It all started with crypto exchanges wherein they are allowing their users to use Bitcoin holdings as collateral but of course, maybe 70%-80% of total value that they can give. It depends on their assessment but the banks are getting the idea now. It's true that the narrative has changed a lot for Bitcoin. Before, many were scared about it. This time, if they know that you own some, you'd be treated as if you're so rich. Little did they know, we're just holders but we don't have that much for them to be impressed.
That's also true.
This type of crypto based collateral is being staking through various centralized exchanges and currently we see many platforms that provide this type of loan service. And there are also things like adding liquidity. Basically, the risk here is completely on the user. The risk of the platforms is very low. So the profit in this investment is also high.
And that's why it's natural for banks to be attracted to it. I think in the future, most banks will be providing this type of loan, because here they don't have to go physically and waste time and money to take collateral, which is less risky.