In 2024, financial institutions began embracing bitcoin as an integral part of their portfolios. Pension funds, endowments, and corporations started holding bitcoin in their custody, marking the beginning of a significant shift. However, this was just the tip of the iceberg. The year 2025 is set to witness institutions moving beyond merely holding bitcoin as a reserve asset and delving into innovative financial products built around it. These new offerings address institutional concerns such as jurisdictional risk, regulatory compliance, and tax efficiency, reshaping traditional finance in profound ways.

Enhanced Custody Solutions for Institutional Investors

One of the most groundbreaking developments in bitcoin custody involves the concept of multi-jurisdictional quorum. This approach distributes private keys across multiple regulated entities in different jurisdictions, providing a safeguard against regulatory capture and jurisdictional overreach. By ensuring that no single entity has unilateral control over assets, institutions can mitigate risks associated with centralized custody solutions. Firms like Onramp have pioneered this model, partnering with SOC2-compliant custodians worldwide to create a resilient and secure framework for holding bitcoin.

Multi-signature (multi-sig) wallets play a crucial role in this innovative custody arrangement. In a typical "2 of 3" setup, any two out of three private keys are required to authorize transactions. By distributing these keys across various countries with differing legal frameworks, institutions hedge against the risk of a single government freezing or seizing assets. This distributed custody model ensures continuous access to bitcoin holdings, regardless of geopolitical tensions or local regulations. As global financial systems become more interconnected and politicized, such strategies provide critical protection for institutional investors.

New Financial Products Driving Institutional Adoption

The introduction of bitcoin exchange-traded products (ETPs) in 2024 marked a watershed moment for institutional adoption. ETPs offer direct exposure to bitcoin without the operational complexities of direct custody, making them highly attractive to large financial institutions. By the end of 2024, the total assets under management (AUM) for spot bitcoin ETPs had reached $114 billion, capturing 80% of gold ETF AUM in just 10 months. This rapid growth underscores the pent-up demand for institutional-grade access to bitcoin and paves the way for more sophisticated investment strategies.

Beyond ETPs, other financial products are emerging to cater to institutional needs. Bitcoin trusts, which facilitate in-kind delivery and tax-efficient structures, eliminate the need to sell and repurchase bitcoin, avoiding taxable events. Additionally, bitcoin bonds allow businesses and governments to capitalize on bitcoin’s unique properties while mitigating volatility. For instance, bitcoin-backed bonds could enable a government to raise substantial funding using bitcoin collected through tariffs. The yield for lenders would be tied to bitcoin’s performance, creating a virtuous cycle of increased adoption and price appreciation. Moreover, bitcoin-backed mortgages offer a revolutionary approach to homeownership, allowing borrowers to secure lower interest rates and potentially self-repay their loans as the value of their collateral increases. These innovations underscore how bitcoin is transforming traditional finance and becoming a core portfolio asset.