JPMorgan Chase is reportedly exploring offering loans backed by clients' cryptocurrency holdings, marking a significant shift in the banking giant's approach to digital assets. This move signals a growing acceptance of digital assets within traditional finance, aligning with a broader trend among large U.S. banks. According to sources cited by the Financial Times, the Wall Street institution is evaluating a program that would allow clients to secure loans using their cryptocurrency holdings as collateral.
The bank may begin lending against cryptocurrencies such as Bitcoin (BTC) and Ether (ETH) as early as next year. JPMorgan was previously reported to be exploring plans to offer loans secured by crypto exchange-traded funds (ETFs), starting with BlackRock's iShares Bitcoin Trust (IBIT). The new plan will go a step further and allow lending against actual bitcoin holdings. The initiative would mark the most direct engagement JPMorgan has had with crypto markets to date.
This potential policy change comes as the largest U.S. banks increasingly embrace cryptocurrencies, despite CEO Jamie Dimon's previous criticisms of Bitcoin, which he once labeled a “fraud”. In past years, Dimon had sharply criticized cryptocurrencies, calling Bitcoin a “fraud” in 2017 and later describing digital assets as “decentralized Ponzi schemes”. More recently, however, he has taken a more measured tone, stating, “I don't think you should smoke, but I defend your right to smoke. I defend your right to buy Bitcoin”.
The plans are still subject to change. For JPMorgan to offer loans backed directly by cryptocurrencies, "it would need to resolve the technical issue of how to handle crypto seized from customers who failed to repay their loans". Since JPMorgan, like most US banks, does not hold digital assets on its balance sheet, it would likely engage a third-party custodian, such as Coinbase, to manage the collateral securely. JPMorgan will likely partner with third-party custodians, such as Coinbase, to manage the crypto collateral. This arrangement allows the bank to mitigate balance sheet risk while leveraging existing infrastructure trusted by institutional investors.
The wave of interest from Wall Street has been driven by a more digital-asset-friendly regulatory environment. Recent guidance from key U.S. regulatory bodies has played a pivotal role in enabling banks to consider digital asset-backed lending. In 2022, changes were made to the US Uniform Commercial Code (UCC) making it viable to treat cryptocurrency as collateral in a legally secure manner.
If a client uses their bitcoin or ethereum as collateral for a loan and can't repay, the bank will have to seize and sell the digital assets. That creates technical and regulatory challenges, including how to manage these assets safely and legally. They will use custodians who have experience in managing digital assets, but money laundering and regulatory risks remain notable.
By allowing clients to borrow against crypto holdings, JPMorgan could help high-net-worth individuals and funds unlock liquidity without selling long-term assets. The bank's size and reputation will give legitimacy to bitcoin-based financial services and attract more institutional clients who want to borrow against their bitcoin without selling it. JPMorgan is getting in on the digital assets action amid increased regulatory approvals in Washington. JPMorgan's evolving stance follows growing momentum in the stablecoin space, with competitor Citigroup recently confirming it is considering issuing a stablecoin for payment use cases.
