Arch lending: Securing loans against alternative assets starting with crypto [SPONSORED]

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

Arch is a financial technology company that is revolutionary alternative lending. The platform allows you to get one single loan with collateral in your combined crypto holdings. The security is safely held by the number one SEC-regulated crypto custodian, BitGo, ensuring that your assets remain untouched in their cold wallets and are returned to you once the loan is completed.

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 finance business for these individuals, aiming to offer a full stack of financial products across asset classes to meet these needs, starting with lending.

Arch has raised $2.75 million in a pre-seed round from top-tier VC firms including Tribe Capital, Castle Island Ventures and Picus Capital, as well as a number 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 industry, but investors in alternative assets such as crypto and shares 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 one safe, regulatory-first lender like Arch. Lending against other alternative assets is also an emerging industry, without large, established players yet. Financially upmarket individuals have seen their allocation to these alternative assets increase exponentially over the past decade, thanks to the rise of large, venture-backed companies and the crypto industry. This has created a large gap for robust, regulated alternative lending platforms to serve the needs of these customers.

Centralized finance (CeFi) vs. decentralized finance (DeFi)

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

A significant disadvantage of DeFi loans is that they are typically loans with variable interest rates, which can make them less attractive for long-term loans. As a result, DeFi loans are typically shorter in duration (less than a month).

Arch’s CeFi lending offers many of the benefits of DeFi, including instant loan configuration and financing, along with additional benefits such as long-term loans with fixed interest rates, financing in fiat US dollars or USDC stablecoins, and notifications of multiple margins to the user’s chosen communication methods. The user experience is simple and easy to use, without any of the complexities of DeFi such as bridging, switching or wrapping. Users simply submit the collateral and receive funding. They electronically sign real loan documents with a regulated lender in the US (Arch) and have the assurance of knowing their assets are held in an SEC regulated qualified custodian based in the US (BitGo).

Arch’s unique value proposition

Arch offers a unique opportunity for users to withdraw one single loans against their entire portfolio of alternative assets, including a diverse range of cryptocurrencies and digital assets. This gives users a significant increase in liquidity, enabling them to get more money from one loan. Furthermore, Arch offers interest-free and monthly amortizing repayment plans, offering maximum flexibility. As Arch continues to expand into other asset classes such as public stocks 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 safety and regulatory-first approach:

• Arch is currently available in 31 states in the United States.
• Client funds are held securely with BitGo Trust Company, Inc., the leading SEC-regulated custodian based in the United States, in a South Dakota trust. Unlike other companies that have self-custodial assets, which are not regulated by the SEC, Arch uses BitGo as a qualified custodian to ensure that user assets are safe and secure. Amid several crypto lenders failing due to rehypothecation of funds in custody, Arch never compromises user security and generates no return on customer funds. Customer funds are always held 1:1 in custody.
• Arch works with best-in-class partners across KYC, custody and payment processing to ensure secure lending.

Arch’s fully automated flow enables users to go from launching 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 loan process.

Arch’s future plans

Arch aims to be primary financial goals of higher income and higher net worth. To achieve this goal, Arch plans to expand the asset classes it lends against. These will include public stocks, equity in private Pre-IPO companies and real estate. In addition, Arch plans to offer high-yield FDIC-insured cash accounts and investment products to its clients.

The Arch Referral Program

Arch launches 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:

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

Furthermore, each person 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 see this step-by-step guide on using the Arch platform and applying for a loan.