Lombard, a Bitcoin-based lending infrastructure company, has announced a strategic partnership with Bitwise Asset Management to enable institutional clients to earn yield and borrow against their Bitcoin (BTC) holdings without moving assets out of custody. The announcement was made on Tuesday at the Digital Asset Summit in New York, with the service rollout expected in the second quarter of 2026.
The core innovation is the "Bitcoin Smart Accounts" system, which connects institutional custody with on-chain finance. Jacob Phillips, CEO and co-founder of Lombard, told Cointelegraph that this eliminates three key risk vectors simultaneously: custody, bridge, and counterparty risks that have historically limited institutional Bitcoin lending. The platform uses Bitcoin-native tools like partially signed transactions and timelocks to verify collateral, allowing positions to be represented on-chain without transferring or rehypothecating the underlying Bitcoin.
Bitwise will develop yield strategies that combine DeFi lending with tokenized real-world assets (RWAs), while the decentralized lending protocol Morpho will provide the underlying lending infrastructure for borrowing against Bitcoin. The offering targets high-net-worth individuals, asset managers, and corporate treasuries seeking to generate returns from long-held Bitcoin positions without changing custody arrangements.
Phillips emphasized the shift this represents: "We're moving Bitcoin from a pure store of value to productive institutional capital." Lombard estimates that approximately $500 billion worth of Bitcoin is held in institutional custody, much of which remains outside on-chain financial markets. The partnership aims to unlock this dormant value.
The development is part of a broader trend of Bitcoin DeFi gaining traction. Data from DefiLlama shows Bitcoin's total value locked (TVL) in DeFi at roughly $2.93 billion, a small fraction of its $1.4 trillion market cap. However, momentum is building. As of the report, Babylon Protocol leads Bitcoin-based DeFi with about $2.8 billion TVL, while Lombard ranks second with around $744 million. Lombard plans to add more custodians and protocols to expand access across institutional Bitcoin holdings.
