Wall Street Accepts Bitcoin Collateral Loans, Will Crypto Assets Become "Hard Currency"?

At three in the morning, the conference room of JPMorgan's headquarters in Manhattan, New York, is still lit. A group of traders and risk control experts in suits are staring at the real-time price of Bitcoin on the screen — this largest global asset bank is advancing a plan that could shake the financial circle: allowing customers to use Bitcoin and other crypto assets as collateral to apply for dollar loans. This seemingly "rebellious" attempt is, in fact, quietly rewriting the rules of the global financial system — when the most traditional Wall Street banks start giving crypto assets "identification cards," a covert battle over asset pricing rights has quietly begun.

1. Why is 'collateral' a key step in the financial history of crypto assets?

To understand the weight of this matter, one must first grasp a fundamental logic: any asset must have "collateralization" in order to become a "hard currency."

Why has the Chinese real estate market been able to run wildly for twenty years? Because houses can be mortgaged to banks for loans, and banks can bundle these mortgages into financial products to sell to more people, forming a cycle of "mortgage-financing-re-mortgaging," ultimately turning concrete and steel into a "symbol of wealth." The same goes for the U.S. stock market: the equity of publicly listed companies in the U.S. can be pledged to investment banks, which then use these collaterals to issue derivatives, turning stocks into a "safety cushion" for global capital.

The financial property of an asset is essentially determined by the extent to which it is "recognized" by the mainstream financial system. Over the past decade, the biggest pain point for Crypto Assets has been precisely this: it resembles a bunch of "digital wild children" - although some believe it to be valuable, banks dare not accept it, institutions dare not collateralize it, and even the tax authorities may not recognize it as "legitimate property."

What if Crypto Assets had a "financial ID"? If you hold 1 million dollars worth of Bitcoin, you used to only be able to borrow money from well-known encryption service provider exchanges (high interest, high risk); now by approaching JPMorgan, you might be able to borrow 700,000-800,000 dollars (lower interest rates, more flexible terms). This means that Crypto Assets have officially transformed from "speculative products in the gray area" into "assets that can be priced by mainstream financial institutions."

2. Why is US capital eager to register Crypto Assets?

On the surface, it appears to be an innovation from JPMorgan, but behind it lies Wall Street's deep-seated anxiety: the global dollar liquidity is searching for new outlets.

In the past two decades, US dollar capital has mainly circulated in two pools: one is the US stock and bond market (accounting for 60% of global household assets), and the other is the housing market (a safe haven for Asian capital). However, now both pools are encountering bottlenecks: US stock valuations are at historic highs, and the Fed's interest rate hikes have turned bonds into "negative yield assets"; the global real estate market, including China, has entered an adjustment period, and cross-border capital flows are restricted.

At this time, the "uniqueness" of crypto assets is evident: it is not controlled by any central bank, trades 24 hours a day globally, and its market value has surpassed 1.3 trillion USD. More crucially, its underlying technology (blockchain) is inherently suitable for collateral registration—every transfer of Bitcoin can be verified by the entire network, making it more transparent than the paper registration of property certificates and more efficient than the registration system for stock pledges.

JPMorgan is not "saving crypto assets," but rather "seizing a new battleground." Once crypto assets are incorporated into the dollar's collateral system, wealthy individuals holding Bitcoin globally can directly leverage their crypto assets for dollar leverage, and these funds will flow back into the US stock and bond markets, forming a closed loop of "crypto assets - dollars - traditional finance." This means that Wall Street has added a "funding reservoir" that could potentially exceed trillions of dollars.

3. Under Currents: Three "Time Bombs" Behind the Carnival

Financial innovation has never been just about flowers and applause. While we cheer for the "legitimization" of crypto assets, we must also see the risks lurking in the shadows:

The First Thunder

The "death spiral" of price volatility. The price volatility of Crypto Assets is far greater than that of stocks and real estate. In May 2021, Bitcoin plummeted 50% in just three days; in 2022, LUNA coin went to zero overnight. If customers use Crypto Assets as collateral for USD, when the coin price crashes, banks are forced to liquidate, which further exacerbates the sell-off, creating a vicious cycle of "downward-liquidation-downward." The subprime mortgage crisis of 2008 started this way—property prices fell slightly, the value of the collateral was insufficient, banks pressured for repayment, and property prices fell again.

Second Thunder

The "Sword of Damocles" of regulation. The U.S. Treasury has made it clear that cryptocurrency collateral loans may involve risks of "money laundering" and "terrorist financing"; the EU is even more aggressive, planning to implement a "full reserve system" for cryptocurrency collateral by 2026 (equivalent to requiring banks to set aside 1 dollar in collateral for every 1 dollar loaned). If regulations suddenly tighten, JPMorgan's pilot could become a "flash in the pan."

Third Thunder

The "cognitive gap" of ordinary investors. Currently, most of those playing with crypto assets are young people who understand technology; while those who can obtain collateral loans from banks are mostly high-net-worth individuals. When these two groups collide, "information asymmetry harvesting" may occur – for example, institutions deliberately driving up coin prices, enticing retail investors to borrow against their collateral, and then crashing the market to trap these retail investors. The "Dogecoin surge and crash" in 2021 is a typical case.

Conclusion

This is not simply a "bank embracing crypto assets", but rather the global financial system adapting to a new era—when digital assets become mainstream, traditional financial rules must be adjusted. In the financial discourse, regulation means recognition. Just like when stocks first appeared, people also felt that "virtual equity certificates" were less tangible than gold. For the average person, this may not be a bad thing. If cryptocurrencies are indeed incorporated into the mainstream collateral system, they may become more stable and also provide ordinary people with more options for asset allocation.