Crypto-Backed Lending – The next logical step for banks

With the MiCA regulation (Markets in Crypto-Assets Regulation), the legal framework for digital assets in Europe is clearly defined. For banks, this means they can obtain a license as a Crypto Asset Service Provider (CASP) and offer crypto services across the European market. This opens up new revenue opportunities while increasing the pressure to act. In this interview, Thomas Münch, Product Owner Crypto Solutions at Sopra Financial Technology, explains why banks should start considering crypto-backed lending now.

Mr. Münch, what exactly does lending with cryptocurrencies mean?

Thomas Münch: Crypto-backed lending is essentially a Lombard loan secured by digital assets. Customers, for example, deposit Bitcoin as collateral and receive a loan in euros. The digital assets remain the property of the customer, avoiding a sale that could have unfavorable tax implications. Banks continuously monitor the loan-to-value ratio. If it falls below a certain threshold, the customer must provide additional collateral or repay part of the loan. If this doesn’t happen, the bank sells the deposited cryptocurrency on the market. The proceeds go directly toward repaying the loan, ensuring that the loan amount is always fully covered by the collateral value.

Can you give a concrete example?

Thomas Münch: Imagine a customer wants to buy a property. Most of their wealth is invested in Bitcoin, but selling it now would be poorly timed. With crypto-backed lending, the customer can deposit the Bitcoin as collateral without giving up ownership. This way, they remain exposed to potential price increases while gaining the liquidity they need.

Why is this interesting for banks?

Thomas Münch: The lending bank generates interest income and uses a fully regulated structure. This means all relevant MiCA provisions, national licensing requirements, and KYC/AML regulations are integrated. Customer collateral is held in segregated custody, risks are continuously monitored, and automatically hedged if necessary. This creates a legally compliant, transparent, and secure offering for both sides. Additionally, banks can expand their product portfolio. Lending with cryptocurrencies appeals to new target groups who often hold significant crypto assets but rarely use traditional loans. For banks, this is an opportunity to attract these customers and unlock cross-selling potential.

When should banks get started?

Thomas Münch: As soon as possible. The combination of clear regulation and growing demand is ideal right now. MiCA provides banks with a unified EU-wide framework to offer crypto services. Those who act now can gain a competitive edge before crypto lending becomes standard. Looking beyond borders: In France, according to ADAN (Association for the Development of Digital Assets), 42% of Gen Z and 36% of Millennials own cryptocurrencies. Similar trends are emerging in other European markets. Many customers expect offerings that combine trading, custody, and financing in one place. Banks that fill this gap will win new customers and strengthen existing relationships.

Sopra Financial Technology is the first company in Germany to offer banks infrastructure for crypto-backed lending. What does this offering include?

Thomas Münch: We are developing an integrated platform that combines custody, trading, and lending of crypto assets. It is part of Sopra Crypto Solutions and is provided as Software-as-a-Service – no need for in-house data center operations. Integration into existing core banking systems is modular and also available as a white-label solution. For custody and trading, we work with partners. This gives banks a fully regulated, ready-to-use solution – from technical implementation and regulatory compliance to scalable integration options.

Want to learn more about the Crypto Lending Pilot?

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