Lombard Finance Introduces “Bitcoin Smart Accounts” to Bridge Institutional Custody and DeFi
February 11 2026 – Lombard Finance, a DeFi protocol with more than $1 billion locked across its suite of products, announced the launch of Bitcoin Smart Accounts, a custodial‑compatible on‑chain wrapper that lets institutional bitcoin holders access decentralized finance without moving the underlying asset out of custody.
What the product does
The service adds a “Smart Account” tag to an existing custodial arrangement—whether a multi‑party computation (MPC) vault, a traditional custodian, or a self‑custody wallet. Once the tag is applied, the custodian issues an on‑chain receipt token, BTC.b, that mirrors the amount of BTC held off‑chain.
- The underlying bitcoin never leaves the custodian’s control; legal ownership stays with the original holder.
- BTC.b can be used as collateral on DeFi protocols, beginning with an integration to Morpho, the $5.7 billion‑TVL lending platform that ranks among the top ten by assets.
- The wrapper enables institutions to borrow against their BTC or earn yield on it while preserving the security of their existing custody framework.
Why it matters
Institutional investors together control roughly $500 billion of bitcoin, but most of that capital is locked in custodial silos and therefore absent from DeFi ecosystems. The primary barriers have been legal and operational risk, as transferring assets to a blockchain address can expose custodians and their clients to regulatory uncertainty, custody‑provider liability, and security concerns.
Jacob Phillips, co‑founder of Lombard Finance, framed the launch as a “settlement network” that eliminates the historic trade‑off between custodial security and on‑chain utility. By keeping BTC in custodial custody while providing a DeFi‑ready token, the protocol aims to transform bitcoin from a passive store of value into a productive capital source for institutions.
Market context
At the time of the announcement, bitcoin was trading around $67,600, a modest dip of 1.5 % on the day according to CoinGecko. The broader crypto market has seen renewed interest from traditional asset managers seeking yield‑generating alternatives, yet many remain hesitant to expose custody‑secured assets to the perceived volatility and operational risks of DeFi.
If institutional participation in DeFi scales as Lombard anticipates, the combined TVL of major lending platforms could see a meaningful uplift, adding liquidity and potentially smoothing interest‑rate dynamics in BTC‑backed markets.
Potential challenges
- Regulatory oversight – While the BTC.b token is a receipt rather than a transfer of ownership, regulators may still scrutinize its use as collateral, especially in jurisdictions with strict custodial rules.
- Custodian adoption – The system relies on custodians supporting the Smart Account designation and issuing BTC.b. Early uptake will likely depend on how quickly major custodians integrate the protocol.
- Smart contract risk – As with any DeFi integration, the security of the underlying lending platform (Morpho) and the BTC.b wrapper contract are critical. Audits and insurance solutions will be essential for institutional confidence.
Key takeaways
- New on‑chain wrapper: Lombard’s Bitcoin Smart Accounts generate a BTC.b receipt token that represents custodial BTC without moving the asset.
- Institutional focus: Targets the roughly $500 billion of bitcoin stored with professional custodians, aiming to unlock DeFi yield and liquidity for asset managers, corporates, and high‑net‑worth individuals.
- First DeFi partner: Integration with Morpho enables BTC‑backed borrowing and lending, creating immediate utility for the wrapped token.
- Risk mitigation: By keeping legal ownership and custody unchanged, the product addresses the primary legal and operational concerns that have kept institutions out of DeFi.
- Growth potential: Successful adoption could expand DeFi TVL, deepen Bitcoin’s role in the decentralized financial system, and set a precedent for other custodial‑compatible on‑chain assets.
Outlook
Lombard Finance’s Smart Accounts could be a pivotal step in bridging the gap between traditional custodial frameworks and the open‑access world of DeFi. The next few months will reveal how quickly custodians and institutional investors embrace the BTC.b token, and whether the integration with lending platforms like Morpho can deliver the promised yield and liquidity without compromising security or regulatory compliance.
For more details, the full press release is available on The Defiant’s website.
Source: https://thedefiant.io/news/defi/lombard-launches-smart-accounts-to-connect-institutional-bitcoin-to-defi
