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Lombard, a company building Bitcoin-based lending infrastructure, said it will partner with Bitwise Asset Management to help institutions earn yield and borrow against Bitcoin without moving assets out of custody. The effort is aimed at unlocking value from the large pool of Bitcoin held in institutional custody.
The partnership was announced Tuesday at the Digital Asset Summit in New York.
Lombard CEO and co-founder Jacob Phillips described the initiative as “Bitcoin Smart Accounts,” which he said connect institutional custody with onchain finance.
Under the announcement shared with Cointelegraph, Bitwise will develop yield strategies that combine decentralized finance (DeFi) lending with tokenized real-world assets. Morpho, a decentralized lending protocol, will provide the lending infrastructure for borrowing against Bitcoin.
The platform is designed to use Bitcoin-native tools—such as partially signed transactions and timelocks—to verify collateral. Phillips said this allows positions to be represented onchain without transferring or rehypothecating the underlying assets.
Phillips also said the approach avoids reliance on bridges or wrapped assets, adding that “Bitcoin Smart Accounts eliminate all three risk vectors simultaneously,” referring to custody, bridge and counterparty risks that have historically constrained institutional Bitcoin lending.
The offering is intended for high-net-worth individuals, asset managers and corporate treasuries looking to put long-held Bitcoin positions to work without changing custody arrangements.
Lombard said the rollout is expected in the second quarter of 2026. The company also plans to add more custodians and protocols to expand access across institutional Bitcoin holdings.
Phillips said the model could change how institutions approach Bitcoin allocations, arguing that it moves Bitcoin from a “pure store of value” toward “productive institutional capital.”
He said Bitcoin in institutional portfolios has historically been used passively, with limited options to generate yield or access liquidity without exiting custody, taking on counterparty risk, or triggering taxable events.
Lombard estimates that $500 billion worth of the largest crypto is held in institutional custody, much of which remains outside onchain financial markets.
Separately, data from DefiLlama shows Bitcoin’s total value locked (TVL) in DeFi is roughly $2.93 billion—small relative to Bitcoin’s approximately $1.4 trillion market capitalization. The article notes that momentum is building as efforts to turn Bitcoin into a yield-generating asset gain traction.
One driver highlighted is the growth of onchain vaults, described as automated investment funds that deploy user capital across DeFi strategies. In January, Bitwise announced a tie-up with Morpho to launch non-custodial vaults designed to generate yield through overcollateralized lending.
The trend has reportedly accelerated in recent months. In February, Telegram added yield-generating vaults to its built-in crypto wallet, enabling users to earn returns on Bitcoin, Ether and USDT within the app. In March, Babylon’s Bitcoin staking protocol integrated with hardware wallet maker Ledger, enabling users to deploy BTC in financial applications while maintaining self-custody through hardware-based transaction signing.
At the time of writing, the article states that Babylon Protocol leads Bitcoin-based DeFi with about $2.8 billion in total value locked, while Lombard ranks second with around $744 million.
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