Flow Traders to tap Bitcoin on-chain credit through Lombard Finance

Flow Traders (Euronext: FLOW) will become the pilot partner of Lombard Finance for its new Bitcoin Onchain Credit Strategy. On-chain BTC lending is still relatively small, and Lombard plans for an expansion with large-scale institutional platforms. 

Flow Traders, a leading trading firm, liquidity provider, and market maker, will be able to borrow stablecoins and access on-chain markets, which were previously difficult to access for institutional clients. 

Lombard Finance has taken steps to make on-chain lending smoother and more accessible, allowing institutions to post onchain collateral more efficiently. Lombard uses Chainlink’s CCIP interoperability tool, allowing cross-chain deposits of BTC.b, moving collaterals from Avalanche to Ethereum. 

Lombard Finance has also opened up its BTC lending strategy through its Bitcoin Earn program for other institutional and retail clients. 

As with other BTC lending tools, the Ethereum network is used for smoother transfers and cross-chain liquidity. The chief reason is that access to stablecoin loans is the most liquid on Ethereum and its compatible networks. This is the reason direct lending on Bitcoin never took off, as stablecoins are not running on Bitcoin’s network. 

Flow Traders to borrow through private collateral placement

Lombard Finance has tweaked the DeFi lending model, where collateral is usually sent to pools. Pools themselves have specific problems, such as utilization rate, available liquidity, and potential attacks to drain the available funds. For this reason, using those liquidity pools is sometimes impossible for institutional clients. 

‘Asset managers have a real, persistent need to borrow stablecoins, but until now, DeFi markets weren’t built in a way they could access. This structure changes that. By separating the borrower from the collateral provider, the parties involved have made it possible for regulated, institutional trading firms to tap into onchain credit for the first time,’ said Jacob Phillips, Co-Founder and CEO of Lombard Labs.

Lombard’s Bitcoin Onchain Credit Strategy will allow Flow Traders to access credit through an underwriting structure. BTC will be supplied to Lombard and be considered as collateral coverage. 

As a result, Flow Traders will gain access to stablecoins for other operations through the Cap automated marketplace. Cap is a dedicated private credit platform with principal protection for lenders. Cap automates the loan process, making sure each loan is backed by on-chain financial guarantees. The loans have a dedicated underwriter, ensuring the collateral is verified and protected.

Each loan will be siloed away and be private to Flow Traders. With this move, Lombard will also make a breakthrough in traditional private credit markets, by utilizing BTC reserves.

BTC lending accelerated in the past month

BTC lending currently carries around $4.31B in liquidity, following the latest BTC price recovery. Lombard Finance is the second-biggest protocol, currently carrying over $6M on two chains. 

Lombard is a well-established protocol with $3.23M in annualized fees, showing lending markets were still lively. 

The Bitcoin Onchain Credit Strategy builds on the already successful Bitcoin Earn program. Bitcoin Earn has already attracted over $1B in deposits, with more than 38,500 users since launch. 

Lombard uses BTC.b and LBTC, two wrapped forms of BTC, for its multi-chain strategy. Currently, most of the reserves are on Ethereum, with smaller markets on Base and Solana.