Lombard, a firm focused on creating lending infrastructure for Bitcoin, has partnered with Bitwise Asset Management to provide institutions the ability to earn yields and borrow against Bitcoin ($BTC) without needing to transfer assets out of their custody. This collaboration aims to unlock hundreds of billions in Bitcoin currently held by institutional custodians.
The announcement was made on Tuesday during the Digital Asset Summit held in New York City.
Jacob Phillips, CEO and co-founder of Lombard, shared insights with Cointelegraph:
The innovation lies in our Bitcoin Smart Accounts—bridging two previously disconnected realms: institutional custody and on-chain finance.
As detailed in an announcement sent to Cointelegraph, Bitwise is set to create yield strategies that merge decentralized finance (DeFi) lending with tokenized real-world assets. Meanwhile, Morpho—a decentralized lending protocol—will supply the necessary infrastructure for borrowing against Bitcoin.
This platform employs tools native to Bitcoin such as partially signed transactions and timelocks for collateral verification. This approach allows positions to be represented on-chain without transferring or rehypothecating the underlying assets.
Phillips emphasized that “Bitcoin Smart Accounts eliminate all three risk vectors simultaneously,” effectively addressing risks associated with custody, bridges, and counterparties that have historically hindered institutional participation in Bitcoin lending.
This offering is particularly aimed at high-net-worth individuals, asset managers, and corporate treasuries looking to leverage long-held positions in Bitcoin while maintaining their existing custody arrangements.
The launch is anticipated for the second quarter of 2026. Lombard also plans to onboard additional custodians and protocols over time to broaden access across various institutional holdings of Bitcoin.
Phillips remarked that this model could revolutionize how institutions allocate their investments into Bitcoin:
We are transitioning from viewing Bitcoin merely as a store of value towards utilizing it as productive capital within institutions. That’s a significant shift.
This transformation stems from the fact that historically within institutional portfolios, Bitcoins have served primarily as passive stores of value—with few avenues available for generating yield or accessing liquidity without exiting custody or incurring counterparty risks or tax implications.
Lombard estimates around $500 billion worth of major cryptocurrencies are currently held under institutional custody; much remains outside accessible financial markets on-chain.
Related: Sygnum Bank invests in bitcoin lending through a multisignature custody model
The Rise of DeFi Utilizing BTC As Vaults Expand
According to data from DefiLlama , approximately $2.93 billion worth of Bitcoin’s total value is locked within DeFi platforms—a mere fraction compared to its overall market capitalization nearing $1.4 trillion . However , momentum appears strong as initiatives aimed at transforming bitcoin into yield-generating assets gain traction .
Bitcoin utilized within DeFi platforms.Source :Defillama
A significant factor driving this trend includes emerging automated investment funds known as “onchain vaults,” which strategically deploy user capital across diverse DeFi strategies . In January , Bitwise announced its collaboration with Morpho—their non-custodial vaults aim at generating returns via overcollateralized loans .
The pace has quickened recently ; Telegram integrated yield-generating vaults into its crypto wallet feature back February enabling users earning returns off bitcoins , ethers & USDT directly through app interface !
Furthermore , Babylon staking protocol integrated seamlessly alongside hardware wallet manufacturer Ledger allowing users deploying $BTC into financial applications while retaining self-custody using hardware-based transaction signing methods!
At present time Babylon Protocol leads among BTC-focused Defi projects boasting around USD 2 .8 Billion Total Value Locked (TVL) followed closely by Lombards position ranking second place holding roughly USD744 million TVL !