Crypto-Backed Lending Totals $67 Billion After 2022 Failures, Ledn Issues First Rated Bitcoin ABS

Silicon Valley Bank said bitcoin lending has shifted toward overcollateralization, transparency and institutional risk management following the failures of BlockFi, Celsius and Genesis. Total crypto-backed lending reached $67 billion, up 49% year over year, the bank stated in a report published last week.

Ledn completed the first investment-grade-rated BTC-backed ABS through a $188 million issuance that received the rating from a Nationally Recognized Statistical Ratings Organization.

Several major U.S. banks now offer bitcoin-backed credit facilities, the report added. Ledn estimates the current consumer BTC-backed loan market at roughly $3 billion. The firm argued the market could scale toward $1 trillion over the next decade.

Bitcoin-backed loan rates generally range from 7.5% to 16% APR. Strike announced a 7.5% rate on term loans larger than $5 million, backed by a $2.1 billion credit facility from Tether. The bitcoin lending industry was reshaped by the failures of Celsius, BlockFi and Genesis during the 2022–2023 crypto credit crisis, which exposed maturity mismatches, excessive leverage, concentrated counterparty exposure and rehypothecation of customer assets.

Authors Anthony Vassallo, director of crypto at the bank, and research analyst Josh Pherigo wrote that bitcoin has spent much of its existence seeking to prove it belongs. They added that some now view it as collateral with instant and global liquidity, fast settlement, fungibility and minimal risk.

The report said the Lightning Network may enable near-instant, low-cost collateral transfers, margin calls and liquidations.