A new Bitcoin-based financial protocol called Hashi has been introduced on the Sui blockchain, with early participation commitments from crypto institutions including BitGo, Bullish and FalconX ahead of its planned launch later this year.
According to an announcement shared with Cointelegraph, Hashi is designed to allow Bitcoin holders to earn returns on native Bitcoin ($BTC) through onchain lending and borrowing, targeting a segment that currently represents a small portion of the overall Bitcoin market.
The protocol, mainly developed by Mysten Labs, the main contributor to the Sui blockchain, will initially focus on $BTC-backed lending, allowing users to borrow stablecoins against their assets, while institutions are expected to provide liquidity at launch.
A spokesperson for the Sui Foundation told Cointelegraph that the protocol is designed to address structural limitations that have hindered Bitcoin’s use in decentralized finance, particularly its reliance on intermediaries and limited transparency around collateral.
The system introduces onchain authentication and programmatic collateral management aimed at creating $BTC loans that are more suitable for institutional use. “We are replacing ‘trust me’ solutions with onchain authentication,” the spokesperson said.
Hashi will enable natively $BTC to be used directly in on-chain financial services without relying on packaged or synthetic assets, providing transparency and automated collateral management for Bitcoin financing, components that institutions need to use it at scale.
Bitcoin remains largely untapped in the decentralized finance world, with about 0.22% of its supply, or roughly $3.07 billion, currently deployed in decentralized finance (DeFi) protocols, according to DefiLlama’s announcement and onchain data.
The rollout also includes participation commitments from custodians and infrastructure providers such as Ledger and Cubist, along with Sui-based DeFi protocols that are expected to support loan, custody and collateral management once the platform launches.
Hashi said it will rely on a combination of multi-party computer custody and smart contracts on Sui to manage collateral and facilitate lending, with audits and formal verification planned before launch.
Additional features described include insurance coverage for $BTC collateral and plans to issue Bitcoin-backed bonds. The project is currently in development, with a devnet expected soon and a mainnet launch planned for later this year.
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Bitcoin-backed lending is rebounding after the FTX collapse
Bitcoin-backed credit markets shrank sharply after the collapse of cryptocurrency lenders BlockFi and Celsius Network in 2022, where remortgaging and opaque risk management exposed users to significant losses.
The practice of remortgaging, which reused customer collateral to generate additional loans, amplified systemic risk during that period and contributed to a broader loss of confidence in crypto lending platforms.
However, in recent years, interest in Bitcoin-backed lending has begun to recover as regulators and companies explore models that emphasize transparency, collateral management and reduced counterparty risk.
In June, the U.S. Federal Housing Finance Agency ordered Fannie Mae and Freddie Mac to investigate whether cryptocurrencies can be counted as borrower reserves when assessing mortgage risk, marking a shift toward recognizing digital assets like Bitcoin without the need for conversion into U.S. dollars.
Private companies are also building Bitcoin lending products. In June, Jack Mallers said Strike had updated its Bitcoin-backed lending agreement to state that users’ collateral is held in segregated wallets and will not be re-mortgaged, “never has been and never will be,” according to a post on X.
Source: Jack Mallers
In January, Coinbase reintroduced Bitcoin-backed lending in the United States, allowing eligible users to borrow up to $100,000 in USDC at $BTC held on the platform.
Other companies, including Ledn, are also offering loans against Bitcoin while emphasizing stricter custody and risk controls.
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