After years of tension between crypto and traditional finance, a symbolic shift is taking shape within the world’s largest bank.
JPMorgan Chase & Co. is reportedly preparing to let institutional clients use Bitcoin and Ethereum as collateral for cash loans. This means the bank’s borrowers can pledge the top two cryptocurrencies by market capitalization, which would be held by approved third-party custodians such as Coinbase.
The initiative is expected to be rolled out by the end of 2025.
This move is quite ironic considering the financial giant’s CEO Jamie Dimon is a renowned crypto critic. Notably, he has previously described Bitcoin as a “fraud.” However, the increased demand for the emerging industry has forced him to support these product launches through his company.
A new chapter for digital collateral
JPMorgan’s move could quietly rewrite the boundaries between digital assets and regulated credit markets.
According to Galaxy Research factsOpen centralized finance (CeFi) loans totaled $17.78 billion as of June 30, up 15% quarter-over-quarter and 147% year-over-year.
Including decentralized lending, total outstanding collateralized crypto credit reached $53.09 billion in the second quarter of 2025, the third highest figure ever.
These figures indicate a structural shift where lending activity increases as digital asset prices rise. This results in improved credit spreads, making loans more attractive to traders and government bonds.
Moreover, companies are also turning to crypto-backed lending to finance operations, replacing equity issuance with secured debt against digital assets.
In that context, JPMorgan’s entry looks less like an experiment and more like a decisive institutional catch-up in the emerging industry.
Taking this into consideration, says crypto researcher Shanaka Anslem Perera estimates the model could free up $10 billion to $20 billion in immediate lending capacity for hedge funds, corporate bonds and large asset managers looking for dollar liquidity without selling their tokens.
In practical terms, this means that companies can now raise capital against digital assets in the same way as they would against US government bonds or blue chip stocks.
Why JPMorgan’s move matters
Although crypto-collateralized loans are well known within DeFi protocols and smaller CeFi lenders, the concept has been institutionalized with JPMorgan’s participation.
The bank’s entry signals that digital assets have matured enough to meet global compliance, custody and risk management standards.
Matt Sheffield, the CIO of Ethereum-focused treasury company SharpLink, believes the development could reform the balance sheet management of asset managers and funds.
According to him:
“Many traditional financial institutions that have until now relied on trading with banks are having to choose between holding spot ETH OR other positions. The world’s largest investment bank is here to change that. With the ability to borrow against positions held with third-party custodians, you can build a more productive portfolio, increasing the value of the collateral.”
Meanwhile, the decision also strengthens JPMorgan’s broader crypto position. Over the past two years, the bank has built out Onyx, its blockchain-based settlement network, processing billions in tokenized payments and exploring digital asset repo transactions.
Accepting BTC and ETH as collateral for loans completes the loop: issuance, settlement, and credit, all of which interact with the blockchain rails.
Taking this into account, Sheffield predicts that this move will trigger a “competitive cascade” between major banks. He noted:
“This starts a wave. Being first is what scares big institutions. The rest will follow if the decision is reduced, because no action would leave them uncompetitive.”
Rivals like Citi and Goldman Sachs have already expanded digital asset custody and repo initiatives. BlackRock, meanwhile, has integrated tokenized treasuries (BUIDL) into its fund ecosystem, while Fidelity has doubled the number of institutional crypto desk staff this year.
The way forward
Despite Wall Street’s growing embrace of digital assets, challenges remain.
Banks entering this market must deal with cryptocurrencies’ intrinsic volatility, uncertain capital treatment by regulators, and persistent counterparty risk – all of which limit how aggressively they can expand crypto-backed lending.
US regulators have not yet issued clear guidelines for the capital weighting of digital collateral, forcing institutions to rely on conservative internal models. Even as third-party custodians manage custody risk, scrutiny is expected to remain intense.
Yet the trajectory is unmistakable as digital assets gradually become woven into the fabric of global credit markets.
Bitcoin analyst Joe Consoerti said these movements show that:
“The global financial system is slowly recollateralizing itself around the highest quality assets known to man.”
