Why Bitcoin-backed loans need qualified custody and no rehypothecation, according to Arch Lending CTO

Arch Lending co-founder Himanshu Sahay has identified qualified custody, zero rehypothecation, and clear collateral rules as three safeguards needed to reduce risks in Bitcoin-backed lending. Summary Bitcoin-backed loans give long-term holders access to cash without requiring an immediate sale. Sahay said independent custody and zero rehypothecation can limit operational and counterparty risks. Borrowers still face interest charges, margin calls and liquidation when Bitcoin’s price falls. Celsius, BlockFi, and Genesis showed how opaque lending structures can leave customers exposed. Himanshu Sahay, co-founder and chief technology officer of Bitcoin-backed lending platform Arch Lending, told crypto.news that wealthy Bitcoin holders are increasingly using loans to meet cash needs while keeping their exposure to the asset. “For long-term Bitcoin holders, borrowing can provide liquidity without requiring them to sell their position,” Sahay said. Individuals may use the proceeds for another investment or personal expenses, while family offices and businesses can borrow for working capital, according to Sahay. The arrangement allows the borrower to retain ownership of their Bitcoin unles...