Industry Overview
The crypto lending industry has reached new heights in 2025. The sector hit an all-time high with $73.59 billion in outstanding crypto-collateralized loans by the end of Q3. This marks a significant growth within both centralized financial (CeFi) and decentralized financial (DeFi) platforms. The figures reflect a solid interest from individuals and institutions in using crypto assets as collateral to access liquidity while keeping their holdings.
Key players in the CeFi market include Tether, Nexo, and Galaxy Digital. Tether remains the dominant lender, commanding roughly 60% of the market share. Nexo follows with 8.36%, while Galaxy Digital holds 7.38%. These platforms continue to attract users by offering simple ways to borrow against digital assets like Bitcoin and Ethereum without selling them.
Regulatory Landscape and Oversight
Regulatory bodies have taken steps to address the growing crypto lending market. The Canadian Securities Administrators (CSA) have issued a statement reminding platforms of potential regulatory requirements. The CSA has engaged with crypto lenders, offering exemptive relief tailored to each platform’s business model to ensure investor protection.
In the United States, several institutions have clarified their stance. The Federal Deposit Insurance Corporation (FDIC) outlined the process for banks engaging in crypto-related activities, and highlighted risk management considerations for banks holding crypto-assets. For more information, see the FDIC's official guidance.
Institutional Involvement and Assets Used
Institutional participation in crypto loans is growing, highlighted by the $20.46 billion net expansion seen in Q3 2025. This increase follows regulatory leniency allowing banks to boost their crypto-asset exposure to meet demand. Assets like Ethereum (ETH), Bitcoin (BTC), and stablecoins such as Tether (USDT) and USD Coin (USDC) remain popular as collateral.
DeFi protocols have seen a marked increase in Total Value Locked (TVL), contributing to 62.71% of the market share, significantly higher than CeFi platforms. This shift suggests a preference for decentralized solutions, where users maintain control over assets.
Past Trends and Shifts in Market Practices
The current record in crypto lending surpasses the previous all-time of $69.37 billion set in Q4 2021. Back then, there was a reliance on undercollateralized lending, leading to credit implosions in 2022. In response, surviving CeFi firms shifted to fully collateralized practices, ensuring greater transparency and security.
DeFi protocols have also adapted, with increased borrowing and lending activity positively affecting their governance tokens like Compound (COMP), Aave (AAVE), and Maker (MKR). Additionally, Layer 1 and Layer 2 assets are being used more as collateral, influenced by protocols allowing greater borrowing potential.
Regulatory and Legislative Developments
Regulatory bodies have been actively addressing crypto lending, with the GENIUS Act proposing new regulations for digital assets. This legislative effort aims to regulate payment stablecoins, impacting collateral management and lending flows. Moreover, the U.S. Securities and Exchange Commission (SEC) is reviewing frameworks for exchange-traded products.
Continuous engagement from the CSA and guidance from other institutions like the Federal Reserve, the FDIC, and the Office of the Comptroller of the Currency ensures that institutions engaging in crypto activities do so with robust risk management practices.
Key Takeaways
- •Crypto lending reached $73.59 billion by Q3 2025.
- •Tether dominates the market with 60% share.
- •Institutional loans increased by $20.46 billion in Q3.