Bitwise will manage LBTC’s new covered-call strategy, targeting a 2.5% net APY while keeping Bitcoin in segregated institutional custody.
New York — 13 August 2026 — Lombard Finance Foundation has announced a major change to the yield model behind LBTC, moving from Babylon Bitcoin staking to an institutional covered-call options strategy managed by Bitwise Investment Manager.
The new structure targets a 2.5% net annual yield in Bitcoin terms. Lombard says the aim is to combine institutional-grade offchain yield generation with LBTC’s existing use across decentralised finance.
The transition begins during the week of 17 August 2026 with a $10 million pilot. A broader rollout is planned through September.
How the New LBTC Yield Strategy Works
The new strategy is based on covered calls.
Bitwise will sell Bitcoin options and collect premiums from counterparties. Those premiums will form the yield generated for LBTC.
The structure does not use leverage, borrowing or uncovered short positions. Every options position must be backed by Bitcoin held in custody.
Lombard says a maximum of 60% of LBTC’s backing can be allocated to the covered-call strategy. The rest remains outside the mandate to support liquidity and redemptions.
The company says the strategy has a 4.5-year operating history under Gordon Grant, now Bitwise’s Head of Derivatives.
Bitcoin Remains in Institutional Custody
A central part of the new model is the custody structure.
Bitcoin assigned to the strategy will be kept in segregated accounts at Anchorage Digital Bank and Kraken Financial under tri-party agreements.
Bitwise will manage the trading strategy but will not have broad authority to withdraw or transfer the underlying Bitcoin.
Options are expected to be executed through institutional OTC counterparties, including FalconX, Kraken Institutional and Anchorage Digital.
For institutional investors, this structure is designed to address familiar concerns around custody, asset segregation and rehypothecation.
Existing LBTC Holders Do Not Need to Take Action
The change affects LBTC’s yield source rather than the token’s core infrastructure.
Lombard says the following elements remain unchanged:
- the LBTC token contract;
- minting and redemption;
- Chainlink CCIP cross-chain infrastructure;
- RedStone price feeds;
- Proof-of-Reserve attestations; and
- integrations with Aave, Morpho and other DeFi protocols.
Current LBTC holders do not need to migrate assets or take any additional action.
Lombard says LBTC now operates across more than 10 blockchains and over 50 DeFi protocols.
From Bitcoin Staking to Options-Based Yield
LBTC originally generated yield through Babylon Bitcoin staking.
Lombard says it spent the past six months assessing alternative Bitcoin yield sources before selecting the covered-call model.
The shift reflects a broader trend in digital-asset markets.
As institutional participation in Bitcoin grows, investors are increasingly exploring ways to generate returns from BTC without selling the underlying asset.
Covered-call strategies are already widely used in traditional markets. They generate income by selling call options against an asset that the investor continues to hold.
The trade-off is that some upside can be surrendered when Bitcoin prices rise strongly beyond the options’ strike prices.
Transparency Dashboard and Phased Deployment
Lombard has also introduced a transparency dashboard for the new strategy.
It is designed to show yield data, custody allocations, Proof-of-Reserve information and risk metrics.
According to the company, underlying risk records will be cryptographically signed and timestamped so they can be independently verified against Bitwise’s public key.
Deployment will happen in stages.
The initial $10 million pilot is intended to test custody arrangements, oracle feeds and dashboard infrastructure before larger allocations are made.
Lombard expects the full planned allocation to be deployed during September 2026.
Bitcoin as Productive Collateral
The announcement also reflects Lombard’s wider strategy of positioning Bitcoin as a productive asset within decentralised finance.
The company says LBTC has onboarded more than $3 billion in Bitcoin onchain and that more than 80% of its supply is actively deployed across DeFi.
Rather than treating Bitcoin solely as an asset held in cold storage, Lombard is betting that BTC will increasingly function as collateral across lending, trading and financial applications.
Bitwise CEO Hunter Horsley said the partnership brings an options strategy already used by large Bitcoin holders into Lombard’s ecosystem.
Lombard Labs CEO and co-founder Jacob Phillips described the long-term goal as making Bitcoin more productive while retaining Bitcoin-denominated exposure.
For the wider digital-asset market, the development highlights an important shift: Bitcoin yield products are becoming more closely connected with institutional derivatives, qualified custody and transparent risk frameworks.
About Lombard Finance
Lombard is a Bitcoin finance protocol founded in 2024. Its products include LBTC, BTC.b, the Lombard SDK, Bitcoin Smart Accounts and Bitcoin Earn.
The company says it has onboarded around $3 billion in Bitcoin and integrates with platforms including Aave, Morpho, Ledger, Binance and Bybit.
About Bitwise
Bitwise is a crypto asset manager offering investment products across the United States and Europe.
Bitwise Investment Manager is registered with the U.S. Securities and Exchange Commission and with the Commodity Futures Trading Commission as a commodity pool operator and commodity trading advisor.
About Anchorage Digital
Anchorage Digital provides institutional digital-asset infrastructure, including custody, prime services, tokenisation and stablecoin services.
Anchorage Digital Bank N.A. operates as a federally regulated digital-asset bank in the United States.
