Key Takeaways
- JPMorgan recently changed its policy on Bitcoin ETFs, allowing its advisors to pitch them to clients.
- The bank plans to let clients use BlackRock’s iShares Bitcoin Trust (IBIT) shares as loan collateral.
- Wall Street’s growing exposure to crypto could lead to new lending products.
A year and a half since the U.S. Securities and Exchange Commission (SEC) approved the first spot bitcoin exchange-traded funds (ETFs), JPMorgan was among the last central American banks to offer them to its clients.
However, having finally embraced crypto funds, the bank plans to accept them as loan collateral.
JP Morgan Eases Crypto ETF Restrictions
While rivals Goldman Sachs and Morgan Stanley were early movers as crypto ETFs gathered steam in 2024, JPMorgan initially prohibited its financial advisors from pitching them to clients.
However, under market pressure and with many American investors expressing an interest in Bitcoin and Ethereum funds, CEO Jamie Dimon announced that the bank would ease its restrictions in May.
A long-time crypto skeptic, Dimon conceded that investors had a right to make their own choices. “I don’t think you should smoke, but I defend your right to smoke,” he said. Likewise, “I defend your right to buy bitcoin,” he added.
However, he said the bank has no intention of offering crypto custody services.
Borrowing Against Crypto ETFs
Having finally opened the doors to crypto ETF investments, JPMorgan is ramping up its integration of the emerging crypto funds.
According to bank insiders cited by Bloomberg, wealth management clients will soon be able to use crypto ETF shares as loan collateral.
The offering will initially only be available for shares in the largest crypto ETF by market capitalization, BlackRock’s iShares Bitcoin Trust (IBIT). However, JPMorgan could integrate other similar products in the future.
The report stated that clients’ holdings in crypto ETFs will now be counted toward their net worth and liquidity calculations.
This marks a major policy shift for JPMorgan that could significantly expand banking services to crypto investors.
Implications for Lending and Liquidity
Allowing crypto ETFs as collateral opens new avenues for liquidity, especially for high-net-worth individuals and family offices. This could boost crypto’s utility in wealth management and even lead to ETF-collateralized structured products.
However, such offerings would introduce new counterparty risks. Given the collapses of crypto lenders like Celsius and Genesis in earlier cycles, banks will likely proceed cautiously.
