Ledn ditches ETH, shifts to full custody model for Bitcoin loans

Ledn, a prominent digital asset lender, is streamlining its operations by transitioning to a Bitcoin-only lending model, effective July 1st. This strategic shift involves discontinuing support for Ethereum (ETH) and adopting a fully collateralized lending structure for Bitcoin (BTC). This means Ledn will no longer lend out client assets to generate yield; instead, Bitcoin collateral will remain under its full custody or that of designated partners. This eliminates the risk of rehypothecation, asset reuse, or lending for yield generation, aligning with Bitcoin’s foundational principles and addressing concerns surrounding fractional reserve banking practices.

Ledn co-founder and CEO Adam Reeds emphasized that this move reflects a return to the company’s core values and a rejection of traditional finance’s reliance on leveraging client assets to create inflation. He highlighted that Bitcoin’s creation was a direct response to the risks inherent in such practices. The shift to a Bitcoin-exclusive model is also driven by client behavior, with Bitcoin representing over 99% of Ledn’s current activity. By focusing solely on Bitcoin, Ledn aims to simplify its platform and cater directly to client preferences.

This transition comes as Bitcoin reaches new all-time highs, exceeding $111,000. Ledn’s model allows long-term investors to access liquidity without selling their Bitcoin holdings or triggering taxable events, a strategy mirroring how wealthy investors leverage other assets like stocks and real estate. With a loan book value of $9.9 billion (according to Galaxy Research), Ledn’s decision underscores the growing institutional interest in Bitcoin and the increasing demand for secure and transparent lending solutions within the digital asset space. The company’s survival through the 2022 crypto winter, while others like BlockFi, Voyager, Celsius, and Genesis faced bankruptcy, further solidifies its commitment to risk mitigation and financial stability. Ledn’s move showcases a clear preference for a model rooted in Bitcoin’s decentralized and transparent nature, prioritizing client asset security above all else.