JPMorgan Chase is reportedly preparing to offer loans backed by client-held digital assets, including Bitcoin and Ethereum, marking a direct engagement with crypto collateralization by a global systemically important bank for the first time.

The plan, reported by the Financial Times and Reuters, would expand an existing effort by the bank to accept spot Bitcoin ETFs as collateral. If implemented, the program could begin as early as 2026, according to people familiar with the discussions.

The proposed expansion signals a broader acceptance of digital assets within regulated finance, aligning with a broader trend among large U.S. banks. JPMorgan’s initial phase will reportedly accept BlackRock’s iShares Bitcoin Trust and other SEC-approved spot-BTC ETFs.

A second phase would involve lending directly against Bitcoin and Ethereum, provided the assets are held with approved third-party custodians such as Coinbase or Anchorage, in accordance with U.S. regulatory expectations. The move positions JPMorgan to serve institutional and ultra-high-net-worth clients seeking liquidity while retaining exposure to crypto markets.

The strategy reflects shifting attitudes within JPMorgan’s leadership. CEO Jamie Dimon, once a vocal critic of Bitcoin, calling it a “fraud” in 2017, has since adopted a more pragmatic stance. In May, Dimon acknowledged that while he remains skeptical of Bitcoin itself, the bank will support clients’ rights to participate in the market and is committed to involvement in stablecoin infrastructure.

Lending against crypto holdings could offer JPMorgan a capital-efficient revenue channel. The structure allows the bank to generate yield without forcing clients to liquidate long crypto positions. This model also introduces new regulatory and operational considerations. Direct lending against crypto requires mechanisms for handling defaults and liquidating digital collateral.

As most U.S. banks do not hold crypto on their balance sheets, JPMorgan would likely use a third-party custodian to hold pledged assets in escrow. The firm will need to address title transfer, legal enforceability of smart contract-based pledges, and treatment of these assets under U.S. bankruptcy law.

Changing regulatory environment for crypto in the US

This push coincides with increasing regulatory clarity. The passage of the GENIUS Act on July 19 established a framework for stablecoins and digital asset-backed financial products, including reserve requirements and Federal Reserve oversight. This law may ease regulatory friction for banks seeking to engage with tokenized dollar assets. JPMorgan’s ETF-based lending initiative benefits from this clarity, as tokenized or ETF-wrapped assets may be more straightforward to value and margin than directly pledged tokens.

Peer pressure is also accelerating traditional banks’ crypto moves. Bank of America, Citibank, and Morgan Stanley are advancing stablecoin development or crypto-adjacent collateral programs. Meanwhile, crypto-native lenders that once filled the crypto credit niche, such as Genesis and Celsius, have exited the market, creating a vacuum that regulated incumbents are beginning to occupy. JPMorgan’s entry would give institutional investors access to crypto-backed liquidity without relying on offshore or non-bank platforms.

Crypto-collateralized loan demand has rebounded substantially since the 2022 retrenchment that followed failures at firms like Genesis and Celsius. As of March, total outstanding borrow volumes across centralized and decentralized platforms reached over $31 billion, according to Galaxy Research, with that figure rising to $39 billion when including crypto-backed stablecoin issuance. The rebound from the $9.6 billion low in late 2022 reflects a revived appetite for on-chain and institutional lending, with decentralized finance now accounting for a growing share of market activity.

In this context, JPMorgan’s program could appeal to clients seeking structured products or liquidity against appreciated crypto positions.

The launch would also serve as a test case for how banks navigate the Basel Committee’s high capital charges for crypto exposure. While direct lending against unwrapped Bitcoin carries a 1,250% risk-weighted asset designation, ETF-based lending may qualify for reduced treatment under existing guidelines.

As regulatory frameworks evolve, questions remain about the operational parameters of the program. These include margining thresholds for high-volatility assets, protocols for seizing and liquidating on-chain collateral, and whether corporates as well as individuals will be eligible. The outcome may influence how other financial institutions structure crypto-backed credit products within the bounds of traditional banking supervision.

JPMorgan’s entrance into crypto-collateralized lending further integrates digital assets into institutional finance. With internal support, regulatory momentum, and competitive necessity converging, the initiative reflects the bank’s calibrated approach to crypto exposure, participating through credit and infrastructure, while avoiding direct asset custody or speculative positioning.

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Filed under: Bitcoin - @ July 22, 2025 8:27 am