Key takeaways

• Institutional credit markets in crypto are making a comeback, but large-scale adoption remains constrained by regulatory capital requirements and technological familiarity.
• New demand is coming from corporate treasurers and HNWs, especially those holding BTC who want to monetize assets via lending.
• DeFi-inspired innovations are seeping into TradFi, with banks piloting tokenized collateral and smart contract automation, but hurdles around KYC, margin calls, and legal clarity still limit adoption.
• Basel III requirements remain a major barrier for globally systemic important banks entering crypto lending markets at scale.
• Smart contract risk, liquidation friction, and off-chain oversight are still critical challenges for scaling crypto credit.

Panelists

• Chris Tyrer, President – Bullish
• Myles Harrison, Chief Product Officer – Amina Bank
• Kevin de Patoul, CEO & Co-founder – Keyrock
• Anoosh Arevshatian, Chief Product Officer – Zodia
• Hemant Pandit, CRO - Cryptio (moderator)

The return of institutional lending

Chris Tyrer from Bullish opened by noting a shift: traditional finance (TradFi) lenders are showing renewed interest, but remain cautious. Despite bitcoin being “24/7, 365, pristine collateral,” it's still seen as exotic by many large capital allocators.

“We’re starting to see more interest from TradFi lenders, but they’re still trying to get to grips with using bitcoin and crypto assets as collateral.” – Chris Tyrer, Bullish

Myles Harrison confirmed the shift from the lender side. Amina Bank has grown its lending book 140% in the past year, largely due to new demand from corporate treasurers and HNW individuals adopting BTC.

Regulatory barriers and Basel III

One of the biggest constraints on crypto lending for traditional banks stems from Basel III, a global regulatory framework that defines capital, liquidity, and leverage standards for financial institutions. Under current rules, crypto assets like BTC and stablecoins are treated as high-risk exposures.

For GSIBs (Global Systemically Important Banks) in particular, this classification has severe implications. Basel III requires these banks to hold one dollar of capital for every dollar of crypto exposure, regardless of the asset’s quality, liquidity, or collateralization. In practical terms, this renders most crypto lending activity economically unviable for the world’s largest banks.

“Even if you give them $100 million in USDC, you can’t get a $100M loan back because the capital requirements destroy the economics.” – Chris Tyrer, Bullish

This has effectively shut the door to crypto lending for GSIBs in the near term, leaving the field open to non-bank players like Cantor Fitzgerald and NYDIG, who are not subject to the same capital reserve rules. These more flexible institutions are now stepping in to fill the gap - with Cantor Fitzgerald recently announcing its $2B Bitcoin backed lending initiative, with early takers such as Maple Finance and FalconX- who secured a $100M loan.

Infrastructure gaps, liquidation, and scale

Zodia Custody’s Anoosh Arevshatian highlighted that while lending volumes are steadily increasing, much of the activity remains fragmented and bilateral. The real challenge, she noted, is not handling a $10M loan, but managing liquidation on a $500M position, where the current infrastructure has yet to be sufficiently stress-tested.

“The sticking point is getting lenders comfortable with liquidation, when it's not $10M, or $100M, but $500M – then what?” – Anoosh Arevshatian, Zodia Custody

This points to deeper structural issues around liquidation agents, liquidity depth, real-time risk monitoring, and interoperability across chains and custodians, especially when collateral spans multiple asset types and venues.

As the market matures, addressing these gaps will require institution-grade solutions that can handle the full loan lifecycle at scale. 

“DeFi mullet” - regulated front end, permissionless back end

Kevin de Patoul from Keyrock summed up the shift well: “Lenders have stopped blowing up.” The market is maturing, with more oversight of centralized lenders and DeFi (Decentralized Finance) offering baked-in transparency.

Chris and Myles introduced the idea of the “DeFi mullet” – a metaphor where regulated front-ends (banks, custodians) provide user-facing trust, while DeFi protocols do the heavy lifting on the back-end. This hybrid model helps overcome trust and compliance hurdles without losing DeFi's automation and capital efficiency benefits.

A concrete example came from Amina Bank, which uses its status as a regulated Swiss bank to interface directly with institutional clients, while leveraging smart contracts on-chain to manage loan issuance and collateral monitoring. For instance, Amina can accept tokenized altcoins like AVAX or LINK as collateral and automatically enforce loan terms via smart contracts, all while ensuring full KYC/AML compliance at the client interface layer.

Still, Myles stressed that smart contract failure and out-of-hours margin calls (e.g. at 3 AM on Saturday) are non-starters for many TradFi institutions, highlighting the operational gap between crypto-native infrastructure and traditional risk governance.

Tokenization and collateral use

The panel also explored the evolving role of tokenization- the process of creating an on-chain representation of traditional or real-world assets. Chris Tyrer argued that tokenized treasuries and securities could unlock massive capital efficiencies in global banking by streamlining settlement and reducing friction in collateral management.

“If you can get to T0 and net that off globally for banks, that’s a massive cost save.” – Chris Tyrer, Bullish

He was referring to T+0 settlement, a model where trades are settled instantly, compared to today's T+1 or T+2 standards, where assets can remain in limbo for up to two days. For banks managing hundreds of billions in forward liabilities, this lag creates significant capital drag. Accelerating that process could free up trillions globally, especially across investment banks with large unsettled positions.

Still, Myles Harrison offered a dose of realism, noting that despite the hype, real client demand for tokenized securities remains limited today. Liquidity is shallow, and the lack of mature secondary markets makes adoption challenging. However, he acknowledged recent momentum from players like BX Digital Swiss, which received FINMA approval to operate as a multilateral trading facility for tokenized assets, and 21X, operating under the EU’s DLT Pilot Regime, as signs that the infrastructure may soon catch up.

Kevin de Patoul delivered a grounded reminder about substance over form:

“If you tokenize a crap asset, it’s still a crap asset, it’s just a different form. What matters is the utility you unlock.” – Kevin de Patoul, Keyrock

He illustrated this point with a humorous example. He noted that he has even issued loans using pictures of cats (NFTs) as collateral. While an extreme case, it technically works because the assets are tradable and have liquidity.

Kevin emphasized that tokenization is only the first step. The real value lies in the utility unlocked afterward, including financial primitives like composability, collateralized lending, and automated workflows that weren’t previously possible.

“Take stablecoins. They’re just tokenized dollars, no one cared at first. But after seven years of infrastructure, utility, and protocol development, they’re now used to settle billions in transactions daily.” – Kevin de Patoul, Keyrock

Stablecoins have evolved into the backbone of crypto capital markets. Today, they settle trillions of dollars annually across exchanges, DeFi protocols, and cross-border rails. As Kevin pointed out, they are proof that tokenization delivers real impact when paired with usable infrastructure – a roadmap other tokenized asset classes are only beginning to follow.

Risk management and what comes next

The panelists emphasized that robust risk management frameworks are essential for crypto lending to scale:

• AMINA conducts real-world scenario testing and monitors collateral 24/7.
• Keyrock uses a 160-point smart contract risk assessment methodology, scoring contracts before allocating capital.
• Zodia highlighted that audit scope ≠ audit trust – a smart contract audit is just a starting point, not a green light.

As Kevin said:

“The question isn’t if something goes wrong, it’s when.”

Looking ahead

In closing, the panelists called for more pragmatic progress using what’s already been built. While the UX still needs improvement and institutional access remains gated, the foundation is in place.

“We’re finally seeing institutions show up, and this time, it’s not just a meme.” – Chris Tyrer, Bullish

Whether it's stablecoin-powered settlements, on-chain collateral, or DeFi-inspired workflows, the next stage is less about vision and more about execution. As banks, custodians, and tech providers converge around crypto credit, standardization, interoperability, and transparency will define who scales first.

About Cryptio

Cryptio is the leading financial data platform for tokenization compliance, crypto accounting, and lending. Trusted by over 450 clients - including publicly listed companies like Circle, Bitcoin Depot and Semler Scientific, crypto-native leaders like Uniswap Labs and MetaMask, and global audit partners like KPMG and Deloitte - Cryptio provides an enterprise-grade data layer that translates complex on-chain activity into auditable, GAAP and IFRS-ready records.

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