The financial regulator of the Cayman Islands sued over the VASP license by Nexo.

The crypto lender said that in its decision to refuse registration, the Cayman Islands Monetary Authority had “put too much weight” on regulators’ enforcement operations.

The crypto lender filed a lawsuit in the Cayman Islands the same week that Bulgarian authorities searched Nexo’s premises and indicted four people on suspicion of money laundering.

Nexo sued the Cayman Islands Monetary Authority (CIMA) in a document dated January 12 for refusing to register it as a virtual asset service provider (VASP) in the island state. The crypto lender argued that it was “appropriate” to offer crypto services to citizens of the Cayman Islands and requested the court to overturn the financial regulator’s decision.

In accordance with court records, Nexo submitted an application to CIMA in January 2021 and added details at the regulator’s request. Although Nexo had not mentioned “some legal and regulatory problems as noted in the mainstream media,” the monetary authority requested clarification on the application last October. In December, it denied the application.

Nexo claimed that “The Authority violated its constitutional and statutory duty to present clear, convincing, and adequately specific reasons for its Refusal Decision.”

Citing instances in UK courts, Nexo argued that CIMA had given “too much weight” to regulators’ threats to take enforcement action against the cryptocurrency lender. In 2022, American state officials also issued cease-and-desist orders to Nexo, but the company contends in its lawsuit that this does not indicate that it acted unlawfully.

“Nexo has diligently cooperated with all US states and federal regulatory inquiries and has been proactive in maintaining dialogue with the respective regulators. There have been some regulatory ambiguities with respect to the laws and regulations applicable to digital assets in the US such that the fact of the regulatory enforcement itself does not connote any improper behavior.”

Due to a lack of regulatory certainty, the loan company declared in December that it will progressively stop operating in the United States over the following months.


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