California Regulator Fines Crypto Lender Nexo Over Unlicensed Operations, As Platform Eyes U.S. Return

Crypto exchange 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 and extended loans without assessing borrowers' ability to repay, according to a report published January 25, 2026.

The enforcement action stems from Nexo's previous U.S. operations, which the company began winding down in mid-2023 amid mounting regulatory scrutiny of its "Earn Interest Product." The settlement comes at a particularly awkward moment for Nexo: the company announced in 2025 that it planned to re-enter the U.S. market, though it has not yet resumed operations.

During its earlier run in California, Nexo offered dollar-denominated loans secured by users' cryptocurrency holdings on the platform. The company's underwriting approach was, let's say, unconventional by traditional lending standards—it conducted no typical credit risk assessment. Instead, Nexo required borrowers to overcollateralize their loans, meaning users had to pledge crypto assets worth more than the dollar amount they borrowed.

This is where things get legally interesting. California regulators apparently took the position that making loans in the state requires a license, regardless of whether you're checking credit scores or simply holding a bunch of Bitcoin as collateral. The "ability to repay" allegation suggests the state viewed Nexo's collateral-only approach as insufficient compliance with lending regulations designed to protect consumers from taking on debt they cannot service.

The timing of this settlement is notable for what it signals about the regulatory landscape crypto lenders face as they contemplate U.S. expansion. Nexo's 2023 retreat from the American market was part of a broader exodus by crypto platforms facing increased enforcement activity. The company's announced plans to return suggested it believed the regulatory environment had improved—or at least clarified—enough to make re-entry viable.

That calculation may now require adjustment. The California settlement demonstrates that state regulators are willing to pursue enforcement actions for past conduct even after a company has exited the market. For crypto platforms weighing U.S. expansion, this creates a potential overhang: leaving a state doesn't necessarily mean leaving behind regulatory liability.

The case also highlights an ongoing tension in how traditional lending regulations apply to crypto-collateralized loans. These products occupy an awkward middle ground—they're loans in the sense that users receive cash they must repay with interest, but the underwriting model bears little resemblance to traditional consumer lending. Nexo's position, presumably, was that overcollateralization eliminated credit risk and thus obviated the need for ability-to-repay analysis. California's position, evidently, was: not so fast.

For CFOs at crypto platforms or traditional financial institutions exploring digital asset lending, the Nexo settlement offers an uncomfortable lesson: novel collateral structures don't automatically exempt you from conventional lending regulations. The question isn't whether your risk management makes sense by crypto-native standards, but whether it satisfies state banking regulators who cut their teeth on auto loans and mortgages.

The specific terms of the settlement—including any financial penalties—were not disclosed in the available reporting. What is clear is that Nexo's path back to the U.S. market just got more complicated, and the company's competitors now have a fresh data point on what California considers unlicensed lending.