City of London skyscrapers on a sunny day, London, UK
In 2024, institutions truly began integrating bitcoin into their portfolios. Headlines were dominated by announcements of bitcoin treasury allocations, as pension funds, endowments, and corporations took steps to hold bitcoin in their custody. But as significant as this shift was, it represents only the first layer of institutional adoption.
The year 2025 is shaping up to be the year institutions move beyond holding bitcoin as a simple reserve asset and begin embracing a new generation of financial products built around bitcoin. These products offer novel ways for investors to gain exposure to bitcoin while addressing key institutional concerns like jurisdictional risk, regulatory compliance, and tax efficiency. The era of bitcoin-native financial engineering is here, and it’s poised to reshape traditional finance in profound ways.
Bulletproof Bitcoin Custody
One of the most innovative developments in bitcoin custody is the concept of the “multi-jurisdictional quorum” – distributed custody arrangements where private keys are held across multiple regulated entities in different jurisdictions. This model is fascinating because it provides a hedge against jurisdictional overreach and regulatory capture, and bitcoin technology is essential to make it work.
In a typical multi-signature (“multi-sig”) wallet, a quorum of private keys is required to authorize a transaction. For example, a “2 of 3” setup requires any two keys out of three to sign off on a transaction. If you hold these keys in different jurisdictions, you are hedging jurisdictional risk by ensuring that these keys are stored across multiple countries, often with different legal frameworks.
This is important because, in an increasingly globalized and politicized financial system, individuals and institutions face the risk that a single government could freeze or seize assets held within its borders. By distributing the keys to a bitcoin vault across multiple jurisdictions, institutions can insulate themselves from these risks and ensure that no single entity has the power to unilaterally block access to their bitcoin holdings. Firms like Onramp have pioneered this approach, partnering with SOC2-compliant custodians across different regions to create a resilient, fault-tolerant custody framework.
Bitcoin ETPs: The Institutional Gateway
It would be safe to say that there was a lot of earth-shaking news about bitcoin in 2024 – from presidential talking points to rapid price appreciation. But it may be the arrival of bitcoin exchange-trade products (ETPs) that will be considered a watershed moment in retrospect.
ETPs have become a key driver of institutional bitcoin adoption. According to Fidelity Digital Assets, the total assets under management (AUM) for spot bitcoin ETPs reached $114 billion by the end of 2024 – a staggering achievement for a product category that has existed for less than a year.
To put this into perspective, bitcoin ETPs captured 80% of gold ETF AUM in just 10 months, a feat that underscores the pent-up demand for institutional-grade access to bitcoin. These products allow institutions to gain direct exposure to bitcoin without the operational complexities of custody. They also open the door to more sophisticated investment strategies, such as the cash-and-carry trade, which exploits price differences between spot and futures markets.
The introduction of options on bitcoin ETPs has further expanded their utility, enabling institutional investors to express nuanced views on bitcoin through traditional exchanges. With over 1,000 entities participating, including hedge funds, pension funds, and banks, the ETP market is rapidly maturing. As larger institutions with stricter oversight begin to allocate, the AUM for bitcoin ETPs is expected to grow even further in 2025.
The Re-Emergence of Bitcoin Trusts
While much of the buzz around bitcoin financial products has focused on ETPs, a quieter but equally significant trend has emerged – the rise of bitcoin trusts that offer in-kind delivery and tax-efficient structures.
Unlike spot bitcoin ETFs, which require that shares be sold for cash, bitcoin trusts can facilitate the direct transfer of bitcoin to investors. Onramp, mentioned above for its multi-jurisdictional approach, is also working to breathe new life into bitcoin trusts. This new generation of product is different from ETPs because it eliminates the need to sell and repurchase bitcoin, avoiding taxable events in the process. Trust structures are particularly attractive to institutions that want the benefits of holding physical bitcoin without the complexities of direct custody.
The Rise of the Bitcoin Bond
For businesses and governments alike, bitcoin bonds offer a new way to capitalize on the asset’s unique properties while mitigating its volatility. Companies hesitant to adopt bitcoin as a reserve asset often cite price fluctuations as a barrier. Bitcoin bonds eliminate this concern by allowing businesses to maintain price exposure while generating cash flow and liquidity.
In this model, bitcoin serves as collateral for bonds issued by businesses or governments. For example, a government could collect bitcoin through tariffs – imagine $6 billion in bitcoin revenue each month – and issue bitcoin-backed bonds to raise $30 billion in funding. Lenders would benefit from principle-protected notes, ensuring their capital is returned regardless of bitcoin’s price movements.
The yield for lenders would then be tied to bitcoin’s performance. If bitcoin’s price doubles over the bond’s term, lenders would receive a significant return. Even if the price remains flat, the structure still delivers competitive yields. This creates a virtuous cycle where higher demand for bitcoin bonds drives greater bitcoin adoption, further bolstering its price and utility.
Bitcoin as Loan Collateral
The traditional mortgage market has long been constrained by high fixed rates and rigid qualification standards. But bitcoin-backed mortgages are set to disrupt this model. Imagine a 30-year fixed-rate mortgage secured by bitcoin collateral, offering a 4% interest rate compared to the industry standard of 8%.
The innovation lies in bitcoin predictable scarcity, four-year halving cycles, and historical price appreciation. In this model, as the price of the bitcoin collateral increases, borrowers could reduce their debt by either paying down the mortgage or using the rising collateral price to offset outstanding balances. This concept of a self-repaying mortgage is revolutionary, allowing individuals to hold onto their bitcoin without triggering taxable events while using its value to secure homeownership.
Even in the event of liquidation, borrowers would not lose everything. The bitcoin sold would clear the mortgage, leaving the borrower with a home fully paid off. This dynamic transforms bitcoin into a dual-purpose asset – one that secures both wealth and real estate.
Integrating Bitcoin with Traditional Finance
The rapid development of bitcoin financial products is forcing traditional finance institutions to evolve. Asset managers, brokerages, and banks that once dismissed bitcoin as a fringe asset are now actively building infrastructure to support it.
Firms like Morgan Stanley’s E-Trade have already taken steps to integrate direct bitcoin trading into their platforms, signaling that retail brokerage clients will soon have seamless access to bitcoin alongside stocks and ETFs.
Meanwhile, new financial products designed specifically for digital assets – such as bespoke actively managed bitcoin funds – are emerging as traditional asset managers look to capitalize on the growing demand for exposure to bitcoin’s asymmetric upside.
Rather than treating bitcoin as a speculative outlier, institutions are increasingly viewing it as a core portfolio asset, akin to gold in the 1970s or tech stocks in the 2000s. New financial products enabled by bitcoin’s unique characteristics is accelerating this shift, making a compelling case for institutions to integrate bitcoin into their financial strategies.