Crypto-backed loans in Canada: how borrowing against bitcoin works and the risks

Borrowing against crypto lets people raise cash without selling their bitcoin or ether. It sounds simple, but the loans have mechanics that can catch borrowers out when prices fall, and the platforms offering them have had problems in the past. Canadian securities regulators addressed them directly in October 2025.

This guide explains how crypto-backed loans work, what regulators say, the terms one approved platform must follow, and what to check. For crypto lending, where you lend your crypto out to earn interest, see crypto lending and earn accounts.

How a crypto-backed loan works

The Canadian Securities Administrators (CSA) describe it simply: the borrower transfers crypto assets to the platform, the lender, as collateral in an amount that exceeds the value of the loan.

In practice:

1. You deposit bitcoin or ether as collateral.
2. You receive a loan in dollars.
3. You pay interest on the loan.
4. When you repay, you get your collateral back.

The key number is loan-to-value (LTV). In the decision described below, it means the outstanding loan, plus unpaid interest and fees, as a percentage of the market value of the collateral. Because crypto prices move a lot, LTV moves too, even if you never touch the loan.

What regulators said in October 2025

On 22 October 2025, the CSA reminded crypto-backed lending platforms that, depending on the circumstances, they may be trading and distributing securities, which may require registration and a prospectus. It encouraged platforms offering or planning such loans to contact their securities regulator.

It also warned investors that platforms that aren’t registered, or haven’t obtained exemptive relief, may present significant risks, such as:

• a lack of internal controls to safeguard collateral;
• inadequate or inappropriate disclosure of the loan terms.

The CSA’s advice: before using a platform, check that it’s registered with a Canadian securities regulator or operating under exemptive relief. It publishes a list of crypto-backed lending platforms that have obtained relief.

What an approved arrangement looks like

The terms of an approved platform show what regulators expect. In April 2026, Québec’s Autorité des marchés financiers granted time-limited relief to Shakepay Credit Inc. for crypto-backed loans. Under its decision:

• loans are term or revolving loans in Canadian or US dollars, for 3 months to 3 years;
• collateral must be bitcoin and/or ether;
• the collateral is held for the duration of the loan and won’t be rehypothecated, that is, not lent out or reused;
• the company won’t offer interest-bearing accounts or take deposits to fund the loans;
• it carries out an appropriateness assessment covering your experience, finances, personal circumstances, risk profile and understanding of the risks, and uses it to set the LTV it offers;
• its marketing discloses, where appropriate, that loan proceeds may not be used to buy crypto;
• there’s no prepayment penalty, though a loan may carry a minimum interest amount, such as three months’ interest;
• you get a separate risk statement before you open an account, including a prominent statement that no Canadian securities regulator has assessed or endorsed the loan agreement, and that the collateral won’t qualify for CIPF coverage.

Margin notices and liquidation

The same decision sets out what happens when prices fall:

• If the collateral’s value drops so that LTV rises above 80% (or another level the company sets), you get a margin notice with your options: repay part of the loan or add collateral to bring LTV back down.
• If you do neither and LTV reaches 90%, the company may sell up to all of the collateral to repay the loan, and must notify you.
• These thresholds don’t change for a loan once it’s made.

A worked example

You deposit bitcoin worth $20,000 and borrow $10,000: an LTV of 50%.

• If bitcoin falls by 37.5%, your collateral is worth $12,500, and LTV is 80%: you’d receive a margin notice.
• If it falls by about 44%, to roughly $11,100, LTV reaches about 90%: the lender may sell your bitcoin.

Interest and fees push LTV up a little over time, so the real thresholds arrive sooner. A 50% starting LTV leaves room for a fall of less than half in the collateral’s value. See crypto leverage and derivatives rules for how liquidations work in general.

Borrowing versus selling

People usually borrow against crypto because they need cash but want to keep their coins. It’s worth comparing the two honestly:

The risks

• Forced sale at the worst time. Liquidation happens after prices have fallen, locking in the loss.
• Platform failure. If a lender goes bust, getting collateral back can take a long time, or fail. See crypto exchange bankruptcy.
• Reuse of collateral. Some arrangements may let the lender reuse collateral; the approved one above doesn’t. Check whether yours can be rehypothecated.
• No compensation scheme. In the arrangement above, the collateral isn’t covered by CIPF. See is your crypto insured?
• Unregistered platforms. The CSA’s warning is about exactly these.

Questions to ask before borrowing

1. Is the platform registered or exempted in Canada? Check the CSA’s list.
2. Where and how is the collateral held, and by whom?
3. Can the collateral be lent out or reused?
4. What are the margin notice and liquidation thresholds, and can they change?
5. What’s the interest rate, any minimum interest, and the fees, including for liquidation?
6. What happens to your collateral if the platform fails?

Tax

The CRA’s crypto guidance doesn’t deal with crypto-backed loans specifically. If the lender sells your collateral, that sale is generally a disposition, which can create a capital gain or loss. How other parts of the arrangement are taxed depends on its terms, so get advice before borrowing. See crypto tax in Canada.