Crypto Banks Forced To Innovate as JPMorgan Encroaches on Their Turf

JPMorgan plans to accept crypto as loan collateral. Credit: Mike Kemp/In Pictures via Getty Images.

Key Takeaways

JPMorgan plans to start accepting BTC and ETH as loan collateral by the end of the year. Increased competition in the space poses a challenge for crypto-native lenders. Crypto banks are building new products and services to differentiate themselves.

Crypto-collateralized loans were once the preserve of niche lenders like AMINA and Sygnum.

But as JPMorgan prepares to enter the space, dedicated crypto banks are looking for new ways to differentiate themselves.

JPMorgan To Let Customers Borrow Against Crypto

JPMorgan initiated its foray into crypto-backed lending earlier this year, when the bank started letting wealthy account-holders use crypto ETF shares as loan collateral.

From there, enabling direct collateralization with digital assets was the next logical step. And according to sources cited by Bloomberg, JPMorgan’s institutional clients will be able to borrow against Bitcoin and Ether by the end of the year.

A Threat to Crypto-Native Lenders

JPMorgan’s move to accept digital asset collateral erases a key differentiator that crypto-native lenders built their business on. Alongside AMINA and Sygnum, other platforms that specialize in crypto-backed loans include Ledn, Nexo, and Unchained Capital.

With typical interest rates in the 10–15% APR range, these offerings are more expensive than many traditional sources of credit. This reflects the higher costs incurred by lenders, who have significantly tightened risk controls since 2023, when Celsius, Genesis, Voyager Digital and BlockFi all collapsed under the weight of bad loans.

As one of the largest banks in the world, JPMorgan benefits from a significant economy of scale, and its asset-backed loans are generally competitive.

If it offers lower interest rates than existing crypto lenders, the institution may start to poach their clients. But don’t rule the lenders who pioneered the concept out yet.

Staying Ahead of the Mainstream

JPMorgan brings institutional heft to crypto-collateralized lending. But firms with years of experience in the space are already busy building the next generation of digital asset services.

For instance, while JPMorgan only accepts BTC and ETH as collateral, AMINA and Sygnum have expanded beyond blue chip cryptocurrencies into alt-coins. They even incorporate staking services to protect collateral assets from inflation.

In another example of innovation in crypto banking, on Oct. 24, Sygnum announced a new Bitcoin-native, multi-signature lending solution. Instead of fully entrusting the bank’s private keys, the new platform lets borrowers maintain shared control over their collateral.

Story Continues

By building new products and services, crypto banks can stay ahead of their TradFi peers.

Commenting on the wave of mainstream crypto adoption, AMINA Chief Product Officer Myles Harrison said he expects more banks to join the fray. “Banks want to play in the space, [but] they have been waiting for the regulatory clarity we’re now seeing,” he observed in an interview.

As the landscape of crypto banking evolves, “we have this great capability and technology at our fingertips. It’s just about how we use it and how we make the most of it,” Harrison stressed.

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