California Regulator Fines Nexo Over Unlicensed Crypto Lending, as Affirm Pursues Banking Charter

The California Department of Financial Protection and Innovation has reached a settlement with cryptocurrency exchange Nexo over allegations the platform operated as an unlicensed lender in the state and extended loans without assessing borrowers' ability to repay, according to a report published this week in Fintech Business Weekly.

The enforcement action stems from Nexo's operations before the company began exiting the U.S. market in mid-2023 amid mounting regulatory scrutiny of its "Earn Interest Product." While Nexo announced plans in 2025 to re-enter the American market under what it characterized as changing regulatory conditions, the company has not yet resumed operations. The California settlement suggests state-level compliance hurdles remain even as federal policy debates continue.

During its previous U.S. operations, Nexo allowed California consumers to take dollar-denominated loans secured by cryptocurrency holdings on the platform. The company did not conduct traditional credit risk underwriting on these loans, instead requiring users to overcollateralize their debt—a common practice in crypto lending that substitutes collateral requirements for income verification or credit checks.

California regulators took issue with both the lack of state licensing and the absence of ability-to-repay assessments, requirements that apply to traditional consumer lenders in the state. The settlement terms were not disclosed in the report, though such agreements typically include financial penalties and commitments to cease unlicensed activity.

The Nexo case illustrates the compliance complexity facing crypto platforms that blur traditional regulatory boundaries. By offering dollar-denominated loans—even when secured by digital assets—the company triggered state lending laws that many crypto firms initially believed did not apply to their operations. For finance chiefs at crypto-adjacent companies, the settlement serves as a reminder that novel collateral structures do not exempt platforms from decades-old consumer lending statutes.

The California action comes as the broader crypto industry navigates a shifting regulatory landscape. While some companies have retreated from U.S. markets in recent years, others are testing re-entry strategies as federal policy discussions evolve. Nexo's 2025 announcement of planned U.S. return—followed by continued absence from the market—suggests companies are finding the gap between policy rhetoric and actual regulatory clearance wider than anticipated.

For corporate finance teams evaluating crypto treasury strategies or partnerships with digital asset platforms, the Nexo settlement underscores the importance of verifying state-level licensing compliance, not just federal registration. A platform's absence from the U.S. market, even temporarily, may signal unresolved regulatory issues rather than strategic choice.