In a bold move aimed at consolidating its business and enhancing client asset safety, digital asset lender Ledn has recently announced a significant shift away from Ethereum (ETH) to fully collateralized Bitcoin (BTC) lending. This decision, disclosed on May 23, marks a return to the company’s foundational principles and positions Ledn firmly within the Bitcoin ecosystem.
Ledn’s new strategy involves adopting a full custody model for Bitcoin loans, meaning that client assets will no longer be lent out in a bid to generate interest. Instead, Bitcoin collateral will remain securely under the custody of Ledn or its designated funding partners. According to Ledn’s co-founder and CEO, Adam Reeds, “This means assets aren’t rehypothecated, reused, or loaned out to generate yield.” This approach not only mitigates client risk but also aligns with the core tenets of Bitcoin as a safeguard against the perils of fractional reserve banking.
Reeds emphasized that Bitcoin was born out of the necessity to combat the threats posed by traditional banking systems, which often leverage client assets to create excess liquidity and inflation. He stated, “Bitcoiners instinctively reject that model. That’s why we’ve moved away from this approach entirely.” By focusing exclusively on Bitcoin, Ledn aims to better serve its clients who predominantly engage with BTC, which comprises over 99% of its activity.
Founded in 2018, Ledn has rapidly grown into one of the leading lenders in the digital asset sector, boasting a loan book valued at approximately $9.9 billion, as reported by Galaxy Research. The company allows Bitcoin holders to leverage their assets for liquidity without the need to sell, allowing them to avoid triggering taxable events. This practice mirrors strategies employed by high-net-worth individuals in traditional finance who utilize loans to access cash while retaining their valuable holdings.
As Bitcoin continues to gain traction, particularly following favorable developments such as the launch of spot exchange-traded funds (ETFs) in 2024, traditional finance (TradFi) is witnessing a seismic shift. Institutions are increasingly recognizing Bitcoin as a legitimate asset class, yet they also express concerns about the potential disruptions caused by blockchain innovations. Specifically, members of the banking lobby have raised alarms about yield-bearing stablecoins, which offer more competitive interest rates and incentives than conventional banks.
Commenting on the evolving landscape, NYU professor Austin Campbell referred to traditional banks as a “cartel” that benefits from fractional reserves, often at the expense of depositors who receive minimal interest on their savings. As the digital asset revolution unfolds, it is clear that companies like Ledn are positioning themselves at the forefront of this transformation, advocating for a future where Bitcoin reigns supreme.
