Lombard, a company building Bitcoin-based lending infrastructure, will team up with Bitwise Asset Management to enable institutions to earn yield and borrow against Bitcoin (BTC) without removing assets from custody, with the aim of unlocking hundreds of billions of dollars of Bitcoin held in institutional custody.
The partnership was announced Tuesday at the Digital Asset Summit in New York.
Jacob Phillips, CEO and co-founder of Lombard, told Cointelegraph:
The breakthrough lies in Bitcoin smart accounts, which connect two previously isolated worlds: institutional custody and on-chain finance.
According to an announcement shared with Cointelegraph, Bitwise will develop yield strategies combining DeFi lending with real-world tokenized assets, while Morpho, a decentralized lending protocol, will provide the lending infrastructure to borrow against Bitcoin.
The platform uses native Bitcoin tools such as partially signed transactions and time frames to verify collateral, allowing positions to be represented on-chain without transferring or rehypothecation of the underlying assets.
Rather than relying on bridges or wrapped assets, Phillips said “Bitcoin smart accounts eliminate all three risk vectors simultaneously,” addressing the custody, bridge, and counterparty risks that have historically limited institutional Bitcoin lending.
The offering targets high-net-worth individuals, asset managers and corporate treasuries looking to leverage their long-held Bitcoin positions without changing custodial arrangements.
Rollout is expected in the second quarter of 2026, with Lombard planning to add more custodians and protocols to expand access to institutional Bitcoin holdings.
Phillips said the model could change the way institutions approach Bitcoin allocations:
We are moving Bitcoin from a pure store of value to productive institutional capital. It’s change.
Indeed, Bitcoin in institutional portfolios has historically functioned as a passive store of value, he said, with limited options to generate yield or access liquidity without going out of custody, taking on counterparty risk or triggering taxable events.
Lombard estimates that $500 billion of the largest cryptocurrency is held institutionally, much of which remains outside of on-chain financial markets.
Related: Sygnum Bank bets on Bitcoin lending with multi-signature custody model
Bitcoin DeFi Gains Ground as Vaults and Lending Grow
Data from DefiLlama watch The total value of Bitcoin locked in DeFi at around $2.93 billion, a small fraction of its market of around $1.4 trillion. capitalization. However, momentum is starting to build as efforts to turn Bitcoin into a yield-generating asset gain traction.
One of the main drivers is the rise of on-chain vaults, which function as automated investment funds that deploy user capital into DeFi strategies. In January, Bitwise announced a partnership with DeFi lending protocol Morpho to launch non-custodial vaults designed to generate returns through over-collateralized lending.
The trend has accelerated in recent months. In February, Telegram added yield-generating vaults to its integrated crypto wallet, allowing users to earn returns on Bitcoin, Ether and USDT within the app.
In March, Bitcoin Babylon Staking Protocol integrated with hardware wallet maker Ledger, allowing users to deploy BTC in financial applications while maintaining their own custody through signing hardware transactions.
At the time of writing, Babylon Protocol leads Bitcoin-based DeFi with approximately $2.8 billion in total value locked, while Lombard ranks second with approximately $744 million.
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