Borrow Against Bitcoin: Why Licensing and Liquidation Terms Trump Headline Rates

If you believe your crypto still has runway, selling to cover a short-term need is usually the least elegant move—you lock in taxes and forgo potential upside. A crypto-backed loan solves a narrower problem: unlock dollars while keeping your BTC, ETH, or SOL. The catch isn’t the concept; it’s the lender design—specifically, how liquidation is handled and whether the lender is actually licensed.

How the structure works - You post Bitcoin, Ethereum, or Solana as collateral. - A lender advances cash against it—Figure offers up to 75% loan-to-value (LTV). - You retain ownership; borrowing is generally not a taxable sale. Liquidation, however, is a taxable event. Speak with a CPA.

The product has matured, but selection still varies widely. Four levers define your actual risk/return profile: 1) Fixed vs. variable rates. Floating “teaser” rates can reprice when markets move. Figure’s crypto-backed loan uses a fixed rate for the 12‑month term, so payment amounts don’t change with volatility. 2) Regulation and licensing. The 2022 CeFi failures reminded the market that “crypto lender” is not the same as “licensed lender.” Figure Lending LLC is a licensed lender (NMLS #1717824), which is a fundamentally different risk posture than sending coins to an unregulated offshore venue. 3) Funding speed and underwriting. Figure funds same-day and doesn’t rely on a credit score; approval is collateral-driven, not FICO-driven. 4) Liquidation design. Crypto is volatile; price drawdowns can trigger margin calls. Figure offers optional Liquidation Protection in select states that defers price-based liquidation for the full loan term, so a temporary downdraft doesn’t force a sale at the worst moment. Liquidations still occur if payments are missed or loan terms are violated; protection only applies to price-driven margin calls.

What actually matters when markets break Investors often anchor on APR, but rate is rarely what saves you in a tail event. Licensing determines whether you have recourse and oversight; liquidation terms determine whether a transient wick becomes a permanent loss. Evaluate, in this order: - Maximum LTV and how it’s calculated intraday - Fixed vs. variable rate mechanics - Regulatory standing (onshore licensing, NMLS, jurisdiction) - Exact margin-call thresholds and liquidation protections

A fixed-rate, fully licensed structure suits holders who accept margin-call risk and want liquidity without selling. If the idea of a margin text at 3 a.m. bothers you, this tool may not fit.

Representative pricing and terms (Figure) - Available interest rates: 8.91% (9.999% APR) at 50% LTV; 11.50% (12.62% APR) up to 75% LTV - Maximum APR: 12.62% APR (includes interest plus a 1% origination fee) - Repayment: 12 months, interest-only - Example: Borrow $10,000 at 50% LTV, 8.91% interest, 1% origination ($100). APR 9.999%. Twelve monthly interest-only payments of $74.25 - Rates change frequently; your rate depends on application date and factors such as LTV

Availability and regulatory notes - Figure Lending LLC is a licensed lender (NMLS #1717824). Equal Opportunity Lender. Licensing can be verified at NMLS Consumer Access - Crypto-backed loans for U.S. borrowers are available in select jurisdictions; not available to residents of DC, ID, IL, KY, MD, MS, SD, TX, VT, or VA - Optional Liquidation Protection is available only in CA, NY, FL, PA, AL, AK, GA, HI, MA, and UT; it covers price-based margin calls, not delinquencies or other defaults - For New York residents and international customers, crypto loans are offered through Figure Markets Credit LLC; not available in the following jurisdictions: Crimea, Donetsk, Luhansk, Afghanistan, Albania, Belarus, Central African Republic, Democratic Republic of the Congo, Cuba, Ethiopia, Haiti, Iran, Iraq, Lebanon, Libya, Mali, Myanmar (Burma), Nicaragua, Nigeria, North Korea, Pakistan, Palestine, Russia, Somalia, South Sudan, Sudan, Syria, Ukraine, Venezuela, Yemen, Zimbabwe - Cryptocurrency trading is not available in NY - Figure Payments Corporation (NMLS #2033432) provides crypto services to self-directed investors and traders; it is not licensed with the SEC or CFTC and is not an NFA member

Operational considerations - System access, trade placement, and execution can be delayed or fail due to volatility, volume, quote delays, software issues, Internet outages, and other factors - Investing in cryptocurrencies involves significant risks

Tax and suitability - Borrowing against crypto is generally non-taxable; liquidation creates a taxable sale - This is not tax or investment advice—consult a CPA and a financial advisor

Practical take If you’re going to borrow against BTC, ETH, or SOL, prioritize survivability over a shiny APR. Fixed-rate terms reduce payment uncertainty, licensing reduces counterparty ambiguity, and clear liquidation rules reduce forced selling in a downdraft. That triad is what keeps long-term thesis holders in control of their coins while still accessing dollar liquidity. For those comfortable with the margin dynamics, a fixed-rate, licensed loan can be a capital-efficient bridge without sacrificing core exposure. Some lenders also run limited-time promotions (e.g., a $50 bonus for a $500 deposit), which can sweeten economics at the margin—but they shouldn’t determine your choice.