Lombard links institutional custody to onchain finance with Bitcoin
Crypto custodian Lombard has announced a new product that will allow institutional investors to use their Bitcoin assets as collateral in decentralized finance (DeFi) protocols, without withdrawing funds from their custodial wallets.
The new service, dubbed 'Bitcoin Smart Accounts', will be integrated with the DeFi platform Morpho as the initial liquidity partner. This will enable Lombard's institutional clients to access loans and participate in other DeFi strategies without relinquishing control over their Bitcoin holdings.
Such an approach benefits both the custodian and the institutions themselves. Lombard will be able to monetize its custody services by providing access to DeFi, while clients will gain the ability to use their crypto assets as collateral without the need to transfer them.
This is particularly relevant for institutional investors, who are often restricted in their ability to interact with decentralized finance due to regulatory requirements and obligations to hold assets on custodial platforms.
Expert opinion
Solutions that link traditional institutional custody with DeFi capabilities can be an important step towards greater institutional adoption of cryptocurrencies. It will allow institutions to access the yields of decentralized finance without breaching asset holding requirements.
In the long run, such integration may attract significant institutional capital into the DeFi ecosystem, boosting its liquidity and stability. However, it is crucial that regulators and governing bodies also support these initiatives, providing the necessary legal safeguards.