Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
CSA Reminds Crypto-backed Lenders of Securities Law Duties
Crypto Regulation | Oct 23, 2025
Image: Freepik
Canadian Regulators Caution Crypto-backed Lending Platforms
The Canadian Securities Administrators (CSA) issued a reminder to platforms offering loans secured by crypto assets that their operations may fall under securities law and that investors should confirm registration or exemptive relief before doing business, setting the tone for how the regulators see the market operating in Canada.
The CSA says it is already engaging with platforms that let borrowers use crypto as collateral. Collateral usually exceeds the loan amount and is transferred to the platform. Depending on the business model, that activity can count as trading or a distribution of securities, triggering registration and prospectus obligations into play.
See: CSA Proposes $50K Harmonized Self Certified Investor Exemption
Operating without registration or relief can expose customers to weak safeguards over collateral and poor disclosure of loan terms. Investors should protect themselves by checking the list of crypto firms authorized to do business with Canadians. One example of a registered crypto-backled lending platform that received exemptive relief on April 1, 2025 is APX Inc.
Advised to Work with Securities Regulators
If a firm offers or plans to offer crypto collateralized loans, the CSA expects early contact with regulators. Firms can use the CSA Financial Innovation Hub to test ideas inside the regulatory framework and to understand whether exemptions fit their model.
The CSA's caution is blunt. Avoid the gray zone. Engage, document controls, and be clear with customers. Firms that ignore this process risk violating securities law and facing action.
Customers should ask how collateral is held, what happens on default, and whether the platform is registered or operating under relief. Yield is only part of the story. Safeguards and disclosure matter more when assets move off your wallet and onto a platform’s balance sheet.
Crypto Lending Rules Diverge
Regulators around the world share the same goal of protecting investors in crypto lending markets, but they’re taking different routes to get there. A few jurisdictional examples below.
See: Takeaways from the SEC’s Crypto Custody Roundtable
Canada
Canadian regulators say loans backed by crypto can sometimes fall under existing securities laws. If a platform takes custody of assets or offers returns tied to their value, it likely needs to register or obtain exemptive relief. This is not a new classification but an application of existing securities law to a new asset form.
United States
In 2022, the U.S. Securities and Exchange Commission fined BlockFi $100 million and told the firm to register after finding its crypto interest accounts were deemed unregistered securities. Since that decision, U.S. regulators have generally treated crypto lending programs that reuse client assets as securities offerings requiring registration and disclosure.
United Kingdom
The Financial Conduct Authority has said that firms offering crypto-backed loans may come under its consumer credit or investment activity rules if they handle client assets or promote these products to the public. It also warns that companies paying interest on crypto must register under the Money Laundering Regulations or stop serving retail users.
Conclusion
To reduce legal risk, map the business model against securities triggers, document custody and collateral controls, and prepare clear disclosures that customers can understand. Engage early with regulators to confirm registration or to request exemptive relief.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create aa vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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