Ledn, a prominent global bitcoin lender, has launched its Open Book Report, a groundbreaking initiative aimed at establishing a new benchmark for reserves transparency within the cryptocurrency lending sector. This report is specifically designed to address and mitigate the types of systemic risks that contributed to the devastating 2022 FTX-driven crypto market crash.

The announcement comes at a critical juncture, as traditional financial institutions, including major players like Citi, JPMorgan, Wells Fargo, BNY Mellon, Schwab, and Bank of America, are reportedly making inroads into the crypto space. This influx of traditional finance is occurring amidst a notable regulatory vacuum, particularly concerning rehypothecation practices and verifiable proof of reserves, as highlighted in a press release shared with Bitcoin Magazine. The recent passing of the GENIUS Act, which sanctions treasury-backed stablecoins, has paved the way for Wall Street to deepen its involvement in the crypto market, potentially even upgrading its existing financial infrastructure.

Despite these developments, Ledn emphasizes the persistent need for clearer regulatory frameworks for crypto counterparties. The company points out that global regulations regarding crypto capital requirements and proof of reserves remain largely undefined, with both the U.S. and the U.K. notably declining to adopt Basel’s proposed framework. Furthermore, the International Organization of Securities Commissions (IOSCO) is actively advocating for regulators to impose traditional finance standards on crypto custody and lending. Yet, very few institutions have transparently disclosed how bitcoin collateral is managed, whether it undergoes rehypothecation, or the protocols in place for liquidation scenarios.

John Glover, Chief Investment Officer at Ledn and a former Managing Director at Barclays, underscores the severe implications of this opacity. He warns that when lenders are not obligated to disclose their use of client collateral, clients inadvertently become the source of leverage. Citing the catastrophic failures of BlockFi, Celsius, and Voyager, which operated without adequate transparency, Glover cautions that the scale of potential crises has amplified with larger balance sheets now in play. He explicitly states, “This is how we get a 2022-style lending crisis at institutional scale.”

Ledn’s newly launched Open Book Report distinguishes itself as showcasing “the industry’s longest-running Proof of Reserves.” The report provides a comprehensive disclosure of Ledn’s BTC loan book, its collateral levels, and aggregate loan-to-value (LTV) ratios. The Network Firm LLP, a certified public accounting firm based in the U.S., independently audited and confirmed that 100% of the collateral held by Ledn is maintained in custody. Key figures from the report include $868 million in outstanding BTC-backed loans, supported by 18,488 BTC in posted collateral, all held 100% in BTC custody, either in on-chain addresses or custodial accounts. Ledn maintains an impressive average loan-to-value ratio of 55%, which is significantly below typical industry liquidation thresholds.

Since its inception in 2018, Ledn has facilitated over $10.2 billion in lifetime loans across 47,000 originations, demonstrating a robust operational history. This new transparency framework aims to move the industry beyond sporadic, one-off snapshots, beginning with monthly disclosures and laying the groundwork for more continuous, real-time transparency. Unlike some approaches that merely publish self-reported wallet addresses, Ledn’s methodology integrates monthly reporting of crucial loan book metrics—such as outstanding loans, posted collateral, and average LTV—with independent reporting from The Network Firm LLP. Additionally, Ledn conducts semiannual Proof of Reserves attestations, verifying that its assets consistently exceed client liabilities, utilizing a Merkle tree methodology that allows clients to independently confirm the inclusion of their balances.

Glover criticizes the insufficiency of merely publishing wallet addresses as a form of “proof of reserves.” He asserts that genuine transparency necessitates independent reporting, regular updates, and methodologies that are verifiable by anyone, stressing that “Clients shouldn’t have to take anyone’s word for it.” Ledn’s commitment to client asset protection is further evidenced by its strategic investment from Tether and its strong track record of navigating and surviving the 2022 crypto lender crisis, along with at least one prior bear market.

The press release concludes with a pertinent warning: as traditional financial institutions increasingly enter the bitcoin-backed lending arena, Ledn’s Open Book Report establishes a vital baseline for transparency and risk management. This baseline, it suggests, should be adopted and adhered to by these new entrants even before regulatory bodies formally mandate such practices.