Lombard partners with Bitwise to facilitate Bitcoin institutional lending, officially launching in Q2

Lombard CEO and Co-Founder Jacob Phillips announced on Tuesday at the New York Digital Asset Summit that Lombard will partner with Bitwise Asset Management and the decentralized lending protocol Morpho to launch a Bitcoin smart account, allowing institutions to earn yields and borrow against Bitcoin without moving their Bitcoin out of existing custody arrangements.

Technical Architecture of the Bitcoin Smart Account: No Bridges, No Leaving Custody

Phillips described this release as a “breakthrough,” stating, “It connects two previously isolated worlds—institutional custody and on-chain finance.”

Lombard’s technical solution centers on native Bitcoin tools, including Partially Signed Bitcoin Transactions (PSBT) and time lock mechanisms, to verify and represent collateral positions on-chain without actual transfer or re-collateralization of underlying assets. This design addresses the three main risks historically faced by institutional Bitcoin lending—custody risk, bridging risk, and counterparty risk.

Phillips pointed out, “We are transforming Bitcoin from a pure store of value into productive institutional capital—that’s the shift.” The target clients include high-net-worth individuals, asset management firms, and corporate finance departments seeking to activate long-term Bitcoin holdings without altering existing custody arrangements.

Three-Party Collaboration Structure, Roles, and Q2 Launch Plan

Lombard: Provides native Bitcoin lending infrastructure, responsible for overall platform architecture and user experience design.

Bitwise Asset Management: Develops yield strategies combining DeFi lending with tokenized real-world assets (RWA).

Morpho (Decentralized Lending Protocol): Offers on-chain Bitcoin-backed lending infrastructure, enabling programmable lending functions for institutions.

The platform is scheduled for a full launch in Q2 2026. Lombard also plans to continue adding more custodians and protocols to expand access options for institutional Bitcoin holders.

Macro Context of Bitcoin DeFi: Market Gaps Amid Accelerating Momentum

According to DefiLlama data, Bitcoin’s total value locked (TVL) in DeFi is currently about $2.93 billion. Compared to Bitcoin’s approximately $1.4 trillion market cap, this is still a small fraction. However, recent developments are clearly accelerating: in January, Bitwise and Morpho jointly launched a non-custodial treasury; in February, Telegram added BTC yield vaults in its built-in crypto wallet; in March, Babylon Protocol announced integration with Ledger hardware wallets, allowing users to deploy BTC while maintaining self-custody.

Currently, in the native Bitcoin DeFi space, Babylon Protocol leads with about $2.8 billion TVL, followed by Lombard with approximately $744 million.

Frequently Asked Questions

What is a Bitcoin Smart Account, and how does it address core institutional pain points?

Bitcoin Smart Accounts utilize native Bitcoin technologies like PSBT and time locks to enable institutions to borrow or earn yields against their Bitcoin holdings without moving the Bitcoin out of custody. This approach eliminates bridging and counterparty risks, solving the three major barriers historically faced by institutional Bitcoin lending.

What roles do Lombard, Bitwise, and Morpho play in this collaboration?

Lombard handles the overall platform architecture, Bitwise develops yield strategies combining DeFi lending with tokenized real-world assets (RWA), and Morpho provides on-chain Bitcoin-backed lending infrastructure. Together, they form a complete technical ecosystem for Bitcoin Smart Accounts.

Why do institutions want to lend or borrow Bitcoin without moving their assets out of custody?

Institutions typically prefer not to alter existing custody arrangements because transferring assets can trigger tax events, increase counterparty risk, and disrupt compliance frameworks. Lombard’s solution allows roughly $500 billion in institutional Bitcoin to be activated in place, avoiding the trade-off between “using assets” and “earning yields.”