As Swiss banks begin to recognize Bitcoin as a trustworthy asset for Lombard loans, a paradox is emerging between the emancipation promised by BTC and the necessary integration into a rigid traditional financial system. This development raises a crucial question: how far can individual sovereignty be preserved while accepting the constraints of established institutions?
Bitcoin for cash: BTC recognized as trusted collateral
Delubac, Swissquote, and more recently Mt Pelerin now offer Lombard loans against Bitcoin. The offer is simple: you deposit cryptocurrencies as collateral (Bitcoin, Ether, etc.), and the company lends you money in exchange. This requires a centralized infrastructure and a bank acting as an intermediary with private keys, meaning that the funds are held by an authority and not by the customer.
Historically, Lombard loans have been reserved for wealthy clients with traditional financial assets such as stocks, gold, or valuables. They allow these individuals to use their portfolio as collateral and borrow easily so they don’t have to liquidate their established wealth.
Thanks to this crypto Lombard loan offering, BTC or ETH holders can now access fiat currency liquidity while maintaining their exposure to cryptocurrencies.
Integrating these principles into a Swiss banking product, often recognized as a symbol of “financial conservatism,” marks a turning point: the implicit recognition of Bitcoin’s economic legitimacy as a store of value. We can say that this amounts to making this long-marginalized asset a trustworthy collateral, on par with gold.
BTC as collateral, but at what price?
However, while this integration appears to be a victory, it also raises questions about the risk of Bitcoin, a revolutionary tool, being “captured” by the very institutions it seeks to circumvent.
Indeed, crypto-backed Lombard loans remain highly constrained. For example, the loan-to-value (LTV) ratio is capped at 40%, which significantly limits the amount that can be borrowed relative to the value of the assets.
Furthermore, this type of credit is only available in certain jurisdictions, thereby excluding a large proportion of international users. In addition, Yann Gerardi, marketing manager at Mt Pelerin, explains in the press release that in order to obtain a crypto Lombard loan, you must not only pass a KYC check, but also “detail the origin of your crypto funds.”
Finally, cryptocurrencies must be deposited in Swiss banks, which means temporarily relinquishing custody of your assets and therefore your private keys.
This contradicts the fundamental principle of individual sovereignty, which favors ownership over mere possession of BTC: “not your keys, not your coins.”
Certain non-custodial and peer-to-peer alternatives, such as HodlHodl and Lendasat, allow users to borrow in stablecoins or fiat without going through a banking intermediary or handing over their private keys. Lendasat even plans to integrate DLC contracts (smart contracts specific to Bitcoin, designed to be private, secure, and non-invasive) in the near future, further enhancing the confidentiality and security of loans.
It should also be noted that in the DeFi world, it is already possible to obtain loans in cryptocurrencies against other cryptocurrencies, but this remains confined to the crypto ecosystem itself, with no direct gateways to traditional finance.
It should also be emphasized that the tax framework is not yet fully stabilized. Some tax lawyers are calling for caution, particularly due to the possibility that a specific European regime on crypto pledging (the use of an asset as collateral for a loan without losing ownership) may be introduced in the future.
Nevertheless, this tension between absolute sovereignty and partial integration into the traditional system can be seen as a temporary compromise allowing wealthy individuals to mobilize their crypto assets without dissolving them or subjecting them to arbitrary taxation.
