Kraken will act as custodian and execution venue for the Bitcoin backing Lombard’s LBTC as the token’s yield source changes. Lombard is moving LBTC from Bitcoin staking to an institutional covered-call strategy managed by Bitwise Asset Management that targets 2.5% net APY in Bitcoin terms, Kraken announcement. The change redirects one of the larger Bitcoin assets in decentralized finance away from staking rewards and toward a managed options overlay.
Under the new setup, Kraken holds the Bitcoin collateral in segregated, bankruptcy-remote accounts as one of the strategy’s qualified custodians, with tri-party agreements that keep the assets inside qualified custody for the life of the trade, Kraken announcement. Kraken also serves as an execution venue where Bitwise trades the options that generate the strategy’s income, giving the exchange a role on both sides of the transaction rather than custody alone.
The arrangement fits a wider push by Kraken Institutional to treat custody as the entry point and then layer execution, financing, and yield on top of it. Beyond Bitwise, Kraken points to work with Upshift on custom vaults and Centrifuge on tokenized funds as part of the same direction, Kraken announcement. The explicit thesis is that institutions now evaluate where they hold Bitcoin not just on trading access but on what the asset can do while it sits there.
Gurpreet Oberoi, Head of Kraken Institutional, framed the custody structure as the core selling point: “Bitcoin backing this strategy is held in segregated, bankruptcy-remote accounts at qualified custodians including Kraken. Tri-party agreements mean Bitcoin deployed in this strategy remains within qualified custody throughout, meeting the requirements of institutional allocators,” Kraken announcement. Kraken also serves as one of the execution venues for the strategy’s options trading, she noted, reflecting the exchange’s combined custody-and-execution mandate.
Kraken has pitched institutional clients on a single platform covering trading, custody, and financing since 2011, advertising deep liquidity and global regulatory coverage across its institutional desk, Kraken Institutional. The Lombard mandate extends that pitch from pure custody and execution into yield-bearing Bitcoin products without the client leaving Kraken’s rails, a step that wraps a third-party asset manager’s strategy inside the exchange’s own infrastructure.
For readers, the practical takeaway is that a major exchange is now packaging Bitcoin yield for institutions through a covered-call wrapper instead of staking. The custody and execution are provided by Kraken entities including Payward Financial and Payward Europe Solutions, and the products are offered only to eligible clients and are not FDIC-insured, Kraken announcement. LBTC holders should confirm how the yield change affects their position before the transition completes. Related coverage: Kraken adds S&P 500 trading to funded accounts and Luke Dashjr removed as Bitcoin proposal editor after fork.
