A new Bitcoin-based financial protocol called Hashi has been introduced to the Sui blockchain, with early participation promised from crypto institutions such as BitGo, Bullish, and FalconX ahead of its expected launch later this year.
According to an announcement shared with Cointelegraph, Hash is designed to help Bitcoin holders earn yield on their native Bitcoin ($BTC) through on-chain lending and borrowing, targeting a segment that currently accounts for a small share of the overall Bitcoin market.
The protocol will be primarily developed by Mysten Labs, a core contributor to the Sui blockchain, and will initially focus on: $BTC-Backed lending allows users to borrow stablecoins against their holdings, while financial institutions are expected to provide liquidity at launch.
A spokesperson for the Sui Foundation told Cointelegraph that the protocol is designed to address the structural limitations that have hindered the use of Bitcoin in decentralized finance, particularly its dependence on intermediaries and limited transparency around collateral.
The system introduces on-chain verification and programmatic collateral management. $BTC Financing more suitable for institutional use. “We are replacing ‘trust me’ workarounds with on-chain verification,” the spokesperson said.
Hashi Enables Native $BTC Used directly in on-chain financial services without relying on wrapped or synthetic assets, it brings transparency and automated collateral management to Bitcoin finance, and is a necessary component for institutions to use Bitcoin at scale.
Bitcoin remains largely unused in decentralized finance, with about 0.22% of its supply, or about $3.07 billion, currently deployed in decentralized finance (DeFi) protocols, according to DefiLlama’s announcement and on-chain data.
The rollout also includes participation commitments from custodians and infrastructure providers such as Ledger and Cubist, as well as a Sui-based DeFi protocol that is expected to support lending, storage, and collateral management once the platform launches.
Hashi said it will rely on a combination of multi-party computing custody and smart contracts on Sui to manage collateral and facilitate lending, with audits and formal validation planned before launch.
Additional features outlined include the following insurance coverages: $BTC Collateral and Bitcoin-backed bond issuance plan. The project is currently in development, with devnet expected soon and mainnet launch later this year.
Related: Maestro launches Bitcoin credit market to support mining for institutions
Bitcoin-backed loans recover after FTX collapse
The Bitcoin-backed loan market contracted sharply after the collapse of crypto financiers BlockFi and Celsius Network in 2022, with re-assumptions and opaque risk management exposing users to significant losses.
The practice of rehypothecation, which reuses customer collateral to generate additional loans, amplified systemic risk during that period and contributed to a widespread loss of confidence in crypto lending platforms.
But in recent years, interest in bitcoin-backed lending has begun to revive as regulators and companies seek models that emphasize transparency, collateral management, and mitigation of counterparty risk.
In June, the Federal Housing Finance Agency directed Fannie Mae and Freddie Mac to consider whether cryptocurrencies could be counted as borrower reserves in mortgage risk assessments, marking a shift toward recognizing digital assets like Bitcoin without the need for conversion to U.S. dollars.
Private companies are also building Bitcoin lending products. Jack Mallers said in June that Strike updated its Bitcoin-backed loan agreement to state that users’ collateral would be stored in isolated wallets and not be re-hypothesized, according to a post on X.
In January, Coinbase reintroduced Bitcoin-backed loans in the US, allowing eligible users to borrow up to $100,000 in USDC. $BTC Held on the platform.
Other companies, including Ledn, are also offering loans against Bitcoin, emphasizing stricter custody and risk management.
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