Context
Published Oct 2, 2025, at 15:00 UTC, CoinDesk’s Crypto for Advisors explores the return of institutional Bitcoin lending following a market reset after the 2022 downturn. The article examines how new collateral and reporting standards have reshaped lending practices for digital assets.
Market Reset
After high-profile CeFi failures in 2022, the lending market underwent stricter collateralization, with lending platforms requiring over-collateral levels above 125 percent to mitigate liquidity risks. These reforms, coupled with on-chain transparency via DeFi smart contracts, have fostered renewed institutional confidence.
DeFi vs CeFi
DeFi protocols now offer fully on-chain loan origination and liquidation, enabling real-time risk monitoring. Regulated CeFi platforms complement this with institutional-grade custody, compliance, and insurance structures, creating a hybrid model attractive to wealth managers seeking both transparency and operational control.
Implications for Advisors
Wealth managers evaluating digital asset exposure can leverage these lending services to generate yield without divesting holdings. The ability to borrow stablecoins or fiat against Bitcoin collateral provides liquidity solutions while preserving upside potential. However, advisors must rigorously assess counterparties’ governance frameworks, smart contract audits, and custodial safeguards before recommending such strategies.
Outlook
With market participants seeking yield in low-rate environments, Bitcoin lending volumes could rebound significantly. Continued regulatory clarity and technological innovations, such as tokenized collateral on settlement layer chains, may further integrate lending into mainstream advisory mandates.
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