Financial institutions are entering the Bitcoin-backed lending space as Bitcoin (BTC) adoption accelerates among investment managers and fiat interest rates tighten. Large institutions are now shifting their focus beyond ETFs to Bitcoin-backed lending, Ledn told Cointelegraph on September 25.

Institutional investors have poured billions of dollars into spot BTC exchange-traded funds (ETFs) after US regulators allowed cryptocurrency funds to trade in January. Ledn reported that it processed $1.16 billion worth of cryptocurrency loans in the first half of 2024, largely on behalf of financial institutions.

According to Ledn’s website, interest rates for borrowers range from 11.4% to 13.4% depending on the type of loan. Ledn creates credit risk for borrowers by lending Bitcoin collateral for additional yield with lower-cost loans.

The US Federal Reserve lowered short-term dollar deposit rates from around 5.3% to 4.8% on September 18. The BTC-backed lending market consists of approximately $8.5 billion worth of existing Bitcoin-backed loans and is expected to reach approximately $45 billion by 2030.

Ledn competes with BTC platforms like Arch and Salt, and will soon face off against financial services giants like Cantor Fitzgerald. It also indirectly competes with decentralized finance (DeFi) lending protocols like Aave.

The proliferation of regulated crypto custody services in the US has benefited the Bitcoin-backed lending market. In August, Cointelegraph reported that Fireblocks received approval to provide asset custody for US clients. Other institutional crypto firms such as Coinbase Custody Trust, Fidelity Digital Asset Services, and PayPal Digital are similarly licensed.

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