Kraken expands Bitcoin yield push with Lombard and Bitwise partnership

A covered-call strategy requires Bitwise to constantly sell call option contracts against Lombard's Bitcoin supply, adding liquidity to the options market.

Kraken on Thursday said it holds Bitcoin backing the strategy in segregated, bankruptcy-remote accounts under tri-party agreements. The US firm also said Bitwise trades the options underlying the strategy on its platform.

Lombard is a decentralised Bitcoin liquidity and infrastructure protocol that brings Bitcoin on-chain to make it usable through LBTC.

The Payward-owned digital asset exchange said institutions are increasingly evaluating platforms not just on where they can trade, but on what their assets can do while held there.

“Bitcoin is at the center of that shift, moving from a passive store of value toward productive collateral, and institutions expect the infrastructure underneath it to reflect that: custody, execution, and yield working together, rather than split across separate providers and counterparties,” Kraken said.

Gurpreet Oberoi, head of Kraken Institutional, said: “Tri-party agreements mean Bitcoin deployed in this strategy remains within qualified custody throughout, meeting the requirements of institutional allocators. Kraken also serves as one of the execution venues for the strategy’s options trading, reflecting our role across both custody and execution for institutional Bitcoin.”

Kraken said the core idea behind its partnerships with Bitwise on Bitcoin yield, Upshift on custom vaults, and Centrifuge on tokenised funds, is that custody is the entry point, with execution, financing, and yield built on top of it.

The US-based digital assets exchange in January said its custody solution, Kraken Custody, was approved by the Ethena Risk Committee (ERC) to support custody of backing assets for Ethena Labs' synthetic dollar USDe.

Speaking to FOW last month, Alexia Theodorou, head of derivatives at Kraken, said the crypto options market remains underdeveloped despite rapid growth in recent years. She said the crypto options market has grown significantly over the past two years, but it's still a small share of derivatives activity in crypto, in contrast to every other asset class.