Hashi testnet has officially launched on Sui protocol, marking a significant milestone in Bitcoin's evolution from digital store of value to programmable financial infrastructure. The testnet introduces the Guardian Layer, a defense-in-depth security architecture designed to help institutions securely manage Bitcoin collateral while preserving transparency and programmability. All BTC collateral is secured with a 2-of-2 multisig requiring MPC signatures from Hashi validators and guardian signatures, creating an additional layer of protection against malicious activity. This development addresses the critical infrastructure gap that has prevented more than $1 trillion of Bitcoin from entering transparent, programmable credit markets due to lack of confidence in moving native BTC without triggering unnecessary tax consequences.
Bitcoin-backed lending is experiencing a significant recovery in 2026, with Ledn emerging as the clear market leader according to recent rankings. The category earned a rough reputation in 2022 when centralized lenders such as Celsius, BlockFi, Voyager, and Genesis failed, locking up billions in customer funds. However, platforms that survived that period have rebuilt the model around stricter custody practices, clearer disclosure, and conservative risk limits. Galaxy Research pegged the broader crypto lending market at $73.6 billion by the third quarter of 2025, representing a rebound driven by borrowers seeking liquidity without surrendering their crypto holdings. The Hashi testnet launch represents a complementary development that could accelerate institutional adoption of Bitcoin-backed financial products.
Ledn has operated continuously since 2018 and maintains the longest clean operating record in the Bitcoin-backed lending category. The Toronto-founded firm has run through multiple market cycles including the 2018-2019 downturn, 2021 bull run, and 2022 credit collapse that wiped out several peers, all without pausing client withdrawals. According to CoinDesk, Ledn reports over $11 billion in loans originated since inception, with Bitcoin-backed loans crossing $1 billion in originations during 2025, including a record $392 million in Q3 2025 that nearly matched its entire 2024 volume. In November 2025, Tether announced a strategic investment in the firm, providing additional confidence from the largest company in the digital asset industry.
The mechanics of Bitcoin-backed lending involve borrowers sending Bitcoin as collateral and receiving loans in dollars or stablecoins, typically worth about 50% of the deposited coin value. Ledn operates with a 50% LTV starting point, margin call at 70%, and liquidation threshold at 80%, with an auto top-up tool that can add collateral automatically when prices drop. Unchained takes a different approach with its 2-of-3 multisig vault system, where borrowers hold one key, Unchained holds another, and an independent key agent holds the third, making rehypothecation difficult. Nexo offers instant credit lines against Bitcoin, Ether, and over 100 other assets, with rates ranging from 1.9% to 18.9% APR depending on loyalty status and token holdings. The Hashi testnet introduces automated collateral management, verifiable loan terms, and full onchain visibility into collateral health as additional operational improvements.
Ledn's custodied loan model ensures collateral is never lent out to generate interest, with neither Ledn nor its funding partners holding rehypothecation rights. Coins are held in segregated on-chain addresses, ring-fenced from partner assets, and the firm publishes a monthly Open Book Report verified by a third party. Ledn was the first crypto lender to introduce independent Proof of Reserves in 2020, a practice now repeated across ten consecutive audits. Coinbase's Morpho-powered platform operates on the Base network, converting Bitcoin to wrapped cbBTC before issuing USDC directly to borrowers, though this introduces smart-contract exposure and requires wrapping Bitcoin into cbBTC. The Hashi Guardian Layer introduces configurable safeguards that can slow or prevent potentially malicious activity before collateral leaves the system, helping institutions manage operational risk while maintaining transparency.
The primary challenge facing Bitcoin-backed lending platforms is the liquidation risk when Bitcoin prices fall, which can trigger margin calls and force collateral sales. Strike's volatility-proof version addresses this by removing price-triggered liquidations, capping initial LTV at 45%, and running for six months instead of the standard 12-month term. While cheaper rates are attractive, Ledn's headline rates are not the cheapest on the market, and the platform accepts only Bitcoin as collateral, limiting suitability for holders with mixed portfolios. The Hashi testnet launch, combined with over 20 day-one launch partners including crypto heavyweights, positions the ecosystem to address institutional adoption barriers that have prevented Bitcoin from fully realizing its utility as a programmable asset class. Fenwick law firm concluded that Hashi's deposit and redemption mechanics should not constitute taxable events under U.S. tax law, addressing a critical barrier to institutional participation.
