Sygnum Bank Launches Multi-Signature Bitcoin-Backed Loans Amid Surging Collateral Use

Swiss digital asset bank Sygnum is launching a new Bitcoin-backed loan product that uses multi-signature wallets to hold client collateral, giving borrowers more control over their assets. The offering, named MultiSYG, was developed with multi-signature lending specialist Debifi to address growing demand from investors seeking liquidity without ceding sole custody of their cryptocurrency.

Enhanced Security Through Distributed Control

The MultiSYG product holds each client's Bitcoin collateral in a segregated, on-chain wallet. Instead of the bank having sole control, access keys are distributed among three parties: the client, Sygnum Bank, and an independent institutional keyholder. According to the companies, this structure prevents any single party from moving the funds unilaterally, as the Bitcoin network would reject any transaction lacking the required signatures.

This approach is designed to mitigate security risks and provide a recovery path for lost keys through the other keyholders. The launch comes as recent high-profile security incidents in the digital asset space have heightened investor concerns about traditional custody models, Sygnum noted.

Bitcoin Dominates Loan Collateral

The new product launch coincides with a significant shift in the composition of collateral for Sygnum's existing Lombard loans. Key figures reported by the bank include:

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• Bitcoin now accounts for over 80% of pledged collateral by volume, a substantial increase from 63% in 2023.
• The bank reports that more than one in five of its clients currently has a Lombard loan.

Sygnum attributes the growing preference for Bitcoin as collateral partly to its decreasing volatility. The asset's one-year volatility has roughly halved to about 40% from approximately 80% in 2021, making it a more stable asset for lending purposes.

Market Response and Client Protection

Sygnum frames the new offering as a direct response to client demand for greater security. "Adding distributed, multi-signature security is a natural next step as more holders want to secure their Bitcoin and access liquidity at the same time,” said Iulian Zanoaga, Deputy Head of Credit & Lending at Sygnum.

Crucially for institutional and high-net-worth clients, all assets are held off Sygnum’s balance sheet. Under Swiss banking law, this makes the collateral bankruptcy-remote, protecting client assets in the event of the bank's insolvency.