Lombard has launched Bitcoin Smart Accounts, enabling institutions to utilize their Bitcoin in decentralized finance (DeFi) without moving it out of custody. This new product, announced on February 11, allows Bitcoin held with custodians, in MPC setups, or in self-custody wallets to be used as on-chain collateral. The initiative targets approximately $500 billion in Bitcoin currently held in professional custody, which has largely been excluded from DeFi due to legal and operational risks associated with asset transfers. The Bitcoin Smart Accounts operate by adding a Smart Account designation to existing custody setups, with Bitcoin recognized on-chain through a receipt token called BTC.b. This token represents the held Bitcoin, which remains with the custodian, ensuring legal ownership does not change. The product will initially integrate with Morpho, a lending protocol, allowing institutions to use their Bitcoin as collateral in lending markets without transferring the underlying assets. Lombard's co-founder, Jacob Phillips, likened the system to settlement networks like SWIFT and ACH, emphasizing its potential to transform Bitcoin from a passive asset into usable capital.