Lombard Finance Unveils Bitcoin Smart Accounts
On February 11, Lombard Finance, a pioneering player in the decentralized finance (DeFi) space, revealed a novel product, Bitcoin Smart Accounts. This ground-breaking product now allows institutions to tap into their Bitcoin holdings for use in the DeFi sector without having to move the asset out of its existing custody.
Lombard’s Expanding Footprint in DeFi
Lombard Finance has carved out a significant position in the DeFi market with its impressive total value locked (TVL) crossing $1 billion, based on data from DeFiLlama. This newly minted product enables Bitcoin holders, be it custodians, those with MPC setups, or even self-custody wallets, to utilize their Bitcoin as collateral on-chain, thus underlining Lombard’s commitment to driving innovation in this dynamic space.
Streamlined Access to DeFi via Bitcoin
The paradigm shift here lies in the fact that institutions can keep their Bitcoin holdings in their existing custody arrangements, bypassing the need to transfer the asset to a DeFi platform. At the time of publication, Bitcoin was trading at $67,615, a marginal drop of 1.5% for the day, as per CoinGecko’s data readings. This product is particularly relevant to approximately $500 billion worth of Bitcoin currently in professional custody held by corporations, asset managers, and other high-net-worth individuals.
Overcoming Barriers in DeFi Integration
Traditionally, this vast Bitcoin hoard has been sidelined from DeFi participation, as moving assets could potentially engender a slew of legal, operational, or security risks. It has been a long-standing dilemma for institutions – the choice was either the assurance of top-notch security from custodians or the on-chain utility yield. Jacob Phillips, who co-founded Lombard, explains that with Bitcoin Smart Accounts, one doesn’t have to trade one for the other.
A New Way to Navigate Asset Management
Phillips likens Bitcoin Smart Accounts to a settlement network mirroring the functions of SWIFT and ACH. It is designed to do away with this dichotomy, allowing Bitcoin to remain in custody while facilitating on-chain settlement. This essentially transmutes Bitcoin from a languid asset into a usable capital – a compelling proposition for financial players.
Transform Bitcoin Holdings with Smart Account
Institutions merely need to embed a Smart Account designation into their existing custody settings, per Lombard’s instructions. Thereafter, the system registers their Bitcoin on-chain via a receipt token known as BTC.b, which mirrors the custody-held Bitcoin.
Ownership and Custody Intact
Lombard emphasizes that the originating Bitcoin always remains with the custody institution throughout the process, ensuring that legal ownership is never altered. Moreover, an exciting integration with Morpho is on the cards. This lending protocol, which boasts TVL exceeding $5.7 billion, enjoys the status as the seventh-largest protocol by TVL as per DeFiLlama’s ranking.
Accelerating Lending through Custody-held Bitcoin
Through Lombard’s collaboration with Morpho, Bitcoin held in custody can now be deployed as collateral in Morpho’s lending markets. Hence, institutions can now strategize to borrow against their BTC, or potentially generate yield without moving underlying assets out of their custodial arrangements.
Conclusion
The introduction of Bitcoin Smart Accounts by Lombard Finance signifies a quantum leap forward in DeFi, providing institutions with unprecedented access to on-chain services without compromising their existing custodial arrangements. By transforming Bitcoin from a dormant asset into vibrant capital, Lombard is redefining possible within the DeFi space and beyond.
