A comprehensive 2025 state-of-the-industry digest covering Bitcoin lending's recovery, new platforms, regulatory shifts, and what's next for borrowers.
Arkadii Kaminskyi
Arkadii Kaminskyi
Head of Operations at Sats Terminal
Head of Operations at Sats Terminal with 5 years of experience in crypto. Specializes in DeFi, yield farming, and borrowing — has reviewed 50+ crypto products.
The bitcoin lending news cycle in 2025 looks nothing like it did three years ago. After the catastrophic collapses of 2022 wiped out billions in borrower funds and shook institutional confidence to the core, the lending market has spent two years rebuilding on fundamentally different foundations. What is emerging is a more mature, more transparent, and more diversified ecosystem — one where Bitcoin-backed loans are becoming a serious financial tool rather than a speculative side product. This piece covers the key developments shaping Bitcoin lending throughout 2024 and into 2025: the recovery from the last bear market, the explosion of Bitcoin-native lending infrastructure, major platform launches, regulatory shifts in the US and Europe, institutional entry, and what it all means for everyday Bitcoin holders who want to borrow without selling.
The collapses of Celsius, Voyager, BlockFi, and Genesis between 2022 and early 2023 were not just business failures — they were a stress test that exposed the structural flaws of the era's dominant lending model. Centralized lenders were taking user deposits, relending them at higher rates, using customer funds as collateral for their own leveraged positions, and in many cases operating with no meaningful reserves. When asset prices fell and counterparties failed, the cascading defaults were inevitable.
What the 2022 crisis proved, in hindsight, was that the problem was never Bitcoin lending itself — it was centralized finance models built on opacity, rehypothecation, and hidden leverage. The survivors and successors that emerged from 2023 onward took a structurally different approach.
The most durable change is the industry-wide embrace of over-collateralization as a non-negotiable standard. In the pre-2022 era, some platforms offered undercollateralized loans to institutional borrowers based on creditworthiness assessments. Those models are largely gone. Today, the dominant architecture requires borrowers to post significantly more collateral than the loan value — typically 130% to 200% — providing a meaningful buffer against price declines before any liquidation is triggered.
Alongside over-collateralization, proof of reserves became a meaningful demand from institutional counterparties. Platforms that survived 2022 and those launched afterward found that demonstrating verifiable reserves was not optional — it was a competitive necessity. Industry groups and regulators began treating proof-of-reserves audits as table stakes rather than a differentiator.
Perhaps the most structurally significant shift was the relative expansion of decentralized finance lending compared to its centralized counterpart. DeFi protocols like Aave and Morpho did not collapse in 2022 — they continued operating because their smart contracts executed automatically, their collateral was always on-chain, and there was no hidden leverage. That track record earned real credibility. By 2024, on-chain lending volumes had recovered meaningfully, and institutional participants who once dismissed DeFi as a retail toy began allocating in earnest.
The recovery was not instantaneous, and it was not linear. Trust had to be rebuilt slowly. But by late 2024 and into 2025, the combination of regulatory clarity, improved tooling, and a renewed bull market created conditions for the next stage of growth.
One of the most consequential shifts in 2025 bitcoin lending news is the emergence of infrastructure designed to keep Bitcoin on Bitcoin — rather than wrapping it and bridging it to Ethereum-compatible chains before any lending can happen.
Despite the emergence of native alternatives, wrapped Bitcoin formats — principally wBTC on Ethereum and cbBTC on Base — remained the dominant form of Bitcoin collateral in DeFi through 2025. Their integration into mature protocols like Aave v3 and Morpho Blue means they benefit from deep liquidity, established oracle infrastructure, and well-tested liquidation mechanisms. Understanding the distinction between custodial wrapped Bitcoin and non-custodial alternatives matters when assessing counterparty risk, as explored in our guide on bridging and wrapping Bitcoin.
Babylon Protocol's approach to Bitcoin staking — enabling BTC holders to participate in proof-of-stake security without moving their Bitcoin to another chain — attracted significant attention throughout 2024 and into 2025. While Babylon's primary use case is security provisioning rather than lending per se, it represents a broader infrastructure buildout that positions Bitcoin as a productive asset within its own ecosystem. Reports indicate that Babylon's mainnet launch and subsequent growth demonstrated meaningful demand for Bitcoin-native financial primitives.
The launch of the Runes fungible token protocol on Bitcoin following the April 2024 halving opened new design space for Bitcoin-native financial applications. While Runes-based collateral in lending is still early and largely experimental as of mid-2025, the protocol's arrival signals a broader maturing of the Bitcoin application layer. Industry observers note that as Bitcoin's programmability expands — whether through RGB, Taproot Assets, Ark, or Runes — the long-term potential for lending protocols that do not require wrapping or bridging grows accordingly.
Several projects have explored using Lightning Network payment channels as a lending primitive, allowing small Bitcoin-denominated loans without on-chain settlement for every interaction. These models remain constrained by channel liquidity and routing complexity, but they represent an important design exploration. The possibility of sub-satoshi-precise lending flows with near-instant settlement addresses use cases that traditional over-collateralized DeFi loans are poorly suited for.
The 2025 lending landscape is characterized by a wave of platform activity — both new entrants and significant expansions from established players. Here is a summary of the most significant developments, followed by a platform comparison table.
Coinbase's launch of a Bitcoin-backed lending product was one of the most-discussed pieces of bitcoin lending news in 2025. Leveraging its existing user base and regulatory standing, Coinbase positioned the product as an accessible entry point for retail users who want liquidity against their BTC without selling. The product uses cbBTC — Coinbase's own wrapped Bitcoin on the Base network — as the collateral mechanism, routing through DeFi protocols on the backend while presenting a simplified interface to users. Reports suggest the product achieved meaningful uptake given Coinbase's distribution, though it operates within regulatory constraints that limit availability in some jurisdictions.
Strike, known primarily as a Bitcoin and Lightning payment application, launched a Bitcoin-backed lending product targeted at US customers. The move was notable because Strike's positioning has historically been firmly in the payments lane — the lending entry signals that the product category is maturing enough to attract companies whose core competency is elsewhere. Strike's approach reportedly emphasizes simplicity and integration with existing Bitcoin holdings on its platform.
Morpho Blue's modular architecture proved well-suited to the growth of Bitcoin collateral markets throughout 2024 and into 2025. Unlike monolithic lending pools, Morpho Blue allows curators to create isolated markets with customized parameters — loan-to-value ratios, oracle sources, liquidation mechanisms — enabling faster innovation without the governance bottlenecks of protocols like Aave. Reports indicate that Bitcoin collateral markets on Morpho Blue, particularly using cbBTC and wBTC as collateral, saw substantial growth in TVL. Borrow by Sats Terminal integrated Morpho Blue as a core lender; you can read about that integration in our Morpho launch announcement.
Aave v3 continued to be the dominant DeFi lending protocol by total value locked through 2024 and into 2025. Key developments included the activation and growth of cbBTC markets on the Base network, giving users another avenue to borrow stablecoins against Bitcoin collateral within one of the most battle-tested protocols in DeFi. Aave v3 typically offers maximum LTVs of 70-75% on wBTC and similar configurations on cbBTC, with variable borrow rates determined by pool utilization. The protocol's multi-chain deployment across Ethereum mainnet, Base, Arbitrum, Polygon, and Optimism means Bitcoin holders can access liquidity on whichever chain suits their needs.
Lava and Arch both made progress in 2024-2025 toward Bitcoin-native lending — meaning loan products where Bitcoin collateral is held in Bitcoin-native constructions (multisig, DLCs, or similar) rather than requiring wrapping to an EVM chain. Lava's approach uses discreet log contracts to create trust-minimized lending agreements where the liquidation condition is enforced cryptographically rather than by a custodian. Arch focuses on Bitcoin's programmability layer to enable financial contracts. Neither has reached the scale of Morpho or Aave, but their development represents genuine progress toward the long-term goal of lending on Bitcoin without needing to leave it.
| Platform | Type | BTC Collateral Format | Typical Max LTV | Chain | Key Feature |
|---|---|---|---|---|---|
| Aave v3 | DeFi Protocol | wBTC, cbBTC | 70-75% | Multi-chain | Largest TVL, battle-tested |
| Morpho Blue | DeFi Protocol | wBTC, cbBTC | Up to 86% (market-dependent) | Ethereum, Base | Modular markets, often better rates |
| Coinbase Borrow | CeFi/Hybrid | cbBTC (via Base) | Varies | Base | Retail-friendly UX, regulatory standing |
| Strike Lending | CeFi | Native BTC | Varies | Lightning/Bitcoin | Integrated with Lightning payments |
| Lava | Bitcoin-native | Native BTC (DLC) | Varies | Bitcoin | Trust-minimized via DLCs |
For a comprehensive side-by-side analysis of DeFi and CeFi lending options, see our guide to comparing Aave, Morpho, and CeFi.
Regulatory clarity — or the credible prospect of it — is perhaps the single largest driver of institutional capital into Bitcoin lending. The 2024-2025 period brought significant movement on multiple fronts, though the picture varies substantially by jurisdiction.
Paul Atkins' confirmation as SEC Chairman in early 2025 represented a meaningful shift in the agency's posture toward digital assets. Under the previous administration, the SEC had pursued an aggressive enforcement-first strategy — using enforcement actions rather than formal rulemaking to define the boundaries of permissible activity. Atkins, with a track record as a more market-oriented regulator, signaled a preference for formal rulemaking and engagement with industry participants. Industry sources suggest the change in leadership produced an immediate shift in tone within the agency, with several high-profile enforcement matters being reviewed or settled rather than pursued to trial.
For Bitcoin lending specifically, the question of whether lending products constitute securities has been central. Public reporting suggests the new SEC leadership is working toward clearer frameworks that distinguish between securities-like lending arrangements and collateralized loan products. The full impact of this shift remains to be seen through formal guidance, but the directional change is broadly welcomed by the industry. You can read more about the regulatory landscape in our guide to crypto lending regulation.
The rollback of Staff Accounting Bulletin 121 (SAB 121) was one of the most practically significant regulatory developments of 2025 for Bitcoin lending. SAB 121, issued in 2022, required financial institutions to record customer crypto assets as both an asset and a liability on their own balance sheets — making it effectively prohibitive for banks and broker-dealers to custody digital assets for clients. The practical effect was to freeze most regulated financial institutions out of the crypto custody and lending market.
With SAB 121 reversed, the pathway for regulated banks to offer Bitcoin-backed lending products — or to serve as custodians for collateral in third-party lending arrangements — opened meaningfully. Industry observers expect this to be a multi-year catalyst as regulated institutions build the infrastructure and compliance frameworks to participate.
The Markets in Crypto-Assets (MiCA) regulation, which began phasing in through 2024 with stablecoin provisions taking effect first and broader provisions following, created the most comprehensive regulatory framework for digital assets in any major jurisdiction. For Bitcoin lending operating in or serving European users, MiCA's implications are significant. The regulation establishes licensing requirements, disclosure obligations, and consumer protection standards that, while creating compliance costs, also create a clear operating environment.
Notably, MiCA's treatment of lending products remains an area of ongoing interpretation, as DeFi protocols are not straightforwardly captured by a framework written primarily for asset issuers and exchange operators. Regulatory guidance from the European Banking Authority and European Securities and Markets Authority on DeFi's treatment under MiCA continued to develop through 2025.
The UK Financial Conduct Authority took a measured, consultation-heavy approach to crypto asset lending through 2024 and into 2025. The FCA's framework development, informed by its earlier consultation on crypto promotion rules (which took effect in 2023), moved toward distinguishing between custodial lending — where a company takes client assets and lends them out — and collateralized loan products where the borrower retains beneficial ownership. Industry sources indicate the FCA is likely to require registration and disclosure standards for both categories, with fuller rules expected in the 2025-2026 period.
Singapore's Monetary Authority of Singapore (MAS) maintained its position as one of the more constructive regulatory environments for digital asset businesses, with its licensing framework for digital payment token service providers providing a relatively clear pathway for compliant operations. Several Bitcoin lending platforms secured or applied for MAS licenses through 2024, positioning Singapore as a hub for institutional Bitcoin lending activity in the Asia-Pacific region. Japan and Hong Kong also made notable progress on digital asset regulatory frameworks, with Hong Kong in particular pursuing an aggressive licensing regime aimed at attracting institutional crypto business.
The institutional dimension of 2025 bitcoin lending news deserves its own examination, because institutional behavior is increasingly setting the terms of market structure. For a deeper look, see our guide to institutional crypto lending and the corresponding institutional lending learn guide.
The growing number of public companies holding Bitcoin on their balance sheets — a trend accelerated by MicroStrategy's well-publicized strategy — created a new class of institutional borrowers. Companies holding significant Bitcoin positions have operational cash needs that can, in theory, be met by borrowing against those positions rather than selling. Throughout 2024, reports indicated growing interest among corporate treasury teams in structured Bitcoin-backed credit facilities, though most such arrangements remained bespoke and handled through private credit desks rather than public DeFi protocols.
The approval of spot Bitcoin ETFs in the US in January 2024 was primarily discussed in terms of price and demand implications, but its effects on the lending market are also material. ETF shares are not directly usable as DeFi collateral, but the approval legitimized Bitcoin as an institutional asset class in ways that reduced compliance friction for traditional financial institutions building adjacent products. Custodians, prime brokers, and asset managers that now hold Bitcoin exposure through ETF operations are developing broader Bitcoin financial service capabilities — including lending — as a natural extension.
The emergence of institutional DeFi — structured access to on-chain lending protocols with compliance wrappers, KYC, and traditional settlement rails — was a meaningful 2024-2025 theme. Firms like Coinbase's institutional arm, Galaxy Digital, and a range of newer entrants have built products that allow institutional participants to access Aave, Morpho, and other protocols without needing to manage private keys directly. This layer abstracts blockchain complexity while preserving the on-chain transparency that institutional risk teams increasingly value. The future of Bitcoin-backed lending likely involves significantly more institutional participation through these kinds of hybrid structures.
Institutional adoption has also driven demand for more sophisticated risk management tooling. Loan health monitoring, automated margin management, dynamic LTV adjustment, and real-time collateral valuation are now expected features for institutional lenders and borrowers. The development of on-chain credit scoring primitives — using transaction history, protocol participation, and collateral behavior as inputs — is early but real, pointing toward a future where creditworthiness can be assessed without requiring traditional KYC and credit bureau data.
Beyond the institutional and regulatory dimensions, product innovation has been a defining feature of the 2025 Bitcoin lending landscape. The platforms and protocols that are winning market share are not doing so by offering marginally better interest rates — they are winning by solving genuine friction points in the borrower experience.
Variable-rate lending — where borrowers pay an interest rate that fluctuates with protocol utilization — has been the default in DeFi. But variable rates create planning problems for borrowers with specific financial needs. If you borrow at 4% APR to fund a home renovation and rates spike to 18% during a bull market, the cost of your loan changes dramatically. Fixed-rate lending products, using mechanisms like Notional Finance, Pendle, or protocol-native fixed-rate vaults, have gained traction through 2024-2025 as borrowers seek predictability. For a detailed treatment of this trade-off, see our guide to fixed vs. variable Bitcoin loans and the corresponding variable vs. fixed interest rates resource.
The multi-chain reality of 2025 DeFi means that Bitcoin collateral — in its various wrapped forms — is accessible across a growing number of networks. wBTC on Ethereum, cbBTC on Base, BTCB on BNB Chain, and native BTC bridged to Arbitrum via protocols like tBTC represent distinct pools of Bitcoin liquidity that did not always communicate well. Cross-chain lending protocols and bridges are reducing this fragmentation, allowing users to deposit Bitcoin on one chain and access stablecoin liquidity on another without manual bridging steps. Our guide on cross-chain borrowing explains the mechanics in detail.
Ethereum gas costs made small Bitcoin-backed loans economically impractical on mainnet for much of DeFi's history. The scaling of Layer 2 networks — Base, Arbitrum, Optimism — with transaction costs orders of magnitude lower than mainnet has changed the calculus. Borrowing $2,000 against Bitcoin on Aave v3 on Arbitrum costs a fraction of what the same transaction would cost on Ethereum mainnet. This cost reduction has opened Bitcoin-backed lending to a much broader range of borrowers who lack the capital to make mainnet gas costs negligible.
A defining product characteristic of the 2025 generation of lending tools is the rejection of the traditional financial institution model of KYC-first, custody-first access. Protocols like Morpho and Aave require no identity verification because the smart contract enforces loan terms mathematically — collateral is locked, liquidation is automatic, and the protocol has no need to know who you are. This model is not universally appropriate (institutional participants often need KYC for compliance reasons), but for self-sovereign Bitcoin holders it represents a genuine alternative to the opacity and trust requirements of custodial lending. Understanding the distinction is covered in our guide to custodial vs. non-custodial lending.
The developments summarized above have practical implications for the average person who holds Bitcoin and wants to access liquidity without selling. The 2025 lending landscape offers more options, more transparency, and more safety than the 2021 peak — but it also has new complexities worth understanding.
The expansion of lending infrastructure — more protocols, more chains, more products — has created genuine competition for borrower demand. That competition shows up as better rates, lower fees, and more flexible terms compared to what was available in 2021. The ability to compare offers across DeFi and CeFi platforms, rather than accepting whatever a single lender offers, is a real improvement for borrowers. Understanding how crypto lending rates are determined helps you evaluate whether a given offer is competitive.
The improvements in market structure do not eliminate the fundamental risk of Bitcoin-backed lending: if Bitcoin's price falls significantly and you do not add collateral or repay part of your loan, you face liquidation. This is not a platform-specific risk — it is inherent to over-collateralized lending against a volatile asset. Managing this risk requires understanding your loan's health factor, setting appropriate buffer between your LTV and the liquidation threshold, and having a plan to respond to rapid price moves. Our series on managing liquidation risk and avoiding liquidation covers this in detail.
One of the most important 2025 developments for everyday Bitcoin holders is the accessibility of self-custodial lending. You no longer have to hand your Bitcoin to a company and trust that it will be there when you want it back. On-chain lending protocols hold collateral in smart contracts — the Bitcoin-equivalent collateral (in wrapped form) is verifiably locked, and the protocol's code defines the conditions under which it can move. This is a fundamentally different security model from the custodial platforms that collapsed in 2022.
The flip side of this improvement is that the best rates and most transparent options require some blockchain literacy. Understanding what loan-to-value ratio means, how oracle pricing works, what a health factor represents, and how gas costs affect your net return requires learning that is not trivial. The industry is building tools to reduce this complexity — including aggregators that handle the technical details automatically — but the underlying mechanics are still worth understanding.
Borrow by Sats Terminal was built specifically for the landscape described in this article — a world where there are multiple good lending options but significant friction in finding, comparing, and accessing them. As an aggregator rather than a lender itself, Borrow connects users with the best available offers from both DeFi protocols (Aave v3, Morpho Blue) and CeFi lenders, presenting them in a single interface.
When you deposit Bitcoin through Borrow, the platform handles the technical complexity automatically: wrapping your BTC into the appropriate format (wBTC, cbBTC, or BTCB depending on the target chain), bridging it cross-chain, and routing it to the lender offering the best terms for your collateral amount and preferred chain. You do not need to manage multiple wallets, navigate multiple protocol interfaces, or manually bridge assets. Borrow creates a self-custodial Privy wallet for you automatically — no seed phrase management required — and all actions require your explicit approval. Borrow never takes custody of your funds.
In a post-2022 world where trust in custodial platforms is rightly scarce, Borrow's non-custodial model is a genuine feature. Because the underlying lenders are on-chain protocols, the collateral you post is verifiable on the blockchain at all times. There is no counterparty holding your Bitcoin in a lending pool and hoping their other bets work out. This is the structural difference between what Borrow routes through and what Celsius, Voyager, and BlockFi were doing.
The wave of platform launches and updates described in this article — Morpho Blue expansion, Aave v3 multi-chain growth, new Bitcoin collateral markets — directly expands the menu of options available through Borrow. As new lenders and new Bitcoin collateral formats are integrated, users automatically benefit through better comparison and potentially better rates. The recent Morpho Blue integration is an example of how Borrow's aggregator model translates protocol expansion into user value.
Borrow's no-KYC model is enabled by the non-custodial, protocol-native architecture of its underlying lenders. As the regulatory landscape evolves — particularly under MiCA in Europe and whatever framework emerges in the US — the distinction between platforms that custody user funds and those that facilitate access to on-chain lending will likely be significant. Borrow's positioning on the non-custodial side of that distinction is a meaningful factor in its long-term regulatory posture. For those interested in the broader implications, our regulatory landscape guide goes deeper on the jurisdictional nuances.
The 2025 bitcoin lending news cycle is not finished. Several developments worth watching are in progress or approaching meaningful inflection points.
Beyond agency-level regulatory change, Congress has multiple digital asset bills at various stages of consideration. A comprehensive market structure bill that clearly delineates which digital assets are securities versus commodities would remove a major source of uncertainty for lending platforms. Industry observers broadly expect some form of legislative movement in the 2025-2026 period, though the specifics remain contested.
Bitcoin-backed loans are denominated in stablecoins. The regulatory treatment of stablecoins — who can issue them, what reserve requirements apply, whether they count as securities — directly affects the usability of Bitcoin lending products. US stablecoin legislation was advancing through Congress in 2025, and its outcome will shape the landscape of available loan denomination currencies. The emergence of well-regulated, bank-backed stablecoins could significantly expand the addressable market for Bitcoin lending. Understanding the risks of different stablecoin types is relevant context for borrowers today.
The maturation of Bitcoin Layer 2 protocols — Lightning, Ark, Statechain, RGB, Taproot Assets — over the next 12-24 months will determine how much lending activity can be conducted on Bitcoin-native rails rather than requiring EVM bridges. If these protocols achieve the security and liquidity levels necessary for meaningful collateralized lending, the landscape could shift materially toward Bitcoin-native products and away from wrapped-BTC-on-Ethereum as the dominant model.
The buildout of institutional-grade DeFi access infrastructure — compliant custodians, on-chain compliance layers, prime brokerage for DeFi positions — is ongoing. As this infrastructure matures, the gap between institutional and retail DeFi lending narrows, potentially driving significant capital into on-chain Bitcoin lending markets.
The macroeconomic interest rate environment has significant implications for Bitcoin lending rates. When traditional finance rates are high, the opportunity cost of holding Bitcoin without generating yield increases, creating pressure for Bitcoin lending products to offer competitive returns. Conversely, in a lower-rate environment, DeFi stablecoin borrowing rates tend to compress. Monitoring the macro backdrop — and understanding how interest rates work in crypto lending — remains essential context for borrowers.
Common Questions
Bitcoin lending has recovered significantly from the 2022 collapse and is now characterized by a more mature, diversified ecosystem. Centralized platforms that failed (Celsius, Voyager, BlockFi) have largely been replaced by on-chain lending protocols with transparent, verifiable collateral management and by regulated CeFi players with stronger reserve practices. Major DeFi protocols like Aave v3 and Morpho Blue support Bitcoin collateral across multiple chains, while new entrants like Coinbase Borrow and Strike lending have expanded the product landscape. Regulatory clarity is improving, particularly in the US following SEC leadership changes and the rollback of SAB 121, creating better conditions for continued institutional and retail growth.
