Short answer: Rehypothecation is when a lender takes your collateral and reuses it for their own trades or loans. At APX Lending, we do not engage in rehypothecation. Nor do we re-loan, pool, or co-mingle your collateral. Ever. Your collateral is used for one purpose only: backing your loan. And we can prove it, with on-chain proof of reserves that you can verify in real time 24/7.

What rehypothecation means

When you borrow, you post crypto as collateral. With rehypothecation, the lender takes that same collateral and re-uses it. For example, they might lend it out to someone else, stake it, or lock it into another deal.

On paper, you still have a loan that looks fine. In practice, your crypto is now tied to other bets you never agreed to. If anything in that chain breaks, you could lose access to your collateral. That’s the core risk.

Why some lenders do rehypothecation

It can make them money. If they can earn extra yield on your collateral, they can boost their margins or offer lower rates. It works when markets are calm. It breaks when stress hits.

How it goes wrong

• Market swings. If prices drop fast, the lender may not be able to return your collateral when promised. That means you could be left without the assets you counted on to repay your loan or cover your own positions.

• Counterparty failures. If the third party holding your crypto fails, your collateral is stuck with them.

• Asset mismatches. Your BTC might be used to back a position that has different risks, timelines, or liquidity.

• Complex chains. The more links in the chain, the more points of failure

How to spot rehypothecation

Ask direct questions. You deserve direct answers.

• Do you rehypothecate client collateral?

• Where is my collateral held, and under what name?

• Is it in a segregated account or mixed with other assets?

• Who is the custodian?

• Can you show me the exact clause in the agreement that you don’t rehypothecate, where the collateral is held and who is the custodian?  

• What happens to my collateral if your firm fails?

• How fast can I see on-chain proof of reserves?  

If the answers are vague, that’s a signal. Ignore it at your own risk. Also note that any credible lender will spell rehypothecation out clearly and transparently on their website and in their marketing materials. At APX Lending, we do exactly that, backed by verifiable on-chain proof of reserves.

Why APX Lending doesn’t do rehypothecation

APX Lending is built around a simple rule: we never use your collateral as a source of funding.  We do not re-use it. We do not pass it down the line. Here is what that means in practice:

• No rehypothecation. Client collateral is not re-lent, staked, or pledged elsewhere.

• Segregated custody. Collateral is held to back your loan. That’s it. It’s custodied in BitGo Trust segregated cold wallets that are insured up to 250 million. When in transit, assets are protected through Fireblocks.

• Clear loan structure. Loans are overcollateralized, which means you post more crypto than you borrow. This protects you and keeps the system stable.

• Transparent terms. The no-rehypothecation policy is explicit in the agreement. There are no hidden side deals.

• Risk controls. Defined LTVs, alerting, and clear liquidation rules reduce surprise.

Our approach might seem cautious. That’s the point. We treat your collateral like it’s our own.

Why this matters to you

• Your crypto stays yours. It backs your loan, not someone else’s trades.

• Lower chain risk. Fewer third parties, fewer unknowns.

• Faster problem handling. If markets move, APX Lending can act on your loan without waiting on outside parties.

• Better clarity. You always know what your collateral is doing,—securing your loan. Nothing more, nothing less.

Common questions

Is rehypothecation always bad?

Not always, but it adds risks you don’t control. In many cases, you might not even be aware of what risks are being taken and when. If you want plain, predictable loans, avoid it.

Does no rehypothecation change my rate?

Sometimes lenders that re-use collateral can offer lower rates. The trade-off is extra risk. With APX Lending, you get a clear structure and clear custody. Many borrowers prefer that.

Is this about regulation?

Yes. Under CSA rules, compliant lenders do not pledge or reuse client collateral. Rehypothecation works against consumer protection and clear custody. If a lender reuses your assets, they are not compliant. APX Lending does not reuse your assets. Your collateral only secures your loan.

How do I confirm your policy?

Read the loan agreement and ask us to point to the clause. You can also ask how custody works in detail.

A quick checklist for borrowers

Use this list with any crypto lender, including us.

• Do you rehypothecate collateral? Yes or no.

• Where is it held, and is it segregated?

• Who controls the keys?

• What are the LTVs and liquidation steps?

• What is the exact response plan if markets drop 20% in a day?

• If your firm fails, how do I get my collateral back, and on what timeline?

Good lenders can answer these in plain language. If you get marketing speak, press for clarity.

APX Lending in one line on this topic

Your collateral is yours. APX Lending never uses it to lend, stake or pledge elsewhere. That is our policy and it will remain so for as long as we're active.

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