After years of tension between cryptocurrencies and traditional finance, a symbolic shift is taking place inside the world’s largest bank.

JPMorgan Chase & Co. is reportedly preparing to allow institutional clients to use Bitcoin and Ethereum as collateral for cash loans.

This means that the bank's borrowers can pledge the two largest cryptocurrencies by market capitalization, and the relevant assets will be held by approved third-party custodians such as Coinbase.

The program is expected to be launched by the end of 2025.

The move is ironic given that the financial giant's CEO, Jamie Dimon, is a well-known cryptocurrency critic who has previously described Bitcoin as a "scam."

But growing demand in the nascent cryptocurrency industry forced him to back the company's product launches.

A new chapter in digital collateral

JPMorgan's move could quietly rewrite the boundaries between digital assets and regulated credit markets.

According to Galaxy Research data, as of June 30, the total amount of outstanding loans in centralized finance reached US$17.78 billion, a month-on-month increase of 15% and a year-on-year increase of 147%.

If decentralized loans are included, the total balance of cryptocurrency-collateralized credit reached US$53.09 billion in the second quarter of 2025, setting the third highest record in history.

These data reflect a structural shift: as digital asset prices rise, lending activity increases in tandem.

The trend has narrowed credit spreads, making loans more attractive to traders and corporate treasuries.

In addition, businesses have also begun to use cryptocurrency-collateralized lending to finance operations, replacing equity issuance with debt secured by digital assets.

In this context, JPMorgan Chase’s entry is less an experiment than a decisive move by the institution to “catch up with its peers” in the emerging industry.

In response, cryptocurrency researcher Shanaka Anslem Perera estimates that the model could unlock $10 billion to $20 billion in instant lending capacity for hedge funds, corporate treasuries, and large asset managers.

These institutions want to access U.S. dollar liquidity without having to sell their cryptocurrency tokens.

In practical terms, this means that companies can now raise funds using digital assets, using the same process as borrowing against U.S. Treasuries or blue-chip stocks.

The significance of JPMorgan's move

While cryptocurrency-collateralized lending is already common among decentralized finance (DeFi) protocols and small centralized finance lenders, JPMorgan’s involvement institutionalizes the model.

The bank’s entry signals that digital assets are mature enough to meet the global financial industry’s standards for compliance, custody and risk management.

Matt Sheffield, CIO of SharpLink, an Ethereum-focused finance firm, believes the development could reshape how asset managers and funds manage their balance sheets.

“Until now, many traditional financial institutions that rely on bank transactions have had to choose between holding Ethereum spot and other positions,” he said.

"The world's largest investment bank is working to change that. By borrowing against positions held by third-party custodians, institutions can build more profitable portfolios and increase the value of their collateral."

At the same time, this decision also strengthens JPMorgan's overall layout in the cryptocurrency field.

Over the past two years, the bank has built Onyx, a blockchain-based settlement network, processed billions of dollars in tokenized payments, and explored digital asset repo transactions.

Accepting Bitcoin and Ethereum as loan collateral completes the closed loop of "issuance-settlement-credit", and all three links rely on blockchain infrastructure.

Based on this, Sheffield predicts that this move will trigger a "competitive chain reaction" among large banks. He pointed out:

“This will set off a wave. For large institutions, the deterrent of ‘being the first to act’ is huge. Once the risks are reduced, other banks will follow suit, and if they don’t act, they will lose their competitiveness.”

Currently, competitors such as Citigroup and Goldman Sachs have expanded their digital asset custody and repurchase businesses; BlackRock has incorporated tokenized Treasury bonds (BUIDL) into its fund ecosystem; and Fidelity has doubled the number of employees in its institutional cryptocurrency department this year.

Opportunities and challenges coexist

Despite growing acceptance of digital assets on Wall Street, challenges remain.

Banks involved in this market must deal with the inherent volatility of cryptocurrencies, uncertainty about regulatory capital treatment, and ongoing counterparty risk, all of which have limited their efforts to expand their cryptocurrency-backed lending businesses.

US regulators have yet to issue clear capital weighting guidelines for digital collateral, forcing institutions to rely on conservative internal models. Even if custody risk is managed by a third-party custodian, regulatory oversight is expected to remain strict.

Nonetheless, the trajectory of the industry is unmistakable, with digital assets becoming increasingly integrated into the fabric of global credit markets.

Bitcoin analyst Joe Consoerti said the moves suggest that “the global financial system is slowly reallocating collateral around the highest-quality assets known to mankind.”