California regulators have fined crypto lender Nexo $500,000 after finding the firm made thousands of loans to state residents without the proper license — and often without adequate checks on borrowers’ ability to repay. What the DFPI found - The California Department of Financial Protection and Innovation (DFPI) says Nexo issued at least 5,456 consumer and commercial loans to Californians between July 2018 and November 2022. - Those loans were backed by crypto assets, and the DFPI concluded Nexo did not sufficiently verify borrowers’ capacity to repay, a practice the agency deemed unlawful under state consumer finance laws. Required fixes and customer impact - As part of the settlement, Nexo must move funds held for California customers to its U.S.-based, licensed affiliate — Nexo Financial LLC — within 150 days. The transfer is intended to place customers’ money under a regulated entity. - The DFPI also imposed additional compliance measures aimed at preventing similar lapses going forward. During the transfer period, some borrowers could see changes in account handling, servicing, or loan terms. Regulatory context and industry reaction - This is not Nexo’s first enforcement action: the firm reportedly agreed to settlements totaling roughly $45 million in penalties in 2023. - The DFPI’s action underscores a broader trend: regulators nationwide are scrutinizing crypto lending and increasingly insisting that platforms using digital assets follow the same consumer-protection rules that govern traditional lenders. - Industry observers say increased oversight can drive improvements in underwriting and documentation, while some users worry tighter rules may curtail access to certain crypto services. Why it matters - By labeling the conduct unlawful, the DFPI signaled that relying mainly on crypto collateral does not exempt lenders from assessing a borrower’s ability to repay. Regulators emphasize that monetary penalties are only one tool — moving customer funds to licensed entities and strengthening internal controls are equally important for consumer protection. Featured image from Unsplash; chart from TradingView. Read more AI-generated news on: undefined/news

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