Crypto Exchange Nexo Settles California Lending Case as U.S. Re-Entry Plans Face Regulatory Hurdles

Crypto lending platform Nexo has reached a settlement with California's Department of Financial Protection and Innovation over allegations it operated as an unlicensed lender in the state, marking the latest regulatory complication for a company attempting to re-enter the U.S. market after a strategic retreat three years ago.

The settlement addresses claims that Nexo extended dollar-denominated loans to California residents without proper licensing and failed to assess borrowers' ability to repay—a fundamental consumer protection requirement under state lending laws. The case stems from Nexo's previous U.S. operations, which the company wound down in mid-2023 amid mounting regulatory scrutiny of its "Earn Interest Product."

For finance leaders watching the crypto lending space, the settlement illustrates a persistent tension in digital asset regulation: platforms that allow users to borrow against crypto collateral are increasingly being treated as traditional lenders subject to decades-old consumer protection frameworks, even when their underwriting models bear little resemblance to conventional credit assessment.

During its earlier U.S. operations, Nexo allowed consumers to take dollar-denominated loans secured by cryptocurrency holdings on the platform. Rather than conducting typical credit risk underwriting, the platform required users to overcollateralize their debt—a model common in crypto lending that substitutes asset-based security for creditworthiness analysis. California regulators determined this arrangement still constituted lending activity requiring state licensure and compliance with ability-to-repay standards.

The timing of the settlement is particularly notable given Nexo's stated intention to resume U.S. operations. The company announced in 2025 that it would re-enter the American market, betting that "changing conditions"—likely referring to evolving regulatory attitudes toward crypto under new federal leadership—would create a more hospitable environment. However, the company has not yet resumed operations, and the California settlement suggests state-level regulatory frameworks remain a significant obstacle regardless of shifts in federal policy.

The case also highlights the fragmented nature of U.S. crypto regulation, where companies must navigate a patchwork of state requirements even as federal agencies debate jurisdiction and appropriate frameworks. For CFOs at financial services companies considering crypto-related offerings, the Nexo settlement serves as a reminder that state regulators continue to assert authority over lending activities regardless of the underlying technology or collateral type.

The settlement amount and specific terms were not disclosed in the available information, though such agreements typically include financial penalties and commitments to cease unauthorized activities. Nexo's ability to successfully re-enter the U.S. market will likely depend on obtaining proper state licenses and adapting its business model to satisfy traditional lending regulations—a process that could prove costly and operationally complex for a platform built around crypto-native mechanics.