Lombard is advancing its yield offerings by transitioning key products toward covered-call strategies managed by Bitwise Asset Management. The changes apply to both its Bitcoin and ethereum-related assets, combining institutional-grade custody arrangements with options-based income generation.

Bitcoin Yield Transition for LBTC

Lombard has spent the past two years scaling Bitcoin onchain activity. Its LBTC product is now shifting the source of yield away from Bitcoin staking toward an institutional covered-call strategy overseen by Bitwise Asset Management. The approach targets a 2.5% net APY denominated in Bitcoin terms.

Kraken Institutional is providing direct support for the transition. Bitcoin used in the strategy is held in segregated, bankruptcy-remote accounts at qualified custodians that include Kraken. These arrangements operate under tri-party agreements that keep the assets within qualified custody at all times. Kraken also functions as one of the execution venues where Bitwise conducts the options trading that underpins the strategy.

The move aligns with a wider institutional focus on treating Bitcoin as productive collateral rather than solely a passive store of value. Platforms are increasingly expected to integrate custody, execution, and yield generation within a single framework instead of relying on fragmented providers.

Ethereum Product Pilot and Broader Partnership

Separately, Lombard Finance is adjusting the yield mechanism for its ethereum product. The protocol will draw on an options strategy managed by Bitwise Asset Management, beginning with a $10 million pilot scheduled to begin next week.

Bitwise introduced its Ethereum Option Income Strategy ETF, which trades under the ticker IETH, on October 2, 2025. That fund employs a synthetic covered-call approach to produce income from ether exposure and supplied the operational foundation for offering similar mechanics to partners such as Lombard.

The collaboration builds on an earlier strategic partnership formalized in March 2026. That agreement centered on Bitcoin Smart Accounts, a structure that enables institutions to generate yield on custodied Bitcoin without transferring private keys to a third party. The framework seeks to activate an estimated $500 billion in institutional Bitcoin held in custody by pairing DeFi lending with tokenized real-world assets while preserving the original custody arrangements.

Bitwise currently manages more than $15 billion in client assets and has expanded its range of options-income strategies across multiple crypto assets.

Risk Considerations in Covered-Call Approaches

Covered-call strategies inherently limit upside participation. In the event of a sharp price increase in the underlying asset, sold call options may be exercised, reducing the gains available to holders. Income-oriented participants typically accept this trade-off in exchange for the yield generated by the options premiums.

Kraken Institutional views its support for the Lombard Bitcoin transition as part of a larger effort that also includes work with Bitwise on Bitcoin yield products, Upshift on custom vaults, and Centrifuge on tokenized funds. The common thread is the use of custody as the foundation, with execution, financing, and yield layered on top.