The Defiant

Arch Lending: Secure loans against alternative assets starting with crypto

Sponsored

Arch is a new lending platform for investors with alternative assets including cryptocurrencies looking to access liquidity without selling their investments.

By: ArchLending

Arch Lending: Secure loans against alternative assets starting with crypto [Sponsored]

Arch is a financial technology company that’s revolutionizing alternative asset lending. Its platform allows you to obtain a single loan collateralized by your combined crypto holdings. The collateral is held securely by the number one SEC-regulated crypto custodian, BitGo, ensuring that your assets remain untouched in their cold wallets and are returned to you when the loan is complete.

The company was founded in February 2022 by co-founders Dhruv Patel (formerly of Brex and Bridgewater) and Himanshu Sahay (formerly of Snap, Bird, and Tinder). They both consistently struggled to access debt when looking to borrow against their alternative assets like crypto and private equity, as did their friends. Arch is building a next-generation financial services business catered to these individuals, with the aim of offering a full stack of financial products across asset classes to fulfill these needs, starting with lending.

Arch has raised $2.75M in a pre-seed round from top-tier VC firms, including Tribe Capital, Castle Island Ventures, and Picus Capital, as well as a variety of founders and operators in the fintech and crypto ecosystem.

The need for alternative lending solutions

The traditional lending industry is a globally well-established one, but investors in alternative assets such as crypto and equity in high value pre-IPO companies are typically unable to access debt backed by these assets.

While the crypto lending industry is still in its early stages, many major players in the space have already failed due to poor risk management and operating in regulatory gray areas. This has created a significant need for a secure, regulatory-first lender like Arch. Lending against other alternative assets is also an emerging industry, with no large, established players yet. Financially upmarket individuals have seen their allocation towards these alternative assets increase exponentially in the last decade, thanks to the rise of large, venture-backed companies and the crypto industry. This has led to a large gap for a robust, regulated alternative asset lending platforms to serve the needs of these customers.

Centralized Finance (CeFi) vs. Decentralized Finance (DeFi)

Decentralized finance lending involves pools of capital that users can access through smart contracts. These contracts manage loan agreements and take responsibility for completing the loan, returning collateral, or liquidating it in the event of default. Given strict margin call response requirements (often within 1 hour) and no human customer service available, borrowers are often more at risk of losing their assets via liquidation in DeFi relative to CeFi. Additionally, the DeFi system can be challenging to navigate, and loans backed by multiple cryptocurrencies are not possible.

One significant drawback of DeFi loans is that they are typically variable rate loans, which can make them less attractive for longer-term loans. As a result, DeFi loans are usually shorter in duration (less than one month).

Arch’s CeFi lending offers many of the benefits of DeFi, including instant loan configuration and funding, alongside additional advantages such as longer-term loans with fixed rates, funding in fiat US dollars or USDC stablecoins, and multiple margin call notifications to the user’s chosen communication methods. The user experience is simple and easy to use, with none of the complexities of DeFi such as bridging, swapping, or wrapping. Users simply send in their collateral and receive funding. They electronically sign real-world loan documents with a regulated lender in the US (Arch) and have the assurance of knowing that their assets are held in an SEC-regulated qualified custody trust based in the US (BitGo).

Arch’s unique value proposition

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Arch offers a unique opportunity for users to take out a single loan against their entire portfolio of alternative assets, including a diverse range of cryptocurrencies and digital assets. This provides users with a significant increase in liquidity, enabling them to obtain more money from one loan. Furthermore, Arch offers interest-only and monthly amortizing payback schedules, allowing for ultimate flexibility. As Arch continues to expand to other asset classes such as public equities and high-value private companies, this single loan will only offer more opportunities for investors to leverage their assets with ease.

Arch is recognized for its focus on security and regulatory-first approach:

  • Arch is currently available in 31 states within the United States.
  • Customer assets are held securely with BitGo Trust Company, Inc., the leading SEC-regulated custodian based in the US, in a South Dakota trust. Unlike other companies that self-custody assets, which are not regulated by the SEC, Arch uses BitGo as a qualified custodian to ensure that user assets are safe and secure. In the midst of several crypto lenders failing due to rehypothecation of funds in custody, Arch never touches user collateral and does not generate any yield on customer funds. Customer funds are always held 1:1 in custody.
  • Arch works with best-in-class partners across KYC, custody, and payments processing to ensure secure lending.

Arch’s fully automated flow enables users to go from starting the application to receiving the loan in their bank account or crypto wallet in as little as 5 minutes. With Arch, users can access the capital they need with confidence in the secure and efficient lending process.

Arch’s future plans

Arch aims to become the primary financial destination for higher income and higher net worth individuals. To achieve this goal, Arch plans to expand the asset classes it lends against. These will include public equities, equity in private Pre-IPO businesses, and real estate. In addition, Arch plans to offer high-yield FDIC-insured cash accounts and investment products to its customers.

The Arch referral program

Arch is launching with a referral program that rewards users for bringing their friends onto the platform. The program offers the following benefits based on the number of referrals:

  • Referring 1 person: 10% increase in LTV
  • Referring 3 people: 10% increase in LTV AND 1% reduction in APR
  • Referring 5 or more people: 15% increase in LTV AND 1% reduction in APR

Furthermore, each person who is referred will receive a 0.50% reduction in APR on their first loan.

How to get started with Arch

  1. Get started with Arch now or watch this step-by-step guide on using the Arch platform and applying for a loan.
  1. Follow us on Linkedin and Twitter, where we consistently write about lending, alternative assets and the ecosystem around them as well as share helpful notes on how and why to borrow against your assets, depending on your use cases.
  2. Check out the Arch Blog for regular content on what the team at Arch is up to, and advice on how to navigate your finances in general.