The following is a guest post by Mauricio Di Bartolomeo, co-founder and CSO of Ledn.
After years of ignoring the asset, Wall Street is finally recognizing Bitcoin's potential. At Bitcoin 2024 in Nashville, the air crackled with not only the usual frenzy but also the unmistakable scent of revenge. That became clear as Donald Trump pledged allegiance to Bitcoin as a reserve asset and Cantor Fitzgerald detailed plans for a $2 billion Bitcoin lending facility. Traditional finance is no longer just dipping its toes into digital assets. Jump in headfirst. A long-standing theme in our industry is unfolding before our eyes.
The industry couldn't dream of better support. For years, we've been labeled fringe, a bubble, a fad. We have been ridiculed and vilified by the very institutions that are now eager to join us. It's not just validation. It is a total capitulation of the old system to the inevitable financial future.
However, this validation requires evolution. The digital asset industry needs to offer both the risk management expertise of traditional finance and the independent spirit of cryptocurrencies. We've seen this movie before. TradFi players enter the crypto space with deep pockets, but little understanding and crypto-native companies stumble when trying to offer traditional financial products. The best operators are those who can combine the best of both worlds.
Build bridges, not walls
Back in 2018, my co-founder (Adam Reid) and I found ourselves in a predicament familiar to many early Bitcoin adopters. Why do Bitcoin users have to sell their valuable assets to access liquidity? This simple question led us down the rabbit hole of Bitcoin-backed lending. This concept seemed obvious to us, but traditional finance was met with skepticism. So we started building a solution to our own problem: how to borrow against Bitcoin without giving up ownership. Six years and more than $860 million in financing later, our vision has been validated by the very institutions that once dismissed us as crazy.
Traditional lenders have been lending for decades and it's safe to say they practice strong risk management. But it is equally true that most traditional finance players have little experience with digital assets.
While they may have large amounts of capital and well-established risk management practices, they lack operational expertise specific to Bitcoin and digital assets. Understanding the new challenges of blockchain technology, managing digital wallets, operating a 24/7 crypto market, and understanding the unique regulatory landscape of digital assets are all still in the development stages for many TradFi institutions. It's an important skill.
This knowledge gap highlights the importance of collaboration between traditional financial companies and Bitcoin-native companies. Combining TradFi's robust risk management practices with Bitcoin's transparency and the technical expertise of our cryptocurrency experts, we have created a safer, more efficient solution that meets the needs of both institutional and retail clients in this market. You can build a lending platform.
We embraced this early on and brought in TradFi expertise when we brought on 'Chief Investment Officer' John Glover. His decades of experience at TD Securities and Barclays have been invaluable in shaping our risk management strategy and lending practices, and his deep understanding of traditional financial markets brings us to the established TradiFi world. and the emerging digital asset ecosystem.
The events that brought down the likes of Celsius and BlockFi showed that even the strongest and most connected players can succumb to careless risk management. These companies took shortcuts and operated irresponsibly, prioritizing short-term profits (often personal gain) over the long-term health of the business and the safety of customer assets. In other words, traditional financial players who have just entered the offering of Bitcoin and crypto products may find that crypto or Bitcoin-native companies are more likely to be It means that you are facing risks similar to those you faced.
That's exactly why the entry of institutional investors like Cantor Fitzgerald is a turning point. This influx of institutional capital reduces costs for borrowers, increases market liquidity, and increases confidence across the sector.
Now the real work begins
Remember, the best operators in this space will always be those that can marry TradFi's robust risk management practices with Bitcoin's commitment to transparency and sovereignty.
For investors and borrowers, due diligence is as important as ever. Look for a platform that prioritizes transparency, verifiable evidence of reserves, and provides clear insight into how assets are managed. Look for a provider with a track record of reliability over multiple market cycles. Consider the legal structure of your lending platform and ensure your assets are protected through measures such as risk fencing and storage services.
We couldn't be happier to see traditional finance wake up to Bitcoin as the world's best loan collateral. This is a significant part of our long-term theme, and we believe this will help reduce the cost of lending to Bitcoiners as financial institutions bid up funding costs. Competition also forces players to continually improve the client experience, leading to increased adoption, uptake, and liquidity.
The future certainly looks orange. And for those who have long believed in Bitcoin's power as a reserve asset, it couldn't be brighter.
