Lombard and Bitwise Partner to Unlock $50 Billion in Institutional Bitcoin for Yield and Lending
Lombard, a provider of Bitcoin-based lending infrastructure, is partnering with Bitwise Asset Management to enable institutions to earn yield and borrow against Bitcoin (BTC) without transferring assets out of custody. The collaboration aims to unlock hundreds of billions of dollars of Bitcoin currently held in institutional custody accounts.
The partnership was announced Tuesday at the New York Digital Asset Summit. Jacob Phillips, CEO and co-founder of Lombard, highlighted the significance of the collaboration, stating, “The breakthrough is Bitcoin Smart Accounts—connecting two previously isolated worlds: institutional custody and on-chain finance.”
How the Partnership Works
Bitwise will develop yield strategies that combine DeFi lending with tokenized real-world assets. Morpho, a decentralized lending protocol, will provide the infrastructure for Bitcoin-backed loans. The platform utilizes native Bitcoin tools, such as partial signatures and timelocks, to verify collateral. This allows positions to be represented on-chain without transferring or re-pledging the underlying Bitcoin assets.
Phillips explained that Bitcoin Smart Accounts eliminate traditional risks associated with institutional Bitcoin lending, including custody, bridging, and counterparty risks. The offering is designed for high-net-worth individuals, asset managers, and corporate treasuries seeking to utilize their long-term Bitcoin holdings without altering custody arrangements.
Launch and Expansion Plans
The platform is scheduled to launch in the second quarter of 2026. Lombard plans to expand access to institutional Bitcoin holdings by adding more custodians and protocols. The company estimates that approximately $500 billion in BTC is currently held in institutional custody.
Bitcoin in DeFi: Growing Momentum
While the total value locked (TVL) in Bitcoin DeFi remains a small fraction of Bitcoin’s overall market capitalization, momentum is building as efforts to transform Bitcoin into a yield-generating asset gain traction. Data from DefiLlama shows that Bitcoin’s total value locked in DeFi is approximately $2.93 billion, compared to a market capitalization of around $1.4 trillion.
Recent developments include the rise of on-chain vaults, which function as automated investment funds deploying capital through DeFi strategies. In January, Bitwise partnered with Morpho to launch non-custodial vaults designed to generate yield through overcollateralized lending. Telegram also added yield-generating vaults to its cryptocurrency wallet in February, allowing users to earn yields on Bitcoin, Ether, and USDT. In March, Babylon integrated with Ledger, enabling users to utilize BTC holdings in financial applications while maintaining self-custody through hardware-based transaction signing.
As of publication, Babylon Protocol leads the Bitcoin-based DeFi sector with approximately $2.8 billion in TVL, while Lombard’s TVL stands at roughly $744 million.
A Shift in Bitcoin’s Role
Phillips believes this model could fundamentally change how institutions approach Bitcoin allocations. “We are moving Bitcoin from a pure store of value to productive institutional capital. That is the change,” he stated. Historically, Bitcoin in institutional wallets has primarily functioned as a passive store of value, with limited options for generating yield or accessing liquidity without incurring custody risks, counterparty risks, or taxable events.
Disclaimer: The information provided in this article is for informational purposes only and should not be considered financial advice. All investments involve risk, and individuals should conduct their own research before making any investment decisions.