +420
So you use crypto as security, but what I don`t get is if your crypto crashes 50% and you can`t pay the loan, how do they get their money back? Is this a pyramid on top of another?
Not sure how Nexo will work, however there are other companies working on similar. They will allow you to take out a loan in Bitcoin backed by assets valued in Bitcoin. So it would be the same as taking out a loan in fiat, backed by assets valued in fiat.

The fiat pyramid scheme is beautiful, many investments appear to appreciate in value while it is really your currency losing value. As fiat accelerates in its 100+ year downward trend, people are for the most part oblivious to its loss in purchasing power (example, a $5000 home in 1950 is now $500,000).

Essentially, crypto loans backed by assets valued in the same crypto will have no concern for your crypto assets crashing against fiat.

While I'm not 100% bullish on crypto, especially not centralized cryptos (bank and government digital currencies), if you're not bearish on fiat, you're not paying attention.

If you don't trust crypto, I get it, but don't keep your savings in fiat, buy physical assets.
 

NightAntilli

Posts: 911   +1,184
So you use crypto as security, but what I don`t get is if your crypto crashes 50% and you can`t pay the loan, how do they get their money back? Is this a pyramid on top of another?
They won't let you borrow 100%. If you crypto is worth $100, likely you're allowed to borrow a max of $50. That way, if the price crashes, you're not immediately liquidated. But if you crypto drops and reaches $50, they immediately confiscate your crypto and sell it, to ensure payment. You lose the crypto, but don't have to pay the money back.

I'm surprised how many people here lack basic knowledge of not only crypto, but how collateral works.
 

emmzo

Posts: 633   +833
They won't let you borrow 100%. If you crypto is worth $100, likely you're allowed to borrow a max of $50. That way, if the price crashes, you're not immediately liquidated. But if you crypto drops and reaches $50, they immediately confiscate your crypto and sell it, to ensure payment. You lose the crypto, but don't have to pay the money back.

I'm surprised how many people here lack basic knowledge of not only crypto, but how collateral works.
Read the article. "You can spend up to 90 percent of the fiat value of your cryptocurrencies" . So, if it drops 10%, it's instant liquidation. Good luck with that. Every day you are prone to liquidation. My question was not about how it works, but how is this sustainable in a highly volatile environment? Thus my question what if it drops more. Can you afford to get a loan thinking you can lose all your crypto on a daily basis? Yes, I know, I initially put it bluntly, because traditionally, you have a time limit to repay debt. So, if it were the case here, they could not only hold crypto collateral, because of what I said above, fast fluctuations.
 
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merikafyeah

Posts: 335   +324
I don't disagree on some points, however you keep calling it a currency, when, in fact, is a high risk type of asset, that's why the high rewards btw. But don't believe me, in a recent interview on CNN, the CEO of Binance, Changpeng Zhao, was asked the very same question and he said crypto is not a currency, but a new type of asset. Ofc he went on to say the benefits of using crypto, but whether you believe more and I believe less doesn't change the nature of it. Also, most investors are enticed to believe Bitcoin will go to 1mil and beyond, so, low risk, high reward forever, when, in fact, crypto market could crash and will crash, just as any market does. Another advice from your documentary, never believe an asset is not linked to a traditional market, that is just is, is the better, and will never fail.
It doesn't have to be "either or", it could be both. Bitcoin fulfills the requirements of being a currency beyond what would typically be referred to as "bartering". The fact that it can also function as a store of value independent of direct manipulation (similar to precious metals) makes it an asset as well. Gold, silver, and copper were once common currency but they diminished in use since they couldn't practically scale to match the size and pace of a global economy.

An all too common mistake most people make is conflating "speculation" with "investment". Speculating is not investing, that's just gambling.
"But isn't all investment really just gambling?" you might hear one ask.
Not quite. As with anything in life, success is never guaranteed, there is an element of risk to everything. Investing means supporting something because you believe in it and wish to help it succeed. Of course not altruistically, almost everyone desires to make a profit down the line, but no one can predict the future.

Risk is also a relative factor. If you only invest using money you can afford to lose, then your risk factor will always be low. When banks loan money they perform a risk assessment since there's no guarantee a borrower won't default on the debt. Writing off losses is just a part of the business. If a company is willing to loan money with crypto as collateral then they've done a risk assessment and have determined that the potential gain is worth the inherent risk.

In 2009 Bitcoin's value was zero. Today it's around 40K USD per BTC.
It's not certain if it will ever hit 1MIL USD, but what is certain is that it will never go back to zero, because unlike stocks or the dollar, there is no mechanism for people to suddenly lose faith in Bitcoin en masse. Companies can go bankrupt and more dollars can be printed out of thin air by the trillions, but Bitcoin cannot be controlled nor is it tied to any entity.
More and more lenders are realizing this so they are slowly embracing the potential of crypto.

The fact that Bitcoin went from being worth $0 to $1 is proof that simply being a cryptographically secure and independent alternative to traditional fiat is in itself, value enough.
 

NightAntilli

Posts: 911   +1,184
Read the article. "You can spend up to 90 percent of the fiat value of your cryptocurrencies" . So, if it drops 10%, it's instant liquidation. Good luck with that. Every day you are prone to liquidation. My question was not about how it works, but how is this sustainable in a highly volatile environment? Thus my question what if it drops more. Can you afford to get a loan thinking you can lose all your crypto on a daily basis? Yes, I know, I initially put it bluntly, because traditionally, you have a time limit to repay debt. So, if it were the case here, they could not only hold crypto collateral, because of what I said above, fast fluctuations.
I doubt they would allow up to 90% for anything other than stable coins. But even if they do, well, that's the user's responsibility. It's sustainable because they guarantee that no loss occurs. That's what liquidation is all about.