How a Lombard Loan Against Bitcoin Works at a Private Bank

A Lombard loan against Bitcoin lets a holder borrow fiat using BTC as pledged collateral instead of selling the position. At a private bank the structure differs from on-chain or platform lending in one decisive way: the collateral is real Bitcoin held in segregated, regulated custody with the private bank, and the lender is a supervised institution rather than a smart contract or an unregulated balance sheet. Where the loan is booked therefore determines who holds the asset, what counterparty layers sit between the borrower and the collateral, and what happens if the market moves against the position.

The borrowing decision is usually framed around rates and loan-to-value (LTV). The more structural question is custody: who actually controls the pledged Bitcoin while the loan is outstanding. Three venues answer that question differently, and the table below summarises the counterparty exposure each one carries.

Borrowing against Bitcoin without selling

The appeal of borrowing rather than selling is straightforward. A holder who acquired BTC early may face a significant capital gains tax (CGT), and selling into a market trading well below its all-time high crystallises a drawdown the holder would rather not realise. A loan secured by the position releases liquidity while leaving the BTC in place. For holders weighing a sale instead, our guide on how to convert crypto to fiat sets out the alternative path. What varies between venues is not the idea of a collateralised loan, which is centuries old, but the integrity of the collateral and the standing of the lender, and those two variables define the borrower's real exposure.

Lending on a DeFi protocol

A position taken on a protocol such as Aave or Compound exposes the borrower to several layers that are not always visible at the point of borrowing. The first is the nature of the collateral. Bitcoin does not run on Ethereum, so these protocols do not hold native BTC. The asset posted is a wrapped token, typically WBTC or cbBTC, which represents a claim on Bitcoin held by a centralised custodian who states it holds one BTC in reserve for each token issued. WBTC reserves sit with a custodian and have passed through a custody restructuring; cbBTC is a claim issued by a single exchange. In each case the borrower relies on a wrapper issuer they did not separately contract with, and if the token loses its peg to Bitcoin, the collateral is worth whatever the market assigns to an unbacked claim.

The second layer is the protocol itself. The wrapped token sits in a smart contract that functions as the custodian, with no institution accountable for its behaviour. Interest rates are variable and driven by pool utilisation, and can rise sharply during periods of market stress. Permitted LTVs are comparatively high, often in the 70 to 80 percent range, because the protocol is built to liquidate collateral automatically and within seconds when a threshold is breached.

Borrowing on a CeFi platform

On a centralised lending platform such as Nexo, pledged BTC is generally held in omnibus accounts that pool client assets together. In that arrangement the borrower functions as an unsecured creditor of the platform. Advertised rates span a wide band, and LTVs on BTC are typically capped around 50 percent. The exposure here is to the platform's solvency, the quality of its loan book and the strength of its risk management, none of which are usually disclosed through granular loan-book data or real-time reserve attestations.

The track record of this model in the previous cycle is a matter of public record. Celsius failed and reached a USD 4.7 billion settlement with the FTC, with its founder later convicted; BlockFi went bankrupt and paid a USD 100 million SEC penalty; Genesis and Voyager both entered bankruptcy; and the Gemini Earn programme saw roughly USD 1.1 billion frozen before settlement. Nexo paid USD 45 million to settle charges with the SEC and state regulators in 2023 and withdrew its Earn product from the United States. The recurring structural feature was that customers who believed they were borrowing against their own crypto in fact held an unsecured claim on a lightly regulated firm that could rehypothecate the collateral.

A Lombard loan at a private bank

A Lombard loan is a long-established private-banking instrument: the bank extends credit against a pledge of liquid assets, traditionally securities, and increasingly digital assets at institutions that custody them. When the collateral is Bitcoin, several features distinguish the arrangement from the two venues above.

Native Bitcoin in segregated custody

The pledged collateral is native BTC held by the bank or its regulated custodian, not a wrapped token and not a balance-sheet entry in a pooled account. The assets are held in segregation, meaning the client's Bitcoin is recorded as belonging to the client rather than commingled in an omnibus structure where the holder ranks as a general creditor. This segregation is the core structural difference: it removes both the wrapper-issuer layer of DeFi and the unsecured-creditor exposure of CeFi.

Conservative LTV and bank-referenced pricing

Private banks typically apply more conservative LTVs to Bitcoin than on-chain or platform lenders, reflecting the asset's volatility and the bank's own risk appetite. Pricing is generally tied to established banking reference rates plus a margin, rather than to an algorithmic utilisation curve. The result is a credit line whose terms are set by an institution operating under capital and liquidity rules, with a margin-call process defined contractually rather than executed automatically by code.

A supervised, regulated lender

The lender is a licensed bank supervised by a financial regulator. In Switzerland that supervision runs through the Anti-Money Laundering Act (AMLA) and ultimately FINMA. That status brings obligations the borrower benefits from, including asset segregation, capital requirements and a defined complaints and resolution framework, and it also brings obligations the borrower must meet to be accepted as a client in the first place.

Documented source of funds and source of wealth

Before a bank will custody Bitcoin and lend against it, the prospective client has to clear onboarding. That means a documented source of funds and source of wealth, with on-chain provenance that holds up to scrutiny under the FATF standards on virtual assets. This is the same threshold that governs any crypto-backed banking relationship, and it is the most common point at which applications stall. Our guides on how to prove crypto source of funds to a private bank and why private banks freeze crypto wealth set out what that documentation has to demonstrate, and opening a Swiss private bank account with crypto wealth covers the onboarding itself.

How a regulated Swiss intermediary prepares the file

The barrier to a Lombard loan at a private bank is rarely the credit itself; it is satisfying the bank that the underlying Bitcoin has a clean, documented origin. Altcoinomy SA is a financial intermediary supervised under the Swiss AMLA and affiliated with the VQF (CHE-209.239.695), audited by BDO SA. We assemble the source of funds and source of wealth dossier, map the wallet provenance, and act as the bridge to a private bank that custodies and lends against digital assets. The detail of the cash-out and custody route is covered in our guide to cashing out Bitcoin with private banks, and the regulatory standing of a Swiss off-ramp in crypto broker Switzerland under VQF and AMLA.

In practice the bank receives a complete, pre-verified file rather than a holder attempting to assemble one under time pressure, which is the difference between an onboarding that proceeds and one that stalls before the credit line is ever discussed.

Frequently Asked Questions

Prepare your Bitcoin for a private bank with a regulated intermediary

Altcoinomy SA coordinates regulated custody access and full source of funds documentation for high-net-worth Bitcoin holders, supervised under the Swiss AMLA and affiliated with the VQF (CHE-209.239.695), audited by BDO SA. We prepare the dossier a private bank requires before it will custody Bitcoin and extend a Lombard loan against it, and we carry the compliance burden on your behalf.

Book a call with the Altcoinomy SA team, or start with a free confidential compliance review to establish your compliance baseline and surface any documentation gaps early, while they are still fixable.

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alt.co is a Geneva-based, Swiss-regulated financial intermediary (Altcoinomy SA) supervised by VQF and audited by BDO SA. We help crypto holders access private banking in Switzerland and Monaco.

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