Nexo is under fire as California imposes a $500,000 fine for offering thousands of unlicensed crypto-backed loans to residents. This regulatory action affects 5,456 loans and poses significant challenges for Nexo”s strategy to reenter the U.S. market amidst heightened scrutiny.
The California Department of Financial Protection and Innovation (DFPI) determined that Nexo operated without a valid lending license while failing to conduct necessary credit checks and repayment assessments from 2018 to 2022. The agency mandated that Nexo transfer all customer funds from California to a licensed U.S. affiliate within 150 days.
These findings emerged from a broader investigation into Nexo”s lending practices, which revealed gaps in risk management and underwriting standards. The DFPI emphasized that while crypto-backed loans use digital assets as collateral, they are still subject to strict consumer protection regulations.
This latest penalty follows a series of significant fines faced by Nexo in the United States, where the company previously paid $22.5 million to settle allegations regarding unregistered Earn Interest Products. Another $22.5 million was paid to federal regulators over similar issues. These past enforcement actions led Nexo to suspend its lending services for U.S. customers while continuing operations internationally.
The ongoing regulatory scrutiny highlights a concerning trend in the crypto lending space, where compliance failures are increasingly met with substantial penalties. Analysts suggest that these actions reflect a systemic issue within the industry, as regulators demand higher levels of transparency and consumer protection.
Despite the challenges posed by regulatory setbacks, Nexo remains determined to reenter the U.S. market. The company recently indicated its aspirations during a public event in Bulgaria, expressing confidence that evolving national policies will create a more favorable environment for digital asset firms.
Nexo plans to implement stricter compliance frameworks in conjunction with new measures to enhance consumer protection. This strategic pivot aims to rebuild trust and ensure alignment with state and federal regulations as the company navigates the complexities of returning to the U.S. market.
However, California”s actions serve as a reminder that regulatory oversight in the crypto space is becoming increasingly stringent, underscoring the necessity for firms to adhere to established lending standards regardless of the broader federal landscape.
