The bank noted that bitcoin lending has emerged from the challenges of 2022 with improved risk management, increased institutional involvement, and a pathway to reduced borrowing expenses.
By Will Canny, AI Boost|Edited by Nikhilesh De Jun 29, 2026, 5:57 p.m. 2 min readMake preferred on ShareShare this articleCopy linkX (Twitter)LinkedInFacebookEmailMake preferred on According to Silicon Valley Bank, bitcoin lending is transitioning into a new institutional phase. (Getty Images)SummaryShow- Silicon Valley Bank highlighted that bitcoin lending is shifting towards overcollateralization, transparency, and robust institutional risk management following the collapses of BlockFi, Celsius, and Genesis.
- Institutional activity is rising as banks broaden bitcoin-backed lending, with crypto-backed loans totaling $67 billion and Ledn completing the first investment-grade-rated BTC-backed asset-backed security.
- Increased bank and private credit participation may lead to lower borrowing costs, and the Lightning Network could enhance the efficiency of bitcoin-backed lending, according to the report.
Bitcoin BTC$60,452.84 lending is progressing into a more sophisticated, institutionally supported market after the upheaval of 2022, according to a recent report from Silicon Valley Bank.
What was previously dominated by lightly regulated crypto lenders is now increasingly adopting practices typical in traditional finance, such as conservative collateral management, enhanced transparency, and disciplined underwriting, the bank stated.
Authors Anthony Vassallo, the bank's crypto director, and research analyst Josh Pherigo noted, "Bitcoin has spent much of its existence seeking to prove it belongs. Some now view it as collateral with instant and global liquidity, fast settlement, fungibility, and minimal risk."
Institutional engagement is also on the rise. They reported that several prominent U.S. banks are now providing bitcoin-backed credit facilities, while the overall crypto-backed lending market has reached $67 billion, marking a 49% increase year over year.
Although bitcoin-backed lending is still a small segment of credit markets, it is rapidly expanding. Ledn estimates the current consumer BTC-backed loan market to be about $3 billion but suggested last month it could grow to $1 trillion in the next decade as more long-term BTC holders look for liquidity without selling their assets.
The potential for growth hinges on a straightforward dynamic: as bitcoin ownership spreads and prices increase, holders are more inclined to borrow against appreciated collateral for tax benefits, working capital, or personal needs, while lenders become more comfortable underwriting overcollateralized loans secured by a highly liquid asset.
The bitcoin lending landscape was significantly altered by the failures of Celsius, BlockFi, and Genesis amid the 2022–2023 crypto credit crisis. While these firms had different operational models, they shared vulnerabilities such as maturity mismatches, excessive leverage, concentrated counterparty exposure, and the rehypothecation of customer assets.
Their collapses highlighted the necessity for conservative underwriting, transparent risk management, and fully collateralized lending—principles that have become the cornerstone of the next generation of BTC-backed lenders, according to the SVB report.
Significant transactions, such as Ledn's $188 million asset-backed security, which is the first bitcoin-collateralized deal to be awarded an investment-grade rating from a Nationally Recognized Statistical Ratings Organization, reflect the increasing confidence in BTC-backed credit structures, according to SVB.
Although the rates for bitcoin-backed loans generally range from 7.5% to 16% annual percentage rate (APR), which is notably higher than traditional financing options, SVB anticipates that greater involvement from banks and private credit funds will reduce these spreads over time. Initial indicators are already visible, including Strike's recent announcement of a 7.5% rate on term loans exceeding $5 million, backed by a $2.1 billion credit facility from Tether.
Looking ahead, the bank indicated that the next growth phase will rely on both the accessibility of institutional capital and borrower demand.
The report suggested that the Lightning Network could serve as a catalyst, facilitating nearly instantaneous, low-cost collateral transfers, margin calls, and liquidations, thereby enhancing the efficiency and scalability of bitcoin-backed lending within established financial markets.
Read more: From Wall Street to Web3: This is crypto’s year of integration, Silicon Valley Bank says
Bitcoin NewsInstitutional AdoptionCrypto LendingSilicon Valley BankAI Disclaimer: Parts of this article were generated with the assistance from AI tools and reviewed by our editorial team to ensure accuracy and adherence to our standards. For more information, see CoinDesk's full AI Policy.Related AssetsBitcoin$60,452.841.52%Aave$92.302.64%Jito$0.757.58%Latest Crypto News- 1JPMorgan backs U.S. crypto bill but warns of risks in digital asset framework28 minutes ago
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