In the fast-evolving world of finance, a new trend is quietly taking shape—one that could redefine how banks and borrowers think about collateral and credit. Crypto-backed loans, once considered a fringe experiment, are now making waves on Wall Street and beyond, with major institutions and innovative startups alike moving to embrace digital assets as a form of loan security. At the heart of this shift is a key debate: what kind of crypto collateral do banks actually want, and why?
Fabian Dori, the chief investment officer at digital asset bank Sygnum, recently shed light on this question. In a conversation with Cointelegraph on September 13, 2025, Dori explained that banks offering crypto-backed loans strongly prefer onchain assets—such as Bitcoin (BTC) and Ethereum (ETH)—over exchange-traded funds (ETFs) representing crypto. Why? The answer, it turns out, is all about liquidity and flexibility.
"It's actually preferable to have the direct tokens as collateral, because then you can do it 24/7. If you need to execute a margin call on an ETF on Friday at midnight, when the market is closed, then it's more difficult. So, direct token holding is actually preferable from that point of view," Dori told Cointelegraph. His point is simple but powerful: onchain assets can be liquidated in real time, any time, giving lenders the ability to manage risk far more efficiently than if they were relying on ETFs that trade only during market hours.
This real-time liquidity has another major benefit for borrowers. According to Dori, lenders are able to offer higher loan-to-value (LTV) ratios when the collateral is onchain. LTV ratios represent the total amount of a loan compared to the value of the collateral backing it. A higher LTV ratio means a borrower can access more credit for the same amount of posted crypto, while a lower LTV means less borrowing power for the same collateral.
For example, if a borrower posts $100,000 in Bitcoin as collateral and receives a loan with a 70% LTV, they could borrow $70,000. If the LTV were only 50%, they'd get just $50,000 for the same collateral. The ability to offer higher LTVs—thanks to the instant liquidity of onchain assets—makes crypto-backed loans more attractive to potential borrowers, potentially fueling further growth in the sector.
But let's not get ahead of ourselves. As Dori is quick to point out, crypto-backed loans are still in their infancy. The concept is only now starting to gain traction among mainstream financial institutions. "Crypto-backed loans are still in their infancy," Dori said, "but I am confident that the sector will continue to grow as crypto gains widespread adoption." His optimism seems well-founded, given recent developments in both the crypto and traditional finance (TradFi) worlds.
One of the most significant milestones came on September 11, 2025, when Figure Technology, a company specializing in crypto-backed lending, made its debut on the Nasdaq exchange. According to Yahoo Finance, Figure's shares surged by more than 24% during intraday trading on their first day, and the company now boasts a market capitalization exceeding $6.8 billion. This strong performance signals a growing appetite among investors for exposure to crypto lending, and it sends a clear message to Wall Street: crypto-backed loans are no longer a niche product.
The excitement isn't limited to startups, either. Legacy financial giants are starting to take notice. JP Morgan, one of the world's largest and most influential banks, is reportedly considering offering crypto-backed loans to its clients, with a potential rollout as early as 2026. While the details are still being ironed out, the fact that such a storied institution is even contemplating this move speaks volumes about how far crypto has come in the eyes of traditional finance.
This growing acceptance is part of a broader shift. As crypto lenders go public on major US stock exchanges and TradFi firms warm to the idea of accepting crypto as loan collateral, the lines between old and new finance are blurring. Financial institutions are increasingly embracing loans secured by crypto, and the trend shows no signs of slowing down. For borrowers, this means more options, better terms, and the possibility of accessing credit in ways that would have seemed unthinkable just a few years ago.
Still, it's not all smooth sailing. The sector faces significant challenges, from regulatory uncertainty to the inherent volatility of digital assets. Critics warn that using crypto as collateral could expose both lenders and borrowers to sudden swings in asset values, potentially triggering margin calls or forced liquidations at inopportune moments. Others worry that the rapid growth of crypto-backed lending could outpace the development of adequate risk management tools and regulatory frameworks.
Yet, for every skeptic, there's an innovator pushing the envelope. As Dori noted, the ability to liquidate onchain collateral in real time gives lenders a powerful tool for managing risk. And as more financial institutions gain experience with crypto-backed loans, best practices are likely to emerge, helping to stabilize and mature the market.
The implications of this shift are profound. If crypto-backed lending continues to gain ground, it could open up new avenues of credit for individuals and businesses that have traditionally been underserved by the banking system. It could also help to legitimize digital assets in the eyes of regulators and the broader public, paving the way for further innovation in financial products and services.
Of course, much will depend on how the market evolves in the coming years. Will more banks follow JP Morgan's lead and offer crypto-backed loans? Will startups like Figure Technology continue to thrive on Wall Street? And perhaps most importantly, will borrowers embrace these new opportunities, or will concerns about volatility and risk keep them on the sidelines?
For now, one thing is clear: the world of crypto-backed lending is evolving rapidly, with onchain collateral emerging as the preferred choice for both banks and borrowers. As financial institutions continue to experiment and innovate, the boundaries of what's possible in lending and credit are being redrawn before our eyes.
With the momentum building and major players entering the fray, the next chapter in the story of crypto-backed loans promises to be both unpredictable and exciting. The financial landscape is changing, and those who pay attention now may well be the ones shaping its future.