Lombard Finance, the Bitcoin liquid staking protocol behind LBTC, has launched its Bitcoin Onchain Credit Strategy, with Flow Traders participating as an early institutional user of the product.

The structure allows Flow Traders to borrow stablecoins while deposits in Lombard's Bitcoin Earn vault provide collateral coverage through Cap's platform. Bitcoin holders receive underwriting premiums in addition to vault returns, linking part of their yield to institutional borrowing demand.

Lombard is also using Chainlink's Cross-Chain Interoperability Protocol, or CCIP, to move BTC.b from Avalanche into Ethereum, broadening cross-chain access to the credit strategy.

The product enables the market maker to borrow stablecoins without directly posting its own collateral onchain. Instead, Bitcoin supplied through Lombard's Bitcoin Earn vault provides separate collateral coverage through Cap's credit platform.

The model connects Flow Traders' demand for stablecoin financing with Bitcoin holders seeking yield. Borrowing premiums paid by the trading firm are directed to depositors whose assets support the credit. Lombard said the new allocation is part of Bitcoin Earn, which has recorded more than $1 billion in deposits from more than 38,500 users.

Flow Traders borrows through Bitcoin depositors

Flow Traders, listed on Euronext Amsterdam and one of Europe's largest exchange-traded fund and digital asset market makers, accesses stablecoins through Cap's automated credit marketplace on Ethereum. Bitcoin Earn depositors supply the assets that cover the loan, while Symbiotic provides the shared-security layer. According to Cap's protocol documents, approved operators can borrow reserve assets after receiving enough collateral from delegators. Each operator receives isolated coverage rather than sharing one collateral pool across multiple borrowers.

If a covered loan falls below the required safety level, Cap can liquidate or slash delegated assets to repay the debt. Lombard CEO Jacob Phillips said, "By separating the borrower from the collateral provider, the parties involved have made it possible for regulated, institutional trading firms to tap into onchain credit for the first time."

Flow Traders executive Michael Lie said the strategy connects Bitcoin holders with financing demand that is "less correlated to DeFi market conditions." Flow Traders has traded digital assets since 2017 and provides liquidity across exchange-based and bilateral institutional markets, according to the company's digital assets page.

Bitcoin Earn adds institutional credit premiums

Bitcoin Earn functions as a managed meta-vault. Users can deposit LBTC, BTC.b, WBTC or native Bitcoin and receive BTCe receipt tokens. Professional managers allocate the pooled assets across several strategies rather than placing them into a single lending market. Sentora manages the initial vault, while Veda provides the infrastructure.

Lombard launched Bitcoin Earn in February 2026 as a managed Bitcoin yield product. The new credit strategy is one allocation within that structure. Flow Traders' fixed annualized premium adds another return source alongside other vault strategies, whose yields can vary with market conditions.

Lombard's documentation says BTCe withdrawals may take up to 14 days and settle in LBTC, regardless of the asset initially deposited. The company also lists smart contract, strategy and liquidity risks. Audits may reduce technical risk, but they do not eliminate the possibility of code failures, losses or delayed withdrawals.

Cap also says delegators face slashing risk if an operator becomes undercollateralized. As a result, the yield reflects defined credit and technical exposure rather than a guaranteed return. Cap's risk disclosures warn that malicious or undercollateralized operators may put delegated assets at risk.

Chainlink moves BTC.b into the Ethereum vault

Lombard is using Chainlink's Cross-Chain Interoperability Protocol to move BTC.b from Avalanche into the Ethereum vault used by the strategy. CCIP allows supported applications to transfer tokens and messages between blockchains. In this case, it lets the credit product draw Bitcoin liquidity from Avalanche while Cap manages borrowing on Ethereum.

The cross-chain step follows Lombard's May decision to use CCIP for more than $1 billion in LBTC and BTC.b assets. The company said the change was intended to standardize transfers as its Bitcoin products expanded across additional networks.

As crypto.news previously reported, Lombard moved LBTC and BTC.b to Chainlink CCIP as its exclusive cross-chain infrastructure after reviewing its bridge setup. Lombard said the migration replaced LayerZero across several networks.

The BTC.b route also follows Lombard's acquisition of the asset and its infrastructure from Ava Labs in October 2025. As previously reported, the deal included BTC.b's existing Avalanche integrations and user base. Lombard planned to expand the 1:1 Bitcoin asset to Ethereum, Solana and other networks.

Pilot tests a different lending structure

Traditional DeFi loans generally require borrowers to post more collateral than they receive. Lombard's structure separates the borrower from the collateral provider: Flow Traders receives stablecoins, Bitcoin Earn depositors provide coverage, and Cap's contracts track the loan, collateral level and potential liquidation.

The structure does not eliminate lending risk. It depends on Lombard's vaults, Cap's credit contracts, Symbiotic's collateral system, Chainlink's cross-chain service and Flow Traders meeting its repayment obligations. Problems in any connected system could affect returns, withdrawals or deposited assets.

Lombard has not disclosed the pilot loan's size, duration, stablecoin type or interest rate. It has also not identified any other borrowers. Whether additional regulated firms adopt the model — and whether the pilot's terms become public — will signal the depth of institutional demand for Bitcoin-collateralized onchain credit. The launch extends Lombard's Bitcoin products beyond staking and standard DeFi lending, while testing whether Bitcoin depositors can support institutional stablecoin credit through an onchain structure.