Lombard said it plans to launch Bitcoin Smart Accounts, designed to allow Bitcoin held in institutional custody to be used as onchain collateral without moving the asset or transferring control to a third party.
According to an announcement shared with Cointelegraph, the escrow Bitcoin will be recognized onchain via a receipt after a launch this quarter. $BTC.b, allowing institutions to access credit and liquidity platforms while retaining legal ownership and existing custody arrangements.
Lombard said the framework targets asset managers, corporate bonds and other institutional holders whose Bitcoin ($BTC) remains in qualified custody. Pilots are underway with select institutional clients, although Lombard did not disclose client names or transaction volumes.
Bitcoin by its nature offers no returns, a limitation that has kept large amounts of the token inactive compared to proof-of-stake networks. That dynamic is starting to change as a growing number of protocols want to put the held Bitcoin to work on-chain.
Trying to let go of Bitcoin
Lombard co-founder Jacob Phillips told Cointelegraph that decentralized exchanges now account for a significant portion of crypto trading activity, with around half of lending and borrowing already taking place on-chain. Philips said:
But Bitcoin is stuck. You have about $1.4 trillion in cash $BTC sitting idle, with only about $40 billion active in DeFi. Until now, if you wanted to get your Bitcoin working on-chain, you had to pack it up or move it to centralized services, which meant giving up the custodial security that institutional holders require. That’s the problem we’re solving.
Morpho will serve as the initial liquidity partner, with additional onchain protocols and custodian integrations expected over time.
Phillips said Morpho was selected for its institutionally focused lending infrastructure and experience supporting isolated Bitcoin-backed lending, adding that Bitcoin Smart Accounts are designed as open infrastructure rather than closed integration, allowing Lombard to support additional DeFi protocols as demand arises.
Founded in 2024, Lombard develops Bitcoin-focused onchain infrastructure and tokenized assets, including LBTC and $BTC.b, designed to allow Bitcoin to be used in DeFi without leaving custody, the company said.
Related: Bitwise to launch onchain vaults via Morpho
New products aim to put idle Bitcoin to work
On May 1, US-based cryptocurrency exchange Coinbase launched the Coinbase Bitcoin Yield Fund, aimed at non-US institutional investors with an expected annual net return of 4% to 8% on Bitcoin holdings.
A few months later, Solv Protocol launched a structured returns vault for institutional investors, designed to deploy idle Bitcoin in multiple return strategies, including decentralized finance, centralized finance and traditional markets. Solvs $BTC+ vault includes strategies such as protocol staking, basic arbitrage, and exposure to tokenized real-world assets.
On February 4, institutional crypto infrastructure provider Fireblocks said it would integrate Stacks to give institutional clients access to Bitcoin-based lending and returns.
Magazine: Bitcoin’s ‘biggest bull catalyst’ would be the liquidation of Saylor: founder of Santiment