JPMorgan Opens the Door for Bitcoin and Ethereum as Institutional Loan Collateral

Wall Street’s largest bank inches deeper into digital assets as clients gain new leverage options

TL;DR:

• JPMorgan will allow institutional clients to pledge Bitcoin (BTC) and Ethereum (ETH) as loan collateral starting late 2025.
• The program will rely on third-party custodians to hold pledged assets, limiting the bank’s direct exposure.
• The move marks a new milestone in integrating crypto into traditional lending markets amid a rising global coin market cap and growing demand for liquidity.

JPMorgan Chase & Co. plans to let institutional clients use Bitcoin and Ethereum holdings as collateral for loans by the end of 2025, a decision signaling the bank’s most direct step yet toward blending digital assets into conventional credit frameworks. The initiative, revealed on October 24, 2025, gives clients the ability to unlock liquidity from their crypto portfolios without selling them, effectively merging crypto exposure with legacy financing tools.

The lending model uses a third-party custodian to safeguard pledged digital assets, ensuring they remain off the bank’s balance sheet and insulated from its risk ledger. By structuring the setup this way, JPMorgan preserves regulatory clarity while offering clients a practical way to borrow against crypto assets. The plan builds on its prior acceptance of crypto-linked exchange-traded funds (ETFs) as collateral, expanding the scope to include the underlying BTC and ETH themselves. Market analysts described the shift as a “significant absorption of crypto into Wall Street’s plumbing,” reflecting a broader institutional embrace of tokenized value.

At the time of the announcement, Bitcoin traded near $110,595, gaining 0.86% on the day, while Ethereum stood around $3,924, up 1.87%. Both assets have rallied sharply in 2025—BTC peaking at $126,038 and bottoming near $74,752—strengthening their appeal as dependable loan collateral in a maturing market. The current crypto price index shows elevated volatility, yet institutional optimism remains high as total coin market cap continues climbing amid rising ETF inflows and stable on-chain liquidity metrics.

Details of the lending terms, such as loan-to-value ratios, margin call logic, and eligible client profiles, remain undisclosed. Sources close to the bank note that discussions are ongoing regarding how to manage 24/7 market fluctuations within traditional settlement windows. Analysts caution that volatility poses systemic risk—rapid price swings could trigger liquidation cascades if collateral values fall too quickly. JPMorgan’s risk-mitigation approach through external custody suggests it is wary of this scenario, aiming to prevent contagion effects in both crypto and fiat markets.

Despite its historic skepticism toward digital assets, JPMorgan’s pivot aligns with intensifying client demand and a broader competitive shift across finance. Institutions such as BlackRock and Morgan Stanley are expanding their crypto frameworks, pressuring peers to innovate within regulatory boundaries. The new policy also indicates a recalibration of how large banks perceive digital collateral: not as speculative tokens but as monetizable, liquid assets that can complement global lending and liquidity operations.

Benzinga contributor Luis Flavio cautioned that JPMorgan’s new collateral framework could expose banks to “24/7 volatility using risk systems designed for markets that close at 4 p.m.” He argued that sudden weekend price drops might trigger automated liquidations before human oversight can intervene, potentially linking crypto crashes to traditional credit markets. 

Flavio outlined how such “cascade mechanics” could force institutions to sell stocks and bonds to meet margin calls, amplifying stress across asset classes. He also noted that Basel III’s 2026 capital rules may require banks to hold equal capital against Bitcoin loans—creating what he called a “regulatory tax” on profitability—while fragmented crypto custody adds another layer of systemic fragility.

This article has been refined and enhanced by ChatGPT.