There are DeFi protocols where you can lock-up crypto assets (eg FTT) and use those locked assets as collateral to borrow another crypto asset (eg ETH). That all happens "on chain" and there is no way for the protocol to know if there are corresponding balance sheet liabilities.
I don't know what the OP was referring to, and I don't know if this is what they were doing, but something like this could happen.
Right, but those are generally going to be on worse terms than you can get in a negotiated loan from someone who knows your entire business. So it doesn’t make much sense to negotiate an FTT loan and then use that as collateral for a less-informed loan from a smart contract.
It would be like getting a personal loan from a bank, buying jewelry with it, and then using the jewelry to get a pawn loan — a dubious strategy, since the terms on the first loan are going to be much better.
Edit: That is, you said the "size of the asset balance" is used to obtain loans. That makes it sound like merely increasing assets -- even if they come with liabilities, makes them more capable of getting loans.