After years of tension between cryptocurrencies and traditional finance, symbolic changes are taking shape within the world’s largest banks.
JPMorgan Chase is reportedly preparing to allow institutional clients to use Bitcoin and Ethereum as collateral for cash loans. This means bank borrowers can pledge the top two cryptocurrencies by market capitalization, which will then be held by an approved third-party custodian like Coinbase.
The initiative is expected to be rolled out by the end of 2025.
The move is highly ironic considering the financial giant’s CEO, Jamie Dimon, is a prominent cryptocurrency critic. Notably, he has previously described Bitcoin as a “scam.” However, the growing demand for emerging industries has created a need for his company to support these product launches.
A new chapter in digital collateral
JPMorgan’s move could quietly rewrite the boundaries between digital assets and regulated credit markets.
Open centralized finance (CeFi) borrowings totaled $17.78 billion as of June 30, up 15% from the previous quarter and 147% from a year ago, according to data from Galaxy Research.
Including decentralized loans, the outstanding amount of collateralized cryptocurrency credit reached $53.09 billion in Q2 2025. This is the third highest number in history.
These numbers point to a structural shift in which borrowing activity increases as digital asset prices rise. As a result, credit spreads improve, making lending more attractive to traders and treasuries.
Additionally, companies are also leveraging crypto-backed loans to finance their operations, replacing equity issues with collateralized debt against digital assets.
In that context, JPMorgan’s entry looks less like an experiment and more like a decisive institutional catch-up move in an emerging industry.
With this in mind, cryptocurrency researcher Shanaka Anslem Perera estimates that the model could unlock $10 billion to $20 billion in instant lending capacity to hedge funds, corporate treasuries, and large asset managers seeking dollar liquidity without selling tokens.
In practical terms, this means that companies will be able to raise money for digital assets in the same way they do for US Treasuries and blue chip stocks.
Why is JPMorgan’s move important?
Cryptocurrency-backed lending is well known in DeFi protocols and small CeFi lending companies, but JPMorgan’s participation will institutionalize the concept.
The entry of banks shows that digital assets have matured enough to meet global financial compliance, custody and risk management standards.
Matt Sheffield, chief information officer at Sharplink, an Ethereum-focused financial firm, believes this development has the potential to reshape balance sheet management across asset managers and funds.
According to him:
“Many traditional financial institutions that have traditionally relied on bank transactions are forced to choose between holding spot ETH or other positions. The world’s largest investment bank is here to change that. The ability to borrow against positions held by third-party custodians allows them to build more productive portfolios and increase the value of their collateral assets.”
Meanwhile, the decision also strengthens JPMorgan’s stance on cryptocurrencies broadly. Over the past two years, the bank has built Onyx, a blockchain-based payments network, to process billions of tokenized payments and explore digital asset repo transactions.
Accepting BTC and ETH as loan collateral completes the issuance, settlement, and credit loop, all of which touch the blockchain rails.
Given this, Sheffield predicts the move will trigger a “competitive cascade” among the big banks. He pointed out:
“This is the beginning of a wave. The scariest thing is the big institutions. The rest of the institutions are going to make decisions that eliminate risk, because no action will make them uncompetitive.”
Already, rivals such as Citi and Goldman Sachs are expanding their digital asset custody and repo efforts. Meanwhile, BlackRock integrated Tokenized Treasuries (BUIDL) into its fund ecosystem, and Fidelity doubled the headcount of its institutional crypto desk this year.
The road ahead
Despite Wall Street’s growing acceptance of digital assets, challenges remain.
Banks entering this market must contend with the inherent volatility of cryptocurrencies, uncertain regulatory capital treatment, and persistent counterparty risk, all of which constrain how aggressively they can expand crypto-backed lending.
U.S. regulators have not yet issued clear capital-weighting guidelines for digital collateral, and financial institutions are relying on conservative internal models. Even if third-party custodians manage custody risks, supervisory oversight is expected to remain intense.
Still, this trajectory is unmistakable, as digital assets are increasingly woven into the fabric of global credit markets.
Bitcoin analyst Joe Consorti said these moves indicate that:
“The global financial system is slowly re-collateralizing around the highest quality assets known to man.”
(Tag translation) Bitcoin
