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Crypto lending surged more than 200% to nearly $25 billion in outstanding loans during the third quarter, the highest level since early 2022, as Tether, Nexo and Galaxy adopted transparent disclosure practices following the industry’s 2022 collapses, according to Galaxy Research.
The report identifies who is driving the expansion, what is different from earlier cycles, where institutional liquidity is concentrating, when transparency began improving, and why the shift matters for crypto investors.
Alex Thorn, Head of Research at Galaxy, highlighted the industry’s progress.
“I’m proud of the increased transparency from contributors as it’s a big change from prior market cycles,” — Alex Thorn, Head of Research, Galaxy. His comments reflect a broader shift toward consistent disclosures that now define the crypto lending market.
During the previous cycle, the crypto lending market was dominated by platforms such as Celsius, BlockFi, Voyager and Genesis all of which collapsed after heavy exposure to the failed exchange FTX in November 2022.
Celsius had already filed for bankruptcy months earlier following losses tied to Three Arrows Capital. With these opaque lenders gone, the industry has reorganized around platforms that publish clear financials and real-time data.
Tether now occupies the largest position in the crypto lending market, reporting $14.6 billion in active loans equal to 60% market share according to the Tether Attestations Report.
Nexo follows with $2 billion, and Galaxy with $1.8 billion, with both companies’ figures supported by public filings that appear in the SEC Financial Disclosures. Thorn argues that the exit of FTX-linked platforms created “a vacuum filled by healthier practices and transparent reporting.”
The shift marks a clear break from opaque leverage structures that once defined the CeFi landscape, giving institutional lenders a more reliable view of counterparties and loan quality.
The collapses of 2022 forced a complete redesign of risk practices within the crypto lending market. Uncollateralized lending as one of the central drivers of earlier failures has been almost entirely eliminated.
Today’s CeFi lenders operate with significantly stricter requirements, including full collateralization, tighter borrower vetting, enhanced liquidity buffers and continuous reporting designed to withstand regulatory scrutiny.
These reforms have made the crypto lending market more attractive to institutional partners seeking verified credit exposures and standardized reporting. Market analysts note that the new structure resembles elements of traditional lending models, but with blockchain-enabled efficiencies for settlement, transparency and collateral mobility.
While CeFi lenders restructure their operations, decentralized finance applications have reached record activity. According to Galaxy’s Q3 figures, documented in the Galaxy DeFi Lending Overview, the dollar value of outstanding DeFi loans surged 54.8% to $41 billion which is an all-time high.
Growth was driven by increased liquidity on major protocols, renewed institutional experimentation with on-chain credit and broader adoption of crypto-collateralized borrowing.
When combined, CeFi and DeFi represent $65.4 billion in outstanding digital asset loans as the highest total ever recorded in the crypto lending market. Analysts say this outcome reflects parallel strengthening: CeFi offers regulated, conservative structures, while DeFi provides flexible and scalable automated lending environments.
Together, they create a hybrid credit landscape that is significantly stronger than that seen during the previous bull cycle.
With transparency improving, loan books expanding and risk frameworks tightening, the crypto lending market appears to be entering a more sustainable phase. Analysts highlight reduced systemic risk, better collateral management and increased institutional participation as the key drivers of this maturing cycle.
“This level of transparency is something we haven’t seen before in the lending space,” — Alex Thorn, Galaxy Research, underscoring the significance of current reforms.
For crypto investors, the evolving structure of the crypto lending market provides:
As the fourth quarter approaches, both CeFi and DeFi lenders are expected to continue expanding lending activities, supported by stronger liquidity conditions and the normalization of transparent, verifiable credit practices.
With these developments, the crypto lending market shows signs of not only recovery but transformation as lenders rebuild trust and reshape digital asset credit for a more resilient future.
