California regulators have issued a $500,000 fine to the crypto lending platform Nexo Capital. What was the cause? It turns out that between July 2018 and November 2022, the company bypassed licensing requirements and issued at least 5,456 consumer and commercial loans to California users.

A more serious issue is that—before most of the loans—Nexo did not assess the borrower's repayment ability, existing debt burden, or creditworthiness. Simply put, they lent out money without regard to whether the borrower could repay.

The regulatory authority's resolution is clear: Nexo must transfer all funds from California clients to its licensed subsidiary, Nexo Financial LLC, within 150 days. This reflects a reality—that even in the crypto finance sector, licensing and risk assessment are unavoidable. For industry practitioners, this case is worth pondering.