Crypto World
Paxful Hit with $4 Million Penalty Over Illegal Transactions and Crimes
TLDR
- Paxful has been sentenced to pay a $4 million fine after pleading guilty to money laundering and prostitution charges.
- The company processed over $3 billion in crypto trades between 2017 and 2019, including transactions linked to Backpage.
- The U.S. Department of Justice initially sought a $112 million penalty but reduced it to $4 million based on Paxful’s financial situation.
- Paxful also agreed to pay a separate $3.5 million civil penalty to the Financial Crimes Enforcement Network.
- The case highlights the legal risks faced by cryptocurrency exchanges involved in facilitating illegal activities.
Paxful Holdings, a peer-to-peer Bitcoin marketplace, has been sentenced to pay a $4 million fine after pleading guilty to charges of fostering illegal prostitution, violating money-laundering laws, and knowingly handling criminal proceeds. The company, which ceased operations in 2023, processed over $3 billion in crypto trades between 2017 and 2019. U.S. authorities also revealed that Paxful had facilitated transactions linked to Backpage, a platform notorious for promoting illicit sex work.
Paxful Pleads Guilty to Criminal Charges
Paxful entered a plea agreement with U.S. authorities in December, admitting to its involvement in illegal activities. The peer-to-peer exchange knowingly transferred Bitcoin for customers linked to criminal schemes, including money laundering and fraud. During this period, Paxful made substantial profits, collecting approximately $30 million from its operations.
The Justice Department emphasized that Paxful’s actions allowed illegal transactions to take place undisturbed. “By putting profit over compliance, the company enabled money laundering and other crimes,” said Eric Grant, U.S. Attorney for the Eastern District of California. The company also processed Bitcoin for Backpage, a platform heavily involved in prostitution and trafficking, further complicating its legal standing.
Impact of the $4 Million Fine on Paxful
Originally, the Justice Department had sought a fine exceeding $112 million. However, the company’s inability to pay that amount led to a drastically reduced penalty. After considering Paxful’s financial situation, the final fine was set at $4 million, which a federal judge affirmed during a sentencing hearing.
In addition to the criminal fine, Paxful agreed to pay a separate $3.5 million civil penalty to the Financial Crimes Enforcement Network (FinCEN). The company’s founders were also implicated, with Artur Schaback, Paxful’s co-founder from Estonia, pleading guilty to violating anti-money laundering laws in 2024. Paxful’s operations and marketing strategies were scrutinized, with the company once boasting about the “Backpage Effect” in boosting its business.
The court’s ruling reflects a broader commitment to holding companies accountable for facilitating illegal activity. U.S. Attorney Eric Grant emphasized that the sentence serves as a clear warning. Companies that fail to prevent criminal activities on their platforms will face severe legal consequences under U.S. law. Paxful’s plea deal marks a pivotal moment in the ongoing effort to regulate cryptocurrency exchanges and curb illegal use.
The $4 million fine, while a fraction of the initial demand, underscores the seriousness of the charges and Paxful’s role in criminal networks. This case serves as a reminder of the legal and financial risks faced by cryptocurrency exchanges that fail to comply with U.S. laws.
The largest realized loss in bitcoin history occurred during last week’s market downturn, shattering previous records as the asset plummeted from $70,000 to $60,000 on Feb. 5.
According to Glassnode, the Entity-Adjusted Realized Loss reached $3.2 billion. This metric exclusively tracks the USD value of moved coins sold below their acquisition price while filtering out internal transfers between the same entity.
This massive capitulation surpassed even the darkest days of 2022, eclipsing the $2.7 billion loss recorded during the collapse.
According to data platform Checkonchain, “Last week’s bitcoin sell-off meets the criteria of a textbook capitulation event. It occurred rapidly, on heavy volume, and crystallised losses from the lowest-conviction holders.”
With daily net losses exceeding $1.5 billion, the scale of this sell-off represents the most significant absolute USD loss ever crystallized in the network’s history. This points to more signs of a bear market bottom.
As of press time bitcoin is trading around $67,600.
US lawmakers questioned Securities and Exchange Commission (SEC) Chair Paul Atkins at a hearing on Wednesday about the agency’s enforcement actions against the crypto industry and why several cases were dismissed since the leadership change.
Enforcement actions since US President Donald Trump assumed office, and appointed Atkins as SEC chair, are down by 60%, Representative Stephen Lynch said.
The Massachusetts Democrat cited the dismissal of several SEC lawsuits against the crypto industry, including the SEC’s motion to dismiss the Binance case in May 2025, as examples of the dropped enforcement cases.
Lynch also said that foreign investments in World Liberty Financial (WLFI), a decentralized finance platform linked to the Trump family, and memecoins launched by the family, were also causes for concern.
Recent reports indicate that Aryam Investment 1, an Abu Dhabi investment vehicle backed by Sheikh Tahnoon bin Zayed Al Nahyan, the national security adviser of the United Arab Emirates (UAE), purchased 49% of the startup company behind WLFI. Lynch said:
“This is hurting the crypto industry, all these scams. Look at crypto today. I think it’s down 25% in the last month. People are losing trust, and it’s not good for crypto. It’s certainly not good for consumers, and it’s awful the reputational damage that the SEC is suffering.”
“We have a very robust enforcement effort, and we are bringing cases,” Atkins responded. The comments rehashed previous concerns voiced by Democratic lawmakers about the Trump family’s involvement in crypto and how it could effect US national security.
The comments come during a US midterm election year and could signal resistance toward crypto from Democrats, which could stall market structure legislation if the Democratic Party takes back control of at least one chamber of Congress.
Related: Trump-linked WLFI faces probe over $500M UAE crypto deal
Rep. Maxine Waters claims crypto industry pardons, dropped lawsuits are politically motivated
“These cases were dismissed, despite the fact that the SEC was winning in court, proving that the SEC’s crypto enforcement program was well-grounded in the law,” California Representative Maxine Waters said.
The crypto industry executives who benefited from the pardons and the dropped regulatory lawsuits gave “millions of dollars” to Trump and his family, Waters continued.
Waters, who is a vocal critic of both Trump and the crypto industry, has repeatedly called for probes into the president’s family’s crypto activities, characterizing the projects as a potential backdoor for foreign entities to influence Executive Branch policy through bribery.
Magazine: How crypto laws changed in 2025 — and how they’ll change in 2026
TLDR
- MSTR stock dropped 4.8% today, following a significant decline in Bitcoin’s price.
- Michael Saylor linked the stock’s decline to a four-month Bitcoin bear market.
- Strategy’s stock has shown extreme volatility, with 58 moves greater than 5% in the past year.
- A 13.4% drop in Strategy’s stock occurred just six days ago due to Bitcoin’s sharp decline.
- Canaccord Genuity analyst Joseph Vafi slashed his price target on Strategy by over 60%.
Shares of Strategy (NASDAQ: MSTR) experienced a 4.8% drop in the afternoon session today. The decline follows the movement of Bitcoin, which faced a notable decrease in its value. Strategy’s strong correlation with Bitcoin’s performance has made the company’s stock price highly volatile.
MSTR Stock Moves in Tandem with Bitcoin
Strategy’s stock price has consistently followed Bitcoin’s fluctuations, given the company’s large holdings in the cryptocurrency. As Bitcoin dropped from over $110,000 to near $70,000, MSTR stock reflected a similar decline. Michael Saylor, Strategy’s executive, directly attributed the recent decrease to the ongoing four-month bear market for Bitcoin. He stated, “The stock’s decline is tied to the market’s response to Bitcoin’s performance.” This strong link between the two assets has resulted in high volatility for Strategy’s shares.
The company’s stock has moved more than 5% on 58 occasions over the past year, showing its sensitivity to market shifts. Today’s drop, however, is viewed as another typical move within the volatility that investors expect. The market, however, does not appear to see this as a fundamental change in the business outlook. Investors are continuing to monitor Bitcoin’s movements as they assess Strategy’s performance.
Previous Drop and Analyst’s Impact on MSTR
The latest drop comes after a 13.4% decrease in Strategy’s stock just six days ago. This drop followed Bitcoin’s sharp decline, which impacted the value of Strategy’s holdings. Canaccord Genuity analyst Joseph Vafi reduced his price target for the company by over 60% due to Bitcoin’s declining price. The drop in Bitcoin’s value below $70,000 also coincided with the market waiting for Strategy’s fourth-quarter earnings report.
The large-scale impact of Bitcoin’s movement on Strategy’s stock is a key focus for analysts. Investors have remained concerned about the company’s crypto exposure, especially as its Bitcoin holdings lose value. Despite these concerns, Strategy continues to be the largest corporate holder of Bitcoin, which has made its stock price sensitive to changes in the cryptocurrency’s performance.
Strategy’s stock has dropped 19.8% since the beginning of the year, with its current price at $126.10 per share. This price is a far cry from its 52-week high of $455.90, a 72.3% drop from that peak. Investors who bought $1,000 worth of Strategy stock five years ago would now see an investment valued at $1,249.
Crypto World
Charles Hoskinson announces late-March debut for Midnight, unveils privacy simulation platform
Input Output Global (IOG) founder Charles Hoskinson announced Thursday that Midnight, the company’s long-awaited privacy-focused blockchain, will officially launch during the final week of March.
The announcement came during Hoskinson’s keynote speech at Consensus Hong Kong, marking a major step forward in IOG’s efforts to bring data protection and regulatory compliance to decentralized systems.
“We have some great collaborations to help us run it,” he said. “Google is one of them. Telegram is another. We’re really excited, there’s more that will come.”
Midnight uses zero-knowledge (ZK) proofs to enable selective disclosure. Think of it as a smart curtain for blockchain data, letting users share only what they choose while keeping the rest private. It works as a partner chain to the smart contract platform Cardano and provides privacy and regulatory compliance for decentralized applications.
Alongside the mainnet timeline, Hoskinson unveiled Midnight City Simulation, an interactive platform offering a glimpse of how Midnight’s delivers scalable privacy through selective disclosure. The so-called rational privacy ensures that transaction data remains private by default, while specific information can be shared with authorized parties when required.
This flexibility balances transparency and confidentiality on the blockchain through multiple disclosure views, categorized as public, auditor, and god, each with a different access level.
The simulation, hosted at midnight.city, became operational at 10:00 a.m. Hong Kong time Thursday, although public access to the simulation remains restricted until Feb. 26, according to a press release.
The simulation, which runs on the Midnight network and recruits AI-driven agents that interact unpredictably to create a steady flow of transactions, shows how well the blockchain can handle real-world demand and scales accordingly.
IOG said this test demonstrates the network’s ability to keep generating and processing proofs at scale — an important step in proving it’s ready for real-world use.
TLDR
- Hong Kong remains committed to digital assets with a transparent and predictable regulatory framework.
- The UAE is rapidly advancing in the digital asset space with clear regulations and a dedicated regulatory body.
- Hong Kong has granted licenses to 11 virtual asset trading platforms under its licensing regime.
- Hong Kong plans to issue licenses for stablecoins and digital asset custodians in the coming months.
- Johnny Ng suggests Hong Kong could benefit from appointing a dedicated position to oversee crypto regulations.
- Hong Kong continues to engage with global partners, including South Korea, to stay competitive in the digital asset market.
Hong Kong has long been a global financial hub, known for its robust commitment to blockchain and cryptocurrency development. Despite this, it now faces increased competition from the UAE, which has been making aggressive moves in the virtual asset space. The rivalry has intensified as both regions strive to lead in digital asset regulation and innovation.
Hong Kong’s Transparent Regulatory Framework for Digital Assets
Hong Kong has built a reputation for its stable and predictable regulatory approach toward digital assets. According to Joseph Chan, Under Secretary for Financial Services and the Treasury, the city’s regulation is transparent and dependable. “Our regulation is transparent, certain, and predictable,” Chan emphasized. This consistency has helped Hong Kong remain a trusted location for virtual asset businesses despite global market fluctuations.
Since the implementation of its licensing regime for virtual asset trading platforms (VATPs) two years ago, Hong Kong has granted licenses to 11 companies. The framework aims to provide a stable environment for virtual asset firms, promoting industry growth. Chan also pointed out that Hong Kong’s approach remains steady, even when facing challenges like crypto winters.
Furthermore, Hong Kong is moving forward with its stablecoin regulatory regime, with licenses expected in the first quarter of this year. The upcoming licensing framework for digital asset dealers and custodians will be addressed later this year. This process, though lengthy, is designed to ensure all industry players are well-informed, minimizing uncertainties for businesses in the region.
UAE’s Aggressive Stance on Virtual Asset Regulation
While Hong Kong has maintained stability, the UAE is making fast strides in becoming a crypto-friendly hub. Johnny Ng, founder of Goldford Group, highlighted that the UAE is very aggressive in attracting digital asset businesses. The UAE has established clear regulations and placed virtual assets under the oversight of a dedicated regulatory body in regions like Dubai and Abu Dhabi.
Ng noted that this approach gives the UAE an edge in competing with other global financial centers. He pointed to South Korea’s similar model, where a government body specifically handles crypto regulations. “The UAE is really aggressive,” Ng said, comparing its regulatory efforts with those of Hong Kong and other jurisdictions.
In response, Ng suggested that Hong Kong could benefit from appointing a dedicated position to oversee digital asset regulation. “Hong Kong’s legislative council can recommend that the government create one position to oversee all these things,” he said. This idea would streamline regulatory processes and enhance the city’s competitiveness.
PIPPIN price has staged a powerful rally, pushing the meme coin closer to its all-time high. While momentum remains strong, continued investor selling could test the sustainability of this advance.
The question now is whether PIPPIN can sustain demand and convert resistance levels into lasting support.
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PIPPIN Is Not Overheating
The Network Value to Transactions, or NVT, ratio remains relatively low despite the recent price spike. Historically, sharp rallies in speculative assets push the NVT ratio higher. A rising NVT often signals that market value is outpacing transaction activity, suggesting overheating conditions.
In PIPPIN’s case, the muted NVT reading indicates that network usage is expanding alongside price. Transaction volumes have kept pace with market capitalization growth. This alignment reduces the probability of an immediate correction driven purely by overvaluation concerns.
Want more token insights like this? Sign up for Editor Harsh Notariya’s Daily Crypto Newsletter here.
A low NVT ratio during a rally can signal healthy participation. It suggests that price gains reflect genuine user engagement rather than excessive speculation. For investors focused on on-chain fundamentals, this metric supports the view that PIPPIN’s recent breakout attempt rests on a stronger footing.
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Will Investors’ Selling Affect PIPPIN?
Exchange data shows that holders have been actively selling over the past several days. Since the beginning of the month, approximately 41.95 million PIPPIN tokens have moved onto exchanges. At current prices, this represents more than $17 million in realized supply.
Such selling typically reflects short-term profit-taking following rapid price appreciation. However, distribution alone does not confirm a bearish reversal. In strong uptrends, elevated exchange balances can coincide with aggressive demand from new entrants absorbing available supply.
The combination of rising prices, steady NVT readings, and exchange inflows may indicate absorption. Buyers appear willing to offset sell pressure without triggering a breakdown. This dynamic is often observed in early-to-mid bull market phases, when demand quietly outpaces distribution despite visible profit-taking.
PIPPIN Price Breakout Likely
PIPPIN price has surged 159% over the past five days, trading at $0.419 at publication. The meme coin stands out as the week’s top-performing digital asset. Technical charts show the token nearing a breakout from a descending broadening wedge pattern.
The wedge formation projects a potential 221% advance upon confirmation. A decisive move above $0.518, flipped into support, would validate the breakout structure. Even if PIPPIN falls short of the full projection, momentum could still drive price beyond its previous all-time high of $0.720 and toward $0.800.
Risk factors remain relevant for short-term traders. If the NVT ratio begins rising while exchange selling persists, transaction activity may weaken. A failed breakout could trigger a pullback toward $0.267 or even $0.186. Such a decline would invalidate the current bullish thesis and shift momentum decisively lower.
Crypto World
Strange New Chinese AI ‘KIMI’ Predicts the Price of XRP, Dogecoin and Solana By the End of 2026
When you feed China’s strange new KIMI AI with a carefully engineered prompt, you can get the model to reveal some eye-catching price predictions for XRP, Dogecoin, and Solana this year.
According to Alibaba’s projections, all three assets could print new all-time highs (ATHs) within the next eleven months.
Below, we break down how these bullish forecasts are supported by chart data, fundamentals, and the news cycle.
XRP ($XRP): KIMI Outlines a Long-Term Path Toward $8
In a recent update, Ripple reaffirmed that XRP ($XRP) remains a core component of its strategy to position the XRP Ledger as an institutional-grade global payments network.
Widely recognized for rapid settlement speeds and ultra-low fees, XRPL is also a leading platform for two of crypto’s most promising sectors: stablecoins and real-world asset tokenization.
With XRP currently trading around $1.38, KIMI estimates the token could surge to $8 by the end of 2026, representing a sixfold increase.
Technical indicators appear to support the thesis. XRP’s Relative Strength Index (RSI) has begun rising from sub-30, suggesting renewed accumulation after recent heavy selling.
Fresh institutional demand driven by recently approved U.S.-listed XRP exchange-traded funds, alongside Ripple’s expanding enterprise partnerships and the potential passage of the U.S. CLARITY bill this year are XRP’s key catalysts.
Dogecoin (DOGE): Alibaba AI Sees Major Upside, But a New ATH Remains Uncertain
What began as a satirical experiment in 2013 has evolved into a $15 billion market cap coin. Dogecoin ($DOGE) now represents half of the $32 billion meme coin market.
Dogecoin last reached its all-time high of $0.7316 during the retail-driven bull run of 2021.
While the long-discussed $1 target remains a symbolic goal for the Dogecoin community, KIMI AI projects DOGE could hit it this year.
From its current price near $0.09, that would equate to gains of more than 1,000%, or roughly 11x.
Adoption continues apace: Tesla accepts DOGE for select merchandise, while PayPal and Revolut have integrated Dogecoin support.
Solana (SOL): KIMI Forecasts a Move Toward $400
The Solana ($SOL) ecosystem now secures roughly $6.4 billion in total value locked (TVL) and maintains a market capitalization close to $50 billion. Rising on-chain activity, developer participation, and daily users have spurred its growth.
The recent launch of Solana-linked exchange-traded funds by Bitwise and Grayscale is also attracting institutional investment.
However, after experiencing a prolonged correction in late 2025, SOL has spent most of February trading below $100.
Under KIMI’s most optimistic scenario, Solana could rally to $400 by 2027. That move would deliver nearly 5x returns for current holders and decisively surpass SOL’s previous ATH of $293, set January 2025.
Furthermore, Solana’s prospects look great. Firms such as Franklin Templeton and BlackRock are issuing tokenized real world assets on the network, giving it a strong use case that could increase exponentially.
Maxi Doge: Roll Over, Dogecoin! Maxi’s the New Alpha in Memesville
Finally, investors seeking classic high-risk, high-reward crypto exposure should look beyond the big projects towards emerging meme coins.
Maxi Doge ($MAXI) is one of the most talked-about meme coin presales of 2026, raising $4.6 million so far in its ongoing presale.
The project stars the brash, gym-obsessed, degen Maxi Doge, a distant envious cousin to Dogecoin, and one that channels the irreverent humor that originally propelled meme coins into the spotlight.
MAXI is an ERC-20 token on Ethereum’s proof-of-stake network, offering a significantly smaller environmental footprint compared to Dogecoin’s proof-of-work consensus model.
Early presale participants can currently stake MAXI tokens to earn yields of up to 68% APY, with rewards gradually tapering as the staking pool expands.
The token is $0.0002803 in the current presale phase, with automatic price increases triggered at each funding milestone. Purchases are supported via MetaMask and Best Wallet.
Memesville is entering a new era — and Maxi Doge’s the new alpha!
Stay updated through Maxi Doge’s official X and Telegram pages.
Visit the Official Website Here.
The post Strange New Chinese AI ‘KIMI’ Predicts the Price of XRP, Dogecoin and Solana By the End of 2026 appeared first on Cryptonews.
CertiK CEO Ronghui Gu told CoinDesk that the security firm has no concrete IPO timeline, but the company’s response to last year’s Huione-related backlash and rapid push into institutional products has positioned it as a credible candidate for a multi-billion-dollar public listing.
When CertiK conducted an audit of what later turned out to be a stablecoin project linked to the illicit marketplace Huione, the firm faced heavy online criticism. Gu framed the episode as a wake-up call rather than a reputational endgame. CertiK publicly clarified it had audited code supplied by a U.S.-registered client, before donating the fee to charity.
“What we do is we strengthen our current KYC procedure,” he told CoinDesk. “Also work with some external capacity providers to reduce the risk.” On monitoring post-audit use, he added: “After we release a report, we will keep a very close eye on how this report being used.”
CertiK is ramping up its enterprise offerings while keeping protocol audits as its main revenue stream. “Our current business was still and I would say that still will be the main revenue source,” Gu said, but he stressed these services must be “pushed to an institutional grade.”
In January Gu ignited discussion at Davos by suggesting that his firm were exploring an IPO, reports he now claims are exaggerated despite strong investor demand.
“We raised more than $240 million and I can tell you we have more money than that in our bank,” while acknowledging investor appetite. “We already received several requests,” he said, noting that media coverage sometimes misinterpreted his Davos remarks: “I explicitly say that we do not have a concrete plan. There’s no concrete timeline yet, but…many actually reached out to us.”
On valuation and the IPO question he struck a measured tone: “People still don’t know how to give the valuation for a web3-native company,” he said. He confirmed CertiK’s investor roster includes big names, Sequoia, Goldman Sachs and Coinbase, and hinted at selective additions: “We’re going to introduce one or two more strategic investors.”
The times are changing
When asked what attack vectors were becoming most prevalent across the crypto market, Gu argued that the risk profile in crypto has moved beyond smart-contract exploits.
“Operational risk became a bigger risk,” he said, alluding to private-key mismanagement, deepfakes and oracle manipulation. On AI-enabled impersonations, he was candid: “Deep fake is tough…we are still studying how to mitigate it.
He added that CertiK can help institutions but stressed the need for collaboration: “We need to work closely with our clients to help them review their internal policy or solution about the key management.”
For Gu, the post-Huione reforms are both reputational repair and strategic preparation for institutional clients.
“These institutions want institutional-grade auditing — formal verification that can demonstrate there are no bugs,” he said, noting demand from large banks across jurisdictions.
In this market, idle funds are the biggest risk. Most crypto users worry about volatility. More experienced participants tend to focus on a different factor: opportunity cost. When markets slow down, extended sideways movement is rarely neutral from a capital perspective.That’s why a growing number of traders are reallocating funds toward more capital-efficient DeFi models.
Each day capital remains unused can result in missed returns compared to more efficient allocation strategies.
A Structural Issue: Many Platforms Incentivize Passive Capital
Many platforms are structured in ways that benefit from users leaving funds idle, trading less frequently, operating under limited transparency, and responding slowly to changing market conditions.
Speed, yield, and flexibility are frequently highlighted, but are not always fully realized in practice.
By contrast, newer DeFi models are increasingly based on the idea that active capital allocation tends to outperform passive positioning.
In crypto, real conviction shows up on-chain.
Users aren’t just registering on these platforms — they’re allocating capital almost immediately. That behavior usually only happens when three conditions are met:
1. Control Is Absolute
Funds remain non-custodial. No permission risk. No “maintenance pauses” when volatility spikes.
2. Capital Efficiency Is Obvious
These platforms illustrate how idle assets can underperform and how quickly capital can be redeployed when infrastructure allows.
When performance becomes measurable rather than hypothetical, user hesitation tends to decline.
3. Exit Is Always Available
Third, liquidity and exit flexibility remain available. Prolonged lockups often undermine trust, which is why many modern DeFi protocols aim to minimize them.
Knowing that capital can be reallocated quickly, both in and out, often increases user confidence and willingness to deploy funds.
Market Dynamics Are Shifting, Often Without Broad Attention
Here’s what’s happening quietly:
- Smart money is reducing exposure to platforms with opaque incentives
- Traders are prioritizing flexibility + yield, not branding
- Capital is flowing toward systems that reward action, not patience
Several emerging DeFi platforms sit at the intersection of these trends.
This isn’t a future narrative. It’s a present reallocation.
Waiting for “Confirmation” Is a Losing Strategy
Many users say they’ll wait:
- for more coverage
- for bigger headlines
- for social proof
By the time that happens, the best conditions are already gone.
In crypto markets, earlier participation is often linked to asymmetric return profiles rather than elevated risk alone.
Early-stage phases of new platforms tend to favor participants who allocate capital sooner, before incentive structures evolve or compress.
From Registration to Deployment: Minutes, Not Friction
IODeFi removes the usual excuses:
- Registration is fast
- Wallet connection is seamless
- Deposits are straightforward
- Capital becomes productive immediately
This reduces unnecessary complexity and lowers the learning curve associated with capital deployment.
Final Thought: Precision Often Outperforms Excessive Caution
Caution feels safe. But in crypto, it often means underperforming by default.
Such platforms are not universally suitable, but they reflect a broader shift toward treating capital as an actively managed resource.
While some participants remain on the sidelines, others have already begun reallocating capital.
The new system lets institutions earn yield and access liquidity without moving Bitcoin out of custody.
Lombard on Wed., Feb. 11, launched Bitcoin Smart Accounts, a new product that allows institutions to use their Bitcoin in decentralized finance (DeFi) without moving it out of custody.
Lombard is a DeFi protocol with more than $1 billion in total value locked (TVL), according to DeFiLlama. The new product allows Bitcoin held with custodians, in MPC setups, or in self-custody wallets to be used as on-chain collateral, according to a press release viewed by The Defiant.
The process eliminates the need to transfer Bitcoin to a DeFi platform first, allowing institutions to keep their BTC in their existing custody arrangements. Bitcoin is currently trading at $67,615, down 1.5% on the day, per CoinGecko.
The product targets roughly $500 billion in Bitcoin that is currently held in professional custody by asset managers, corporations and high-net-worth individuals. Most of that Bitcoin does not currently participate in DeFi because transferring assets can create legal, operational or security risks.
“For 17 years, institutions could have the security of top custodians, or they could have on-chain utility — never both,” said Jacob Phillips, co-founder of Lombard. “Bitcoin Smart Accounts are a settlement network, similar to that of SWIFT and ACH, that eliminate that trade-off, and allow Bitcoin to stay in custody and settle on-chain, transforming Bitcoin from a passive asset into usable capital.”
How it Works
Institutions begin by adding a Smart Account designation to their existing custody setup, according to Lombard. Their Bitcoin is then recognized on-chain through a receipt token called BTC.b, which represents the held BTC.
The underlying Bitcoin remains with the custodian at all times, the company said, and legal ownership does not change.
Furthermore, the product will launch with Morpho, a lending protocol with more than $5.7 billion in TVL (and the seventh-largest protocol by TVL), according to DeFiLlama. Through the integration, Bitcoin held in custody can be used as collateral in Morpho’s lending markets.
This allows institutions to borrow against their BTC or potentially earn yield without transferring the underlying assets out of custody.
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