At Arch, we do not rehypothecate your assets. But what exactly does this mean, and why is it important?
What is Rehypothecation?
Rehypothecation is a practice where a company uses customer assets, such as crypto collateral, for its own financial activities—typically to lend or invest in order to generate profit. While this can allow lenders to offer attractive rates, it exposes your assets to additional risk because they are being utilized by third parties, rather than being held securely for you.
Why Arch Never Rehypothecates Your Assets
At Arch, we believe in protecting your assets at all costs. We never use your crypto for lending, investing, or any external activity. Your assets are held securely with Anchorage, a federally chartered U.S. bank and regulated custodian. With Anchorage, your assets are stored in bankruptcy-remote trusts and are insured against loss and theft. Additionally, only a select group of Arch team members can request asset transfers, and these require multi-level approval and video verification.
We focus on keeping your assets safe, available, and fully under your control at all times.
The Risks of Rehypothecation
Rehypothecation introduces a significant level of risk because your assets are no longer isolated and secured. In the event of a loss—whether through bad investments, market crashes, or the collapse of a third party—all customers who have rehypothecated their assets may be impacted. One loss can affect everyone, and your assets could be at risk even if you weren't directly involved in the activity.
Unfortunately, this is not just a theoretical concern. The crypto lending industry has seen numerous failures tied to rehypothecation, where users’ collateral has been lost due to risky practices by lending platforms.
Beware of Business Models that Rely on Rehypothecation
If a company offers low APRs for loans with lower loan-to-value (LTV) ratios, it’s often a sign that they’re engaging in rehypothecation. These companies are likely making money by using your collateral for external activities, so they incentivize you to deposit more. The more collateral you deposit, the more they can use it to generate revenue elsewhere.
In contrast, at Arch, the more collateral you deposit, the more we pay to securely store it with our regulated custodian, Anchorage. We don’t profit from your assets—we simply ensure they’re protected and readily available for you.
Arch’s Commitment to Security
Alongside our no-rehypothecation policy, Arch implements multiple layers of security to keep your assets safe:
Anchorage Custody: Your assets are stored with Anchorage, a federally regulated bank that uses institutional-grade security practices.
Insurance Coverage: Anchorage provides insurance against loss and theft for all accounts.
Multi-Level Approval: Asset transfers require approval from multiple authorized team members and are verified with video authentication.
Transparency: For transactions over $100k, we provide a block explorer link to show your crypto is stored in a segregated wallet, giving you complete transparency.
At Arch, we take a cautious and protective approach to asset management, ensuring that your crypto is secure, and never rehypothecated.