Centralised crypto lending (CeFi), once thought to be dead after the 2022 meltdown, is quietly regaining ground. According to Galaxy Research, active CeFi loans totalled $17.78 billion in Q2 2025, accounting for roughly 40% of the global crypto credit market. That marks a 14.66% quarter-over-quarter rise, suggesting that institutional and retail confidence is slowly returning.
By contrast, decentralised finance (DeFi) has surged ahead. With over $26.47 billion in active loans and 42% growth in the same period, platforms like Aave and Compound have captured nearly 60% of the total market share. Aave alone boasts $3 trillion in cumulative deposits and $40 billion in total value locked (TVL), proving that transparency remains DeFi’s strongest weapon.
CeFi, meanwhile, has opted for discipline over dominance, focusing on compliance, tighter risk monitoring, and rebuilding reputation. Yet despite its leaner, more regulated form, the structural flaws that triggered the last crisis remain worryingly intact.
The Old Ghosts of Rehypothecation
One of CeFi’s biggest unresolved issues is rehypothecation, the reuse of client assets by platforms for their own trading or investment purposes. This practice magnifies systemic risk, especially during market downturns.
In 2022, Celsius Network collapsed under similar pressures. Managing $20 billion in assets, it lent customer funds into illiquid projects while promising instant withdrawals. When prices fell, the mismatch between long-term loans and short-term liabilities triggered a liquidity death spiral.
Fast forward to 2025 and rehypothecation still exists, though more discreetly disclosed. Lenders such as Nexo, Salt Lending, Strike and Ledn openly admit to reusing deposited assets. On the other hand, platforms like CoinRabbit have made non-rehypothecation their core principle.
“User assets must remain secure,” says Irene Afanaseva, CMO at CoinRabbit. “The absence of rehypothecation is vital for the entire market. We do not use client funds under any circumstances.”
This commitment to asset segregation is becoming a key differentiator. Surveys show users now value transparency and fund safety far above yield, a sharp shift from the pre-2022 mindset.
Power Concentration and the Oligopoly Problem
Today’s CeFi landscape is strikingly top-heavy. Tether, Nexo and Galaxy Digital dominate between 74% and 89% of the market. Tether alone holds 57.02% of active loans, around $10.14 billion. This concentration gives the market an oligopoly score (HHI of 3,450–3,500), meaning true competition is limited.
Such consolidation carries significant risk. If a major player faces liquidity stress, the entire CeFi market could freeze within days. Worse still, because CeFi operates largely off-chain, users cannot independently verify loan books, collateral ratios, or liquidity buffers.
This opacity also allows large players to set lending and deposit rates unilaterally, squeezing smaller firms and stifling innovation. The result? A less dynamic market where “security” becomes a marketing claim rather than a standard expectation.
What Users Expect from CeFi in 2025
Post-crisis, users demand speed, safety, and clarity above yield. While DeFi protocols issue loans in seconds, most CeFi platforms still take 24–48 hours due to manual KYC and liquidity checks. CoinRabbit has narrowed this gap with loan approvals in around ten minutes, proving that speed and compliance can coexist.
Transparency remains CeFi’s weakest link. Few platforms share details on loan-to-value ratios, liquidation logic, or fee structures. This lack of visibility often fuels panic withdrawals when markets fluctuate. Platforms that provide real-time risk alerts, such as CoinRabbit’s multi-channel notification system, are setting a new standard for user trust.
Regulation adds another layer of complexity. With frameworks like MiCA in Europe and SEC oversight in the US, compliance costs are climbing. Smaller lenders struggle to keep up, leading to further consolidation and greater systemic fragility.
Safer, Not Safe Yet
CeFi’s rebound is real, but it’s not without risk. The market looks healthier only because it’s smaller, more regulated, and better capitalised. Yet transparency gaps, asset reuse, and concentration make it far from foolproof.
To achieve lasting stability, CeFi platforms must embrace the principles of DeFi: verifiable transparency, strict asset segregation, and user-first liquidation protection. CoinRabbit’s cold-storage custody and no-rehypothecation model hint at what a genuinely safe CeFi could look like.
Until such practices become industry-wide standards, however, the question remains: are $17.78 billion in CeFi loans truly safe or just safer for now?
