The Letter of Credit

The Letter of Credit (LoC) is the on-chain mechanism that connects your collateral to your loan. It’s how you reserve collateral without handing over the coins.

What it does

When you create an LoC, you reserve a defined amount of your collateral against a defined amount of a credit asset: USDT for USD loans, EURC for CHF loans. The LoC names a beneficiary: Helva’s beneficiary contract. Under the conditions in your contract, that contract can request conversion of the required collateral into the credit asset. Redemptions can only go to Helva’s Safe, enforced by the contract. The credit asset is held for the lender. See Helva’s underlying entity.

CHF loans

A CHF Letter of Credit is denominated in EURC, not francs, and includes an FX buffer sized by the loan term. See The FX buffer.

flowchart LR
    V[Your collateral in your vault] -->|reserve| LoC[Letter of Credit]
    LoC -->|defines| Amt[Credit amount covers the loan]
    LoC -->|names| Ben[Helva's beneficiary contract]
    Ben -->|only under contract conditions| Conv[Convert required amount]
    Conv --> Excess[Unused collateral returns to you]

The key guarantees

• You can never lose more than the LoC amount. Conversion produces the credit amount defined. Unused collateral returns to you atomically in the same transaction.
• Your collateral asset is not what gets paid out. Redemption pays the credit asset to Helva’s Safe. That Safe does not receive your WETH, wstETH, WBTC, or cbBTC.
• You keep the coins. The collateral stays in your self-custodial vault. The LoC is a reservation, not a transfer of the coins. The conversion right is held for the lender.

Worked example

You deposit 10 wstETH and reserve it against 10,000 of the credit asset. If conversion is ever triggered, only enough wstETH to produce that credit amount is converted — the rest is returned to you. Helva’s Safe receives the credit asset, never your wstETH. wstETH continues to accrue yield while it sits as collateral.

Why a Helva-operated beneficiary?

The beneficiary is a contract operated by Helva. Conversions happen only under the agreed contract conditions. The lender cannot trigger them on their own. See Helva’s underlying entity.