Ledn to drop ETH support in favor of fully custodied bitcoin-only model amid rising BTC-backed lending competition

Centralized crypto lender Ledn is discontinuing bitcoin yield generation and Ethereum support to double down on bitcoin-collateralized lending.

From July 1, Ledn will stop lending client assets to earn interest, ensuring they are never exposed to third-party credit risk. Going forward, it will only offer its "Custodied Bitcoin" loan structure, where client collateral stays fully held in custody by Ledn or its trusted funding partners, the firm said in a statement shared with The Block.

Ledn only expanded its crypto lending platform to support loans collateralized by ether in February 2024 — a move partly designed to assist victims of Celsius' 2022 bankruptcy with outstanding ether loans to refinance with "more digital assets proving their worth and resilience." However, just over a year later, support for ETH will be retired at the same time, reflecting Ledn's shift to focus exclusively on a BTC-only model.

"With our new hyper-focus on bitcoin-only lending, we're going back to our roots and principles that inspired Bitcoin to begin with," Ledn co-founder and CEO Adam Reeds said. "Bitcoin was created as a direct response to the risks of fractional reserve banking and unchecked use of client assets to generate interest. Traditional finance relies on constantly reusing client assets to create leverage and, ultimately, inflation. Bitcoiners instinctively reject that model. That's why we've moved away from this approach entirely. With our Custodied loan structure, client assets stay where they belong and are held in a transparent manner."

The move means Ledn is also retiring its BTC and ETH "Growth Accounts" — crypto savings products that offered annualized yields of up to 4% APY — to focus 100% on loans, the company confirmed.

Users still wary of centralized crypto lending

The crypto lending sector suffered significant setbacks following a tumultuous year for centralized services in 2022 — a period that saw the bankruptcy of firms like Celsius , BlockFi , Voyager Digital , and Genesis .

Following those events, it remained unclear the extent to which users would trust such services going forward. Ledn co-founder and CSO Mauricio Di Bartolomeo previously told The Block the company survived the period because of its "sound risk management program" and "prioritization of the safety and security" of its clients' assets.

However, the appetite for centralized bitcoin lending appears to growing again amid the foremost cryptocurrency's rise to fresh all-time highs , with users attracted by the opportunity to take some gains off the table without generating a taxable event or potentially lever up on their position.

Earlier this month, Strike , the Bitcoin Lightning Network-based payments app founded by Jack Mallers, became the latest firm to unveil a bitcoin-backed lending program for individual and corporate accounts. Strike joins companies, including Xapo Bank , Unchained , and Coinbase , in offering bitcoin-collateralized loans, each with varying risk models.

Ledn said it is taking these latest steps to further de-risk its product and enhance client security. Without specifically naming them, it argued many of the new lending products in the market are exposing consumers to risky and opaque structures once again — the exact dynamics that led to the meltdown of the lending sector in 2022. 

"As more new entrants push half-baked lending models back into the market, we're choosing the opposite path — eliminating lending risk entirely for our users and making it 100% clear how their assets are dealt with," Reeds added. "That clarity is what has helped us originate over $9.5 billion in loans and become the #1 retail CeFi lender in the Bitcoin space. We believe this approach should become the new standard for any serious digital asset lender."    

Improving regulatory clarity

Ledn was the first crypto lender to introduce proof-of-reserves attestations in 2020, using third-party verification to demonstrate all assets were fully accounted for — a transparency-first approach that it says helped it stay stable as less transparent peers collapsed.

With global regulators beginning to signal support for the industry as opposed to blanket restrictions, Ledn argues digital asset platforms have the opportunity and responsibility to build resilient systems and proactively manage risk. As for Ledn's strategy in this regard, the firm said it is "going all in on bitcoin, simplifying its product stack, and sharpening its focus around the most secure and proven digital asset."