Recently, the California Department of Financial Protection and Innovation (DFPI) imposed a hefty fine of $500,000 on the crypto asset management platform Nexo. The reason for this penalty is straightforward: the platform provided crypto asset-backed loan services to at least 5,456 California residents without obtaining a state license.

Regulatory investigations uncovered more details. Nexo Capital Inc., a subsidiary of Nexo registered in the Cayman Islands, had been lending to consumers and businesses from July 2018 to November 2022 without a valid license. Even more concerning, the company did not conduct any due diligence before issuing loans — it neither assessed borrowers' repayment ability nor checked their existing debts or credit history. This clearly violates California’s financial regulations.

DFPI Director KC Mohseni stated clearly: lending institutions must comply with the law and cannot issue high-risk loans that jeopardize consumer interests, including crypto-backed loans. In addition to the fine, Nexo is required to transfer all funds of California users to an affiliated entity holding a U.S. license within 150 days.

It is noteworthy that this enforcement action coincides with Nexo’s announcement of plans to re-enter the U.S. market. The platform previously exited the U.S. in 2022 due to regulatory pressures from state and federal authorities. In 2023, Nexo also reached a $45 million settlement with the U.S. Securities and Exchange Commission and multiple state regulators over unregistered crypto lending and yield products. These series of events further demonstrate the ongoing scrutiny and strict stance of U.S. regulators towards crypto lending businesses.