Aven, a fintech company based in Silicon Valley and boasting over 100,000 customers, has officially launched a bitcoin-backed credit card that allows consumers to pledge bitcoin as collateral in exchange for a credit line. This innovative card, which integrates aspects of a home equity line of credit (HELOC), offers borrowers the ability to access credit limits of up to $1 million, spread over a maximum term of 10 years.
The card’s interest rates are notably lower than the typical U.S. credit card rates. According to data from the Federal Reserve, the average annual percentage rate (APR) for U.S. credit cards currently stands at 21.52%. In contrast, Aven’s bitcoin-backed card offers interest rates ranging from 7.99% to 11.99%, depending on the amount of collateral a customer is willing to pledge.
To utilize this card, customers must transfer their bitcoin to BitGo, a cryptocurrency custody firm based in South Dakota, as Aven partners with them for this service. Aven’s structure necessitates that loans are overcollateralized; therefore, borrowers cannot take out more than the value of the bitcoin they secure.
Customers can choose from three distinct borrowing tiers based on their collateral percentage. If a borrower opts for a credit limit capped at 30% of their collateral value, they can access the lowest interest rate of 7.99%. For a limit of 50%, the rate rises to 9.99%, and for the maximum limit of 70%, the interest rate is set at 11.99%. Importantly, these rates are available regardless of the borrower’s credit score, although this aspect may change in the future.
In comparison to competitors within the space, Aven asserts that its bitcoin-backed loans are more favorable due to their lower interest rates and extended repayment term. Other established providers, such as Ledn and Salt Lending, offer bitcoin-backed loans with APRs that generally start around 9.95% to 11.49%, often with repayment schedules restricted to one year.
Aven’s cofounder and CEO, Sadi Khan, emphasizes the competitiveness of their product, stating that the regulatory clarity surrounding bitcoin has bolstered their willingness to offer these loans. He anticipates that, over time, crypto-backed loans will become the least expensive asset-backed lending option offered by Aven due to the intrinsic nature of bitcoin as a secure and easily verifiable digital asset.
However, potential customers should be mindful of the inherent volatility associated with bitcoin. Aven has structured safeguards to mitigate risks—if a borrower’s balance approaches 70% of their collateral’s value, the card will be locked to prevent further purchases or cash withdrawals. If it rises to 80%, borrowers will be given a 72-hour window to either add more collateral or pay down their balance before Aven liquidates some of their bitcoin assets to restore the loan-to-value ratio. A balance exceeding 85% will trigger an immediate liquidation, where Aven sells off the collateral, assesses a 2% liquidation fee, and returns any excess to the customer.
Furthermore, there are restrictions on using Aven’s credit cards for transactions involving gambling, cryptocurrency exchanges, or prediction markets. Since its inception, Aven has issued over $4 billion in loans across different products, ultimately saving consumers more than $300 million in interest payments when compared to traditional credit sources.
Despite not holding a bank charter, Aven collaborates with Coastal Community Bank from Washington State to issue its cards. The startup’s funding strategy involves borrowing from a diverse array of institutions, including Goldman Sachs and various community banks, ensuring stability amid recent capital flight from some private credit sectors.
As Aven expands its suite of offerings with this bitcoin-backed card, it continues to position itself at the nexus of technology and finance, navigating the evolving landscape of digital assets and lending frameworks.
