Lombard, a company building Bitcoin-based lending infrastructure, is teaming with Bitwise Asset Management to let institutions earn yield and borrow against Bitcoin (BTC) without moving assets out of custody. The partnership, announced at the Digital Asset Summit in New York, aims to unlock hundreds of billions of dollars held in institutional custody.
Jacob Phillips, Lombard’s CEO and co-founder, described the core innovation as Bitcoin Smart Accounts, which bridge institutional custody and onchain finance. Bitwise will design yield strategies that combine decentralized finance (DeFi) lending with tokenized real-world assets, while Morpho, a decentralized lending protocol, will supply the borrowing infrastructure.
Lombard’s platform uses Bitcoin-native primitives—partially signed transactions and timelocks—to verify collateral and represent positions onchain without transferring or rehypothecating the underlying assets. By avoiding bridges and wrapped tokens, Phillips says Bitcoin Smart Accounts address custody, bridge and counterparty risks that have historically constrained institutional Bitcoin lending.
The offering targets high-net-worth individuals, asset managers and corporate treasuries that want to generate returns or access liquidity from long-held Bitcoin positions without changing custody arrangements. Lombard plans a rollout in the second quarter of 2026 and intends to add more custodians and protocols to broaden institutional access.
Phillips framed the approach as shifting Bitcoin’s role in institutional portfolios: moving it from a passive store of value to productive institutional capital. Historically, institutions have had limited ways to earn yield or obtain liquidity on Bitcoin without exiting custody, taking counterparty risk or creating taxable events. Lombard estimates roughly $500 billion of Bitcoin sits in institutional custody, largely outside onchain financial markets.
Bitcoin DeFi gains traction as vaults and lending expand
Data from DefiLlama shows Bitcoin’s total value locked (TVL) in DeFi at about $2.93 billion, a small share of its roughly $1.4 trillion market capitalization, but momentum for yield-generating Bitcoin products is building. Onchain vaults—automated funds that deploy capital across DeFi strategies—are a key driver. In January, Bitwise and Morpho announced non-custodial vaults aimed at generating yield via overcollateralized lending.
Recent developments include Telegram adding yield-generating vaults to its wallet in February, enabling returns on Bitcoin, Ether and USDT, and Babylon integrating with hardware wallet maker Ledger in March so users can deploy BTC into financial apps while keeping self-custody via hardware signing. At the time of reporting, Babylon Protocol led Bitcoin-based DeFi with about $2.8 billion in TVL, while Lombard ranked second at around $744 million.
Cointelegraph is committed to independent, transparent journalism. This article was produced in line with Cointelegraph’s Editorial Policy; readers are encouraged to verify information independently. Read the Editorial Policy at https://cointelegraph.com/editorial-policy
