In brief
- JPMorgan is reportedly exploring crypto-backed loans secured by Bitcoin and Ethereum.
- The move follows growing institutional interest and regulatory clarity, including the recent passage of the GENIUS Act.
- Experts say Basel III rules remain a hurdle, but JPMorgan’s plans may signal progress toward treating crypto as acceptable collateral in TradFi.
JPMorgan Chase is reportedly exploring the option of offering loans directly secured by clients’ crypto holdings, a potential policy shift at the bank whose CEO once dismissed Bitcoin as a “fraud.”
The Wall Street giant could begin lending against digital assets, including Bitcoin (BTC) and Ethereum (ETH), as early as next year, according to people familiar with the matter who spoke to the Financial Times.
JPMorgan has yet to respond to Decrypt’s request for comment.
The bank’s acceptance of crypto-backed lending could trigger similar moves across Wall Street, potentially unlocking billions in new credit markets while establishing crypto as acceptable collateral for traditional loans.
The policy shift could mark a change in views for CEO Jamie Dimon, who in September 2017 dismissed Bitcoin as a “fraud” that would “eventually blow up.” He later expressed regret for making those statements.
In his May announcement at the bank’s annual Investor Day, Dimon said JPMorgan would begin allowing customers to buy Bitcoin, although he maintained he was still “not a fan” of the asset and reiterated well-worn narratives about its use for illicit activities.
People familiar with the matter said Dimon’s earlier criticism had cost the bank potential clients who made their wealth through crypto or were believers in digital assets.
JPMorgan, like most U.S. banks, cannot hold crypto on its balance sheet, requiring partnerships with third-party custodians such as Coinbase to manage seized collateral from defaulting borrowers, according to Ganesh Mahidhar, an investment professional at Further Ventures.
The Basel III banking rules impose a punitive 1,250% risk weighting on crypto exposure, effectively requiring banks to hold $1 in capital for every $1 of crypto-backed loans, he told Decrypt.
However, he said JPMorgan’s acquiescence “could also be an indication of progress” in evolving Basel III guidelines.
The Bitcoin play
Mahidhar said Bitcoin’s performance justifies institutional interest.
“If you compare the Sharpe ratio of Bitcoin over the last 4 years to the Sharpe ratio of S&P 500, Bitcoin has been higher, showing better risk-adjusted returns,” he said.
The Sharpe ratio measures an investment’s return relative to its risk, with higher ratios indicating better risk-adjusted performance.
“The risk-adjusted part makes it interesting,” he said, given Bitcoin has a history now similar to “most large cap equities, as well as market cap beating most large cap equities.”
While still subject to change, the effort would expand JPMorgan’s crypto footprint beyond exchange-traded products to the underlying assets themselves.
A JPMorgan spokesperson recently confirmed to Decrypt that the bank will accept crypto ETF shares, such as BlackRock’s iShares Bitcoin Trust, as loan collateral.
“ETFs are the first step for institutions to dip their toes in crypto investments,” Krishnendu Chatterjee, CEO & co-founder of A2ZCryptoInvestment, told Decrypt. “Next, they would directly buy and own the underlying crypto, with regulated custodians.
“Banks will jump at the chance to acquire a custodian license where available, by either building the wallet infrastructure from scratch or partnering with existing wallets,” he said.
Recent regulatory changes may ease certain constraints, following President Trump’s signing of the GENIUS Act into law last week, which establishes federal frameworks for stablecoin issuance and trading.
The legislation has encouraged banks previously hesitant to engage with digital assets.
JPMorgan has separately expanded its own stablecoin development, with Dimon saying earlier this month that the bank would be “involved in both JPMorgan deposit coin and stablecoins to understand it, to be good at it.”
Meanwhile, rival Morgan Stanley is weighing crypto trading through its E*Trade platform, while Citigroup CEO Jane Fraser confirmed the bank is “actively exploring” a Citi-branded stablecoin for cross-border payments.
And just this week, Western Union CEO Devin McGranahan pointed to the shifting sentiment, telling Bloomberg on Monday his company sees stablecoins “really as an opportunity, not as a threat” for cross-border payments and currency conversion.
Daily Debrief Newsletter
Start every day with the top news stories right now, plus original features, a podcast, videos and more.
