Arch Lending Crypto Loans: What SEC Filings Actually Reveal About Its

Arch Lending is a Bitcoin-backed lender offering a non-recourse, collared, 30-day rolling loan facility documented in SEC filings. Its flagship Collar Loan uses a proprietary hedging structure to reduce liquidation risk. Public filings show LM Funding America borrowed $18.13 million against 307 BTC at a Bitcoin price near $64,000 in August 2026, implying an LTV around 92%. This high advance rate reflects the collar's risk-buffering function, but the structure reduces, not eliminates, liquidation exposure.

Arch Lending crypto loans are documented not in marketing brochures but in SEC filings, and those filings tell a precise story. The lender's core product is a non-recourse, collared, 30-day rolling facility secured by Bitcoin, with LM Funding America borrowing $18,127,131.88 against 307 BTC in August 2026 (SEC 8-K/A, August 10, 2026). This article reconstructs what those public filings reveal about the Collar Loan's mechanics, its real-world LTV math, its liquidation protection limits, and the IRS tax treatment that every US borrower needs to understand before pledging Bitcoin as collateral.

Key takeaways

• Arch Lending's Collar Loan is a non-recourse, 30-day rolling facility secured by Bitcoin, documented in SEC filings EX-10.2 and EX-99.1 (August 2026).
• LM Funding America borrowed $18.13 million against 307 BTC at a Bitcoin price near $64,000, implying an approximate LTV around 92%.
• The collar structure reduces but does not eliminate liquidation risk, a critical distinction for borrowers in a market where Bitcoin fell ~25% in 2026.
• Pledging Bitcoin as collateral likely does not trigger a taxable event, but IRS guidance on crypto-collateralized loans remains absent as of 2026.
• Only institutional borrowers (LMFA, PowerCompute) are documented in public filings; retail availability is unconfirmed.

What Is Arch Lending and How Does Its Collar Loan Work?

Arch Lending is a Bitcoin-backed lender that offers a proprietary product called the Collar Loan. The company's facility is documented in a material definitive agreement filed with the SEC on August 3, 2026 (EX-10.2), which defines the loan as "a non-recourse, collared, 30-day rolling loan secured by Bitcoin."

"Non-recourse" carries a specific legal meaning: if the borrower defaults, the lender's only remedy is to seize the pledged Bitcoin. Arch cannot pursue the borrower's other assets. This structure appeals to institutions holding large Bitcoin positions who want dollar liquidity without selling their BTC, but it also means the lender prices risk into the loan terms aggressively.

The "30-day rolling" feature is equally important. Each loan matures after 30 days. At that point, the borrower either repays in full, or the loan rolls into a new 30-day term under then-prevailing market conditions. Rates, collateral requirements, and renewal eligibility can shift at each rollover. This is not a fixed-term facility.

For a deeper primer on how collateralized crypto borrowing works across platforms, see our crypto lending explained guide.

Arch's SEC filing (EX-99.1, August 5, 2026) notes the facility "incorporates a proprietary hedging structure designed to reduce liquidation risk." The word is "reduce," not "eliminate." Borrowers who conflate the two are making a costly assumption.

The Collar Loan defined: non-recourse, collared, 30-day rolling

The Collar Loan's defining mechanics flow directly from the EX-10.2 agreement filed August 3, 2026. Three characteristics set it apart from standard crypto-backed margin loans.

First, the loan is collared: Arch uses an options-based hedging structure that places both a floor and a cap on the collateral's effective exposure. This means the lender absorbs some downside within a defined range before liquidation becomes the remedy.

Second, it is non-recourse. A defaulting borrower loses the pledged BTC, nothing more. This is a meaningful protection in a volatile asset class, though lenders compensate by requiring higher collateralization or pricing the option value into the loan terms.

Third, the 30-day rolling term creates renewal exposure. Each month, the borrower faces a binary outcome: repay or renegotiate. In a declining Bitcoin market, renewal terms can tighten sharply, higher collateral demands, higher rates, or outright refusal to roll.

What 'proprietary hedging structure' means for liquidation risk

Arch's SEC disclosure (EX-99.1, August 5, 2026) states the structure is "designed to reduce liquidation risk", not to remove it.

A collar is an options strategy: the lender buys protective puts and sells covered calls against the collateral position. The put establishes a downside floor within a range, meaning moderate Bitcoin declines do not automatically trigger liquidation. The call caps upside, which limits the lender's cost of providing the protection.

In a market where Bitcoin has fallen approximately 25% in 2026 as of late July (Morningstar, July 27, 2026), this floor becomes expensive to maintain. The hedging provider, Arch or its counterparty, must continually roll the option positions. If volatility spikes, the cost of the collar rises. That cost passes through to the borrower, either as higher rates at renewal or as more stringent collateral requirements.

A borrower who reads "reduced liquidation risk" as "no liquidation risk" may hold a loan through a drawdown that erodes the collar's protective range entirely.

Real Borrowing Numbers: What SEC Filings Show

The most revealing data on Arch Lending does not come from marketing materials. It comes from the SEC filings of a publicly traded borrower: LM Funding America (ticker: LMFA).

On August 3, 2026, LMFA drew $18,127,131.88 from its Arch Lending facility, according to an 8-K/A filed August 10, 2026. The loan was secured by 307 Bitcoin from LMFA's corporate treasury (SEC EX-99.1, August 14, 2026). At a Bitcoin price of approximately $64,000 as of July 31, 2026 (cited in the same EX-99.1 filing), the collateral was worth roughly $19.6 million.

This translates to an implied loan-to-value ratio of approximately 92%. That is aggressive by crypto-lending standards, where most platforms cap LTV at 50% to 70%. The high ratio likely reflects the collar structure: if Arch has hedged the downside via options, it can extend more credit against the same collateral base than a plain-vanilla margin lender.

The filing also notes the facility is a 30-day rolling structure, meaning LMFA faces renewal risk every month. If Bitcoin were to drop significantly before rollover, Arch could demand additional collateral or decline to renew, forcing repayment or triggering liquidation.

LTV scenario: 307 BTC at $64,000 = ~$19.6M collateral value

Take the numbers directly from the SEC filing (EX-99.1, August 14, 2026). LMFA pledged 307 BTC when Bitcoin traded near $64,000 as of July 31, 2026.

• Collateral: 307 BTC × $64,000 = approximately $19.6 million in notional value
• Loan amount: $18,127,131.88 (8-K/A, August 10, 2026)
• Implied LTV: $18.13M ÷ $19.6M ≈ 92.5%

This is not a retail LTV. It is an institutional facility with negotiated terms and an embedded hedging structure. Most individual borrowers using other platforms encounter LTV caps in the 40% to 60% range. The collar is what enables the higher advance rate: Arch can afford to lend closer to the collateral's full value because the options structure limits its downside.

If you are evaluating whether a Bitcoin-backed loan makes sense for your situation, our breakdown of crypto lending risks walks through the math from a borrower's perspective.

How the $18,127,131.88 borrowing maps to an approximate LTV

The LTV math that emerges from LMFA's filing, roughly 92%, demands context.

A standard crypto-backed loan from a platform like Ledn or Unchained Capital typically caps LTV at 50% for Bitcoin collateral. At 50% LTV, LMFA's 307 BTC ($19.6M) would yield about $9.8 million in borrowing capacity. Arch extended nearly double that.

Two factors explain the difference. The collar structure provides Arch with a defined downside buffer, so the lender faces less mark-to-market risk. And the non-recourse nature means Arch prices the loan assuming it may have to absorb a shortfall, the higher LTV offsets the risk transfer.

For borrowers, the trade-off is clear: more liquidity per BTC pledged, but at the cost of higher sensitivity to Bitcoin price moves. At 92% LTV, a 10% drop in Bitcoin wipes out nearly all equity cushion.

Bridge loan context: the $18M draw on July 27, 2026

A week before LMFA's draw, Arch Lending funded a separate transaction. On July 27, 2026, PowerCompute Inc. borrowed an aggregate of $18 million from Arch Lending in what an SEC 8-K filing describes as a bridge loan transaction.

Bridge loans are short-term financing instruments, typically used to cover an immediate cash need pending a longer-term funding event. The filing does not disclose the collateral structure or LTV for PowerCompute. What it confirms is that Arch Lending serves multiple institutional borrowers, and its facility is flexible enough to accommodate both treasury-collateralized Bitcoin loans and bridge financing.

This dual-use capability suggests Arch positions itself as a crypto-native specialty lender, not merely a Bitcoin-collateral shop.

Collar Loan Mechanics: Liquidation Protection and What It Actually Costs

The collar structure Arch markets as a liquidation safeguard is a real financial engineering tool. It is also expensive to maintain, and its protective range shrinks in sustained downturns.

Bitcoin fell nearly 30% year-to-date as of early June 2026, and was still down roughly 25% by late July (Morningstar, June 5 and July 27, 2026). A collar written when Bitcoin was above $90,000 in January would have seen its put strike breached repeatedly as the asset declined through $70,000 and then $65,000. Each time the spot price approaches or breaches the put strike, the hedging counterparty must decide whether to roll the position at a higher cost or allow the collar to reset at a lower floor.

That cost reappears in the borrower's renewal terms. A 30-day rolling structure means the borrower absorbs this repricing monthly. In a flat or rising market, the collar is cheap and renewals are routine. In a market down 25%, renewal becomes an underwriting event.

How a collar limits (but does not eliminate) liquidation exposure

A collar for a Bitcoin-collateralized loan works by combining two option positions: a purchased put option below the current price and a sold call option above it.

The put gives the lender the right to sell Bitcoin at a predetermined strike price, establishing a floor. If Bitcoin falls below that floor, the lender exercises the put and the option seller absorbs the loss beyond the strike. This is what "reduces liquidation risk": moderate declines do not immediately trigger forced selling of the collateral.

The sold call caps the lender's upside on the collateral, which generates premium income that partially offsets the put's cost. The net effect: within a defined price band, the collateral's value is stabilized.

The band is not infinite. A drop exceeding the put's strike, or a drop so fast the options market cannot price new protection, still exposes the collateral to full mark-to-market loss. The collar buys time and buffers volatility. It does not guarantee recovery.

COMMON MISTAKE: confusing 'reduced liquidation risk' with 'no liquidation risk'

Arch's own SEC filing says the hedging structure is "designed to reduce liquidation risk" (EX-99.1, August 5, 2026). It never says "eliminate."

The mistake borrowers make is treating the collar as insurance. It is not. It is a volatility-management tool that works until it doesn't. Two scenarios break the collar's protection.

First, a rapid crash: if Bitcoin drops 15% in a single day, option market makers may widen spreads or withdraw from quoting, making it impossible to roll the collar at any price. The lender then faces an unhedged position and may liquidate.

Second, sustained erosion: a grind lower over several 30-day cycles forces repeated collar resets at progressively lower strike prices. Each reset costs more. Eventually the cost of the collar exceeds the loan's economics, and the lender refuses to renew.

What the collar costs the borrower is harder to quantify. Arch does not publicly disclose its collar pricing methodology, interest rates, or fee schedules. The cost is embedded in the all-in rate the borrower pays, and that rate adjusts at each 30-day rollover. In a declining market, a borrower might see their effective borrowing cost double or triple between renewals.

What happens at the 30-day rollover if Bitcoin has dropped sharply

Every 30 days, the borrower faces a decision. Repay the loan in full, or accept whatever terms Arch offers for renewal.

If Bitcoin has dropped sharply since the loan was originated, say from $64,000 to $55,000 over a single 30-day cycle, the borrower's equity cushion has shrunk dramatically. At origination, 307 BTC at $64,000 against an $18.13 million loan leaves about $1.5 million in equity. After a $9,000-per-BTC decline, that equity falls to roughly negative $1.3 million: the loan exceeds the collateral value.

Arch now holds an underwater loan. The collar may absorb some of this loss if the put strike was set above the current price. But the lender also has the right to decline renewal. A non-renewal forces the borrower to repay $18.13 million within the loan's maturity window, or forfeit the Bitcoin.

This is not a theoretical risk. Bitcoin's ~25% decline in 2026 means any loan originated early in the year has already tested its collar structure multiple times.

IRS Tax Treatment: Does Pledging Bitcoin Trigger a Taxable Event?

This is the question every US borrower asks before posting Bitcoin as collateral, and the answer requires careful framing. The IRS has not issued explicit guidance on crypto-collateralized loans as of 2026.

Under general federal income tax principles, a taxable event occurs when a taxpayer sells, exchanges, or otherwise disposes of property. Pledging an asset as collateral does not transfer ownership, the borrower retains title to the Bitcoin, and the lender holds only a security interest. Most tax practitioners interpret this to mean that pledging BTC as collateral does not trigger a realization event under Section 1001 of the Internal Revenue Code.

That interpretation is not codified in regulation or a revenue ruling. It is the dominant professional consensus, anchored to long-standing treatment of securities-collateralized loans. The IRS could issue guidance that alters this analysis; nothing prevents it from doing so.

When the analysis shifts is at liquidation. If the borrower defaults and Arch seizes the Bitcoin, that seizure constitutes a disposition: the borrower is treated as having sold the BTC for the amount of debt satisfied. The difference between the liquidation value and the borrower's cost basis produces a capital gain or loss, short-term if the BTC was held for one year or less, long-term if held longer. This is reported on Form 8949 and Schedule D of the borrower's Form 1040.

For more on tax implications, our piece on tax drag on crypto lending returns examines the after-tax economics.

Pledging BTC as collateral vs. disposing of it: the realization question

The core tax principle: pledging is not selling. When LMFA transferred 307 BTC to a custody arrangement securing its Arch Lending facility, that transfer created a security interest, not a sale. LMFA retained the economic exposure to Bitcoin's price movements, gains and losses still accrue to LMFA, not to Arch.

Section 1001 of the Internal Revenue Code defines realization events around "sale or other disposition." Collateral pledges have not historically been treated as dispositions. The asset remains the taxpayer's property; the lender's interest is contingent on default.

Crypto introduces complications. If the pledge requires moving Bitcoin to a lender-controlled wallet, does that constitute a transfer of ownership? The dominant view among tax counsel is no, custody arrangements do not equate to beneficial ownership transfer. But the absence of IRS crypto-specific guidance means this position rests on analogy, not authority.

When liquidation of collateral becomes a taxable event

When Arch liquidates collateral, whether because the borrower defaulted, failed a margin-call-like event, or could not repay at rollover, the tax consequences become concrete.

The IRS treats the forced sale of collateral to satisfy a debt as a disposition by the borrower. The amount realized equals the debt discharged. Subtract the cost basis in the Bitcoin, and the difference is a capital gain or loss.

Take a simplified example. A borrower pledges 10 BTC with a cost basis of $30,000 per coin ($300,000 total). The loan is for $500,000. If Bitcoin drops to $40,000 and Arch liquidates, the 10 BTC are sold for $400,000. The borrower realizes a $100,000 short-term capital gain (if held ≤1 year), taxable at ordinary income rates up to 37% in 2026, despite having lost the collateral value relative to the loan.

This outcome is counterintuitive and dangerous. The borrower owes tax on a gain while simultaneously losing their Bitcoin and still potentially owing a deficiency if the collateral sale does not cover the full loan balance.

Record-keeping requirements for US borrowers using crypto loans

Borrowers using Bitcoin-collateralized loans face record-keeping burdens that exceed those of typical securities-backed borrowing.

The IRS requires taxpayers to track the cost basis, acquisition date, and disposition date for every lot of cryptocurrency sold or exchanged. If 307 BTC were accumulated across dozens of purchases at different prices, each lot liquidated in a collateral seizure must be matched to its specific acquisition. FIFO (first-in, first-out) is the default method unless the taxpayer can specifically identify lots.

Additionally, borrowers should retain:

• Loan agreements and all amendments
• Records of BTC transfers to custody or collateral wallets
• Monthly statements showing collateral value and loan balance
• Any correspondence documenting renewal terms or collateral calls
• Liquidation notices if applicable

These records support both the tax position that pledging was not a disposition and the calculation of gain or loss if liquidation occurs. Digital asset tax software, such as CoinTracker, Koinly, or TaxBit, can automate lot identification and Form 8949 generation for complex Bitcoin holdings.

Who Is Actually Using Arch Lending? Institutional Use Cases from Public Filings

Every documented Arch Lending borrower to date is an institution. Public companies disclose their financing arrangements in SEC filings; those filings provide a window into who uses the platform and why.

Two borrowers appear in the public record: LM Funding America (LMFA), a publicly traded company that provides funding to community associations and holds Bitcoin on its balance sheet, and PowerCompute Inc., a privately held entity that used Arch for bridge financing.

The common thread is Bitcoin treasury management. Companies that hold Bitcoin, whether as a corporate treasury asset, as LMFA does, or as an operational necessity, face a liquidity problem: selling BTC triggers taxable gains and surrenders upside exposure. Borrowing against it solves the cash need without the tax event. Arch's facility, with its collar structure and high implied LTV, is built for exactly this use case.

LM Funding America: treasury BTC as borrowing collateral

LM Funding America's engagement with Arch Lending is the most thoroughly documented crypto-collateralized borrowing in the public record.

According to SEC EX-99.1 (August 14, 2026), LMFA used 307 Bitcoin from its corporate treasury as collateral for the Arch facility. The company did not acquire new Bitcoin for the loan, it deployed existing balance-sheet assets. The filing explicitly frames the transaction as a treasury management decision: obtaining dollar liquidity without selling BTC.

Why does this matter for a publicly traded company? Selling Bitcoin at a gain creates a taxable event and reduces the company's reported BTC holdings, a metric some investors track closely. Borrowing against BTC preserves the position while generating working capital. The risk, as LMFA's filing acknowledges, is that the 30-day rolling structure exposes the company to refinancing risk in a down market.

This use case, corporate Bitcoin treasury as collateral, mirrors the strategy that publicly traded companies like MicroStrategy (now Strategy) have employed with other financing instruments, albeit through different structures. A separate SEC filing (mstr-20260331) documents a $39.9 million non-Bitcoin secured loan maturing in 2026, illustrating that companies with Bitcoin treasuries typically maintain a mix of collateralized and uncollateralized facilities.

PowerCompute Inc.: an $18M bridge loan via Arch Lending

On July 27, 2026, PowerCompute Inc. borrowed $18 million from Arch Lending, disclosed in an SEC 8-K filing. The filing characterizes the transaction as a bridge loan, short-term financing intended to cover an immediate funding need until permanent capital is secured.

Bridge loans in crypto lending serve a specific function. A company may need dollar liquidity for operations, acquisitions, or debt service, but its permanent financing, whether equity, a longer-term loan, or revenue, is weeks or months away. Borrowing against Bitcoin avoids selling into a down market.

The PowerCompute filing does not disclose the collateral structure, LTV, or Bitcoin amount pledged. What it does confirm is that Arch Lending's facility accommodates multiple loan types, not solely the Collar Loan product documented in the LMFA agreement.

For potential borrowers evaluating Arch, this flexibility is relevant. It suggests the platform can structure facilities around different collateral types, terms, and borrower profiles, though all publicly documented borrowers remain institutional.

Key Risks Every US Borrower Should Understand Before Applying

Bitcoin-backed lending, even with a collar structure, carries risks that are amplified in the 2026 market environment. Borrowers evaluating Arch Lending, or any crypto-collateralized facility, should weigh these risks against the benefit of accessing dollar liquidity without selling BTC.

Three risk categories dominate the analysis: price-driven collateral risk, structural rollover risk, and counterparty/regulatory risk. Each becomes more acute when Bitcoin is in a sustained drawdown, as it has been through most of 2026.

Before committing collateral to any lending platform, review our detailed analysis of whether crypto lending is safe for a broader risk framework.

Price volatility risk in a down market

Bitcoin's price trajectory in 2026 illustrates the core risk. The asset fell nearly 30% year-to-date by early June, and was still down roughly 25% as of late July (Morningstar, June 5 and July 27, 2026).

For a loan at 92% implied LTV, a 25% decline from $64,000 to $48,000 would leave the collateral worth roughly $14.7 million against an $18.1 million loan balance, a deficit of approximately $3.4 million. Even a collar with a put strike at 80% of spot ($51,200) would be breached well before the bottom.

The collar does not prevent this scenario. It shifts who absorbs the loss, the options counterparty rather than the borrower directly, but the economics of the loan still break. At that point, Arch faces a choice: demand additional collateral, force repayment, or seize the BTC. None of these outcomes benefits the borrower.

Rollover risk and forced liquidation scenarios

The 30-day rolling term is the structural vulnerability in Arch's product design. Each month, the borrower must qualify for renewal under current market conditions.

In a rising or stable Bitcoin market, rollover is routine. In a declining market, three things can happen:

• Higher rates: The cost of the collar rises as volatility increases, and that cost passes through to the borrower's renewal rate.
• Collateral calls: Arch may demand additional BTC to maintain the LTV ratio, forcing the borrower to commit more assets.
• Non-renewal: Arch can simply decline to roll the loan, forcing repayment within the maturity window. If the borrower cannot repay, the collateral is seized.

A borrower who cannot source dollar liquidity on 30 days' notice should not take a 30-day rolling loan against volatile collateral. The mismatch between the loan's term and the borrower's liquidity profile is the single most dangerous aspect of this product.

Regulatory and counterparty risk

Crypto-collateralized loans occupy a regulatory gray zone. They are not bank deposits, FDIC insurance does not apply. They are not securities accounts, SIPC coverage does not apply. The collateral is held in a custody arrangement whose legal protections depend on contract terms and state law, not federal depository insurance.

Counterparty risk has a specific dimension with Arch: the proprietary hedging structure. The collar relies on Arch or its counterparties maintaining options positions. If Arch or its hedging provider faces financial distress, the collar could fail precisely when it is most needed, during market turmoil.

Regulatory risk is also evolving. The SEC, CFTC, and federal banking agencies have expressed interest in crypto-lending activities. A future enforcement action or rulemaking could alter the legality or economics of the Collar Loan structure. Borrowers should assume the regulatory environment will change, and not necessarily in their favor.

Sources

• sec.gov
• sec.gov
• sec.gov
• sec.gov
• sec.gov
• sec.gov
• sec.gov
• global.morningstar.com
• global.morningstar.com

The information provided here is general in nature and is not a substitute for advice from a licensed financial advisor. Review your situation with a professional before committing.