JPMorgan‘s decision to accept Bitcoin ETFs as loan collateral marks a pivotal shift in how traditional finance (TradFi) evaluates cryptocurrency risk and client liquidity, with experts predicting advanced risk models and hybrid analytics to integrate crypto’s unique volatility and 24/7 market dynamics into mainstream financial frameworks.

This policy, set to roll out in the coming weeks, reflects a broader trend of integrating cryptocurrencies into conventional banking systems amid a more permissive regulatory environment under the Trump administration.

Experts highlight that this shift will reshape how banks assess crypto-related risks and client liquidity.

Speaking with Benzinga, Anndy Lian, an intergovernmental blockchain advisor and author, describes JPMorgan’s decision as a “catalyst for change.”

By treating Bitcoin ETFs similarly to traditional securities, banks may develop sophisticated models to evaluate crypto volatility, applying higher risk weights than for stocks.

“Under Basel III, Bitcoin ETFs are treated as stocks, not crypto-assets, allowing better capital treatment, 100% risk-weighted assets (RWA) exposure instead of 1,250% for direct crypto,” Lian explains.

However, banks may charge higher loan rates due to limited capital benefits, as traditional stocks can reduce RWA to zero with a 25% haircut.

Lian notes that including crypto in net worth calculations will enhance clients’ borrowing capacity, aligning with trends where ETFs are evaluated alongside stocks and real estate, boosting global liquidity access.

Marcin Kazmierczak, COO and co-founder of RedStone, sees this as a “fundamental shift” in risk assessment, moving crypto from a speculative asset to a legitimate class.

“We’re seeing convergence between TradFi risk models and crypto’s volatility profile through structured products like ETFs,” he told Benzinga, pointing to tokenized products like BlackRock‘s Kazmierczak anticipates hybrid models combining traditional credit analysis with on-chain analytics to reflect crypto’s 24/7 markets and programmable nature, creating nuanced liquidity calculations.

The integration of crypto assets into lending frameworks also raises concerns about regulatory fragmentation and systemic risks, particularly in decentralized finance (DeFi).

Lian warns that jurisdictions with laxer Basel III capital requirements, such as the U.S. and UK (delayed to January 2027), could attract crypto activities, creating arbitrage opportunities.

This could lead to overexposure in less regulated markets, with potential spillovers into DeFi through collateral or liquidity pools, posing risks to financial stability.

Kazmierczak, however, views fragmentation as a driver of innovation. “DeFi’s composability allows it to route around restrictive frameworks,” he says, noting that clear regulatory frameworks will attract institutional capital, fostering better standards and self-regulation.

To maintain market stability as crypto-backed lending grows, experts emphasize robust safeguards.

Lian advocates for over-collateralization (50-90% loan-to-value ratios), real-time reporting of collateral values, and segregated custody to prevent hacks and rehypothecation risks.

Kazmierczak highlights DeFi’s existing infrastructure, such as smart contract-based collateral management and automated liquidation mechanisms, as transparent and resilient.

“BlackRock’s BUIDL integrates institutional-grade compliance, and robust oracle networks and multi-sig custody solutions are evolving rapidly,” he says, suggesting these systems could surpass traditional finance in resilience.

JPMorgan’s policy shift follows a broader industry trend, with rival Morgan Stanley planning to add crypto trading to its E*Trade platform.

Previously, JPMorgan accepted crypto ETFs as collateral on a case-by-case basis, but the new framework will apply globally, treating crypto holdings akin to stocks, real estate, or art in net worth and liquidity assessments.

Since their U.S. launch in January 2024, spot Bitcoin ETFs have grown to manage $128 billion, driven by rising demand and a crypto-friendly regulatory shift post-Trump’s election.

Despite CEO Jamie Dimon‘s skepticism, comparing Bitcoin to a “pet rock” and defending clients’ right to invest, JPMorgan’s embrace of crypto ETFs points toward the asset class’s growing legitimacy.

Source: https://www.benzinga.com/crypto/25/06/45977672/jpmorgan-embraces-bitcoin-etfs-as-loan-collateral-is-tradfi-finally-changing

Anndy Lian

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com