Digital asset lender Ledn is transitioning to fully collateralized Bitcoin lending and discontinuing support for Ethereum, in moves designed to consolidate its BTC-focused business and further safeguard client assets against credit risks.

In adopting a full custody structure for Bitcoin (BTC) loans, Ledn will no longer lend out client assets to generate interest, the company disclosed on May 23. Instead, Bitcoin collateral will remain under full custody by Ledn or one of its designated funding partners. 

“This means assets aren’t rehypothecated, reused, or loaned out to generate yield,” Ledn co-founder and CEO Adam Reeds told Cointelegraph.

Reeds said the move brings the company back to its roots and aligns more closely with Bitcoin’s founding principles.

“Bitcoin was created as a direct response to the risks of fractional reserve banking and unchecked use of client assets to generate interest,” said Reed, adding:

“Traditional finance relies on constantly reusing client assets to create leverage and, ultimately, inflation. Bitcoiners instinctively reject that model. That’s why we’ve moved away from this approach entirely. 

Reed told Cointelegraph that the company is ending support for Ether (ETH) as “part of a broader strategic shift,” as Bitcoin represents over 99% of Ledn’s client activity.

“Rather than fragmenting the platform to chase marginal volume, we’re going all-in on Bitcoin and simplifying our stack to reflect what our clients actually value,” said Reed.

Founded in 2018, Ledn has emerged as one of the largest lenders in the digital asset space with a loan book value of $9.9 billion, according to Galaxy Research. The company enables Bitcoin holders to borrow against their assets, giving them access to liquidity without having to sell their holdings or trigger a taxable event.

This approach is commonly used by wealthy investors, who take out low-interest loans against stocks, real estate, and other assets to access cash.

Bitcoin’s price has reached new all-time highs above $111,000. Instead of selling their assets for cash, long-term investors can borrow against their holdings. Source: Cointelegraph

Related: ‘Before Bitcoin, my most successful investment was shorting the Bolivar’ — Ledn co-founder

Digital assets are disrupting TradFi

Bitcoin’s genesis block was mined in the wake of the global financial crisis in 2008, offering the world a sound money alternative to the inflation-prone fiat monetary system. 

Bitcoin now thrives within traditional finance, especially after the successful launch of spot exchange-traded funds (ETFs) in 2024.

Institutional investors have embraced the spot Bitcoin ETFs, as evidenced by the continued surge in cumulative inflows. Source: Farside

While financial institutions are increasingly embracing Bitcoin, some members of the banking lobby are reportedly concerned about other blockchain innovations disrupting their business models. 

Specifically, the banking lobby is “panicking” over yield-bearing stablecoins, which can pay higher interest rates and other financial incentives that traditional banks have largely abandoned, according to New York University professor Austin Campbell. 

Referring to banks as a “cartel,” Campbell said financial institutions rely on fractional reserves to maximize profits while offering depositors minimal interest. 

Magazine: Danger signs for Bitcoin as retail abandons it to institutions: Sky Wee