Bitcoin BTC$108,222.79 Holders facing high taxes have a new option to ease their burden by converting their debt into income-generating mining hardware.
Cryptocurrency finance company Arch is rolling out TaxShield, which allows investors to deduct the cost of mining equipment from their taxable income by taking advantage of a specific provision of the US tax law (bonus depreciation under IRS §168(k)).
Here’s how it works: Users pledge Bitcoin as collateral for overcollateralized loans from Arch and use the loan proceeds to purchase and host mining rigs through Blockware. Investors can deduct the entire purchase amount in the first year, potentially wiping out hundreds of thousands in taxes while continuing to earn monthly mining rewards in BTC.
Arch co-founders Himanshu Sahai and Dhruv Patel told CoinDesk in an interview that the service, developed in collaboration with prominent Bitcoin educator Mark Moss and Blockware, is primarily targeted at high-income BTC holders. They explained that a customer with $1 million in taxable income could potentially reduce their federal tax bill by approximately $400,000 while maintaining their BTC exposure and earning mining income.
This is part of a broader push by Arch, best known for its crypto-backed loans, to build a series of niche services commonly available in traditional finance but aimed at high-net-worth digital asset holders.
“Many people who have built significant wealth in digital assets over the past 12 to 15 years have not had access to the same level of high-quality financial services that they have access to in the real world,” Sahay told CoinDesk.
The founders say their long-term goal is to evolve into a next-generation wealth management platform that handles private bank-like services for crypto holders: lending, income, custody, and tax planning.
TaxShield follows the recent launch of Perpetual Income, another product built with Mark Moss that allows Bitcoin holders to earn regular tax-advantaged income without having to sell their assets.
Last year, Arch secured $70 million in debt funding from Galaxy and a $5 million equity round led by Morgan Creek Digital and Castle Island Ventures to expand its platform.
Arch plans to begin trading in the coming months and is also considering introducing card products beyond that, the co-founders said.
Read more: Bitcoin-backed loans are about to get cheaper around the world: Ledn co-founder
