The Node: JPM’s BTC Lending Play

The Financial Times reports that JPMorgan, the world’s biggest bank, is looking into issuing crypto-backed loans, meaning that its clients may soon be able to pledge bitcoin, ether, or some other token to borrow dollars.

The news is notable for a couple of reasons. Crypto folks love pointing out that Jamie Dimon, the bank’s chief executive, famously said in 2017 that he’d fire any employee caught trading bitcoin for being “stupid,” so JPMorgan considering the issuance of such a product (and getting involved with stablecoins) is seen as vindication by some in the industry.

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More interesting is what JPMorgan’s move could end up meaning for crypto lending. The Bank of Dimon isn’t the first TradFi firm to look into crypto-backed loans (Cantor Fitzgerald announced a similar program last July) but it’s certainly the largest.

At the end of 2024, the crypto lending market stood at $36.5 billion, down 43% from its $64.4 billion peak at the height of the 2021 bull run. The lending sector was dominated by Tether, followed by Galaxy Digital and Ledn. Together, the three firms accounted for 90% of $11.2 billion outstanding loans (excluding DeFi, which saw $19.1 billion in borrowings across 20 applications and 12 blockchains).

I’m sure these numbers need updating, considering how many crypto native firms have announced their entry into the market since then — Coinbase, Strike, Xapo Bank, Lava, Onramp and Arch, and even real-estate focused Propy, to name a few.

The growth of the sector is great for consumers because it will force interest rates on crypto-backed loans to drop significantly, Mauricio Di Bartolomeo, co-founder of bitcoin lender Ledn, told CoinDesk in an interview back in April.

“It’s a seller’s market right now,” he said. “We are lending out dollars fully collateralized at north of 12.5%, with zero losses over seven years. Banks are going to look at this and say ‘Wow, this is a great rate of return.’ One bank will come in with 12% interest. Another will do 10%. Another says 9%. So this is going to compress, and compress.”

Down the line, such loans could become competitive with home equity or personal lines of credit, Di Bartolomeo said. Even better, rates wouldn’t simply drop in Western countries with efficient banking systems, but all over the globe.

“Gold in a vault in Switzerland is not gold in a vault in Venezuela, but bitcoin in Colombia is bitcoin in Madrid is bitcoin anywhere in the world. As an underwriter, I have uniform collateral,” Di Bartolomeo said.

JPMorgan’s foray into the sector takes us one step closer towards fulfilling that vision.