Lombard said it plans to launch Bitcoin Smart Accounts, which can allow bitcoins held in institutional custody for use as on-chain collateral without moving the asset or transferring control to a 3rd party.
According to an announcement shared with Cointelegraph, upon launch this quarter, custodial Bitcoins will likely be recognized on-chain by a receipt token, BTC.b, giving institutions access to lending and liquidity venues while retaining legal ownership and existing custody agreements.
Lombard said the framework is geared toward asset managers, corporate treasuries and other institutional holders whose Bitcoin (BTC) stays idle in qualified custody. Pilot projects are currently underway with chosen institutional clients, although Lombard has not disclosed any client names or transaction volumes.
Bitcoin inherently offers no yield, a limitation that has left large amounts of the token unused in comparison with proof-of-stake networks. This dynamic is starting to alter as increasingly protocols aim to make custodial Bitcoins work on-chain.
I'm attempting to eliminate Bitcoin
Lombard co-founder Jacob Phillips told Cointelegraph that decentralized exchanges now account for a major share of crypto trading activity, and about half of lending and borrowing already occurs on-chain. Phillips said:
But Bitcoin is stuck. There is around $1.4 trillion of BTC lying idle, while only around $40 billion is energetic in DeFi. Previously, in case you desired to stake your Bitcoin on-chain, you needed to package it or move it to centralized services, which meant foregoing the custodial security required by institutional holders. That's the issue we're solving.
Morpho will serve because the initial liquidity partner, with additional on-chain protocols and custodian integrations expected over time.
Phillips said Morpho was chosen due to its institutional-focused lending infrastructure and its experience supporting isolated Bitcoin-backed loans. He added that Bitcoin Smart Accounts are designed as an open infrastructure slightly than a closed integration, allowing Lombard to support additional DeFi protocols as demand increases.
Founded in 2024, Lombard is developing Bitcoin-focused on-chain infrastructure and tokenized assets, including LBTC and BTC.b, designed to enable the usage of Bitcoin in DeFi without leaving custody, the corporate said.
New products aim to place idle Bitcoins to work
On May 1, US-based crypto exchange Coinbase launched the Coinbase Bitcoin Yield Fund, geared toward non-US institutional investors with an expected net annual return of 4% to eight% on Bitcoin holdings.
A couple of months later, Solv Protocol launched a structured yield vault for institutional investors, designed to leverage idle Bitcoins in multiple yield strategies spanning decentralized finance, centralized finance, and traditional markets. Solv's BTC+ vault includes strategies similar to protocol staking, basis arbitrage, and access to tokenized real-world assets.
On February 4, institutional crypto infrastructure provider Fireblocks announced that it might integrate Stacks to offer institutional customers access to Bitcoin-based lending and yield.
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