Xapo Bank, a Gibraltar-based financial institution, announced the launch of Bitcoin-collateralized loans on March 18, enabling customers to borrow up to $1 million in U.S. dollars while retaining ownership of their Bitcoin holdings. The service excludes residents of the U.K., Australia, and the U.S. due to regulatory restrictions.
The bank positions Bitcoin as optimal collateral due to its liquidity, divisibility, and 24/7 market availability. CEO Seamus Rocca emphasized that Bitcoin’s borderless nature makes it uniquely suited for global lending services. Clients can select repayment periods of 30, 90, 180, or 365 days without early repayment penalties. To qualify, borrowers must undergo pre-approval and meet specific eligibility criteria.
Xapo distinguishes its offering by prohibiting rehypothecation of collateralized Bitcoin. Instead of repurposing client assets for other financial activities, the bank stores pledged Bitcoin in institutional-grade custody vaults secured through multiparty computation (MPC) protocols. This approach addresses past industry concerns about mismanagement, highlighted by the 2022 collapses of Celsius and BlockFi.
The move aligns with renewed interest in crypto-backed lending from traditional financial players. Wall Street firm Cantor Fitzgerald recently expanded its Bitcoin financing division, while Coinbase revived its collateralized loan program in partnership with decentralized platform Morpho. Xapo’s service targets long-term Bitcoin holders, particularly high-net-worth individuals and institutional investors seeking liquidity without selling assets.
To mitigate risks, the bank implemented real-time price alerts and allows borrowers to adjust collateral ratios dynamically. These measures aim to prevent automatic liquidations during market volatility. Xapo, founded in 2013 by Argentine entrepreneur Wences Casares, became one of Europe’s first crypto banks to establish a physical headquarters during the pandemic-era crypto surge.
Sources:
https://www.ainvest.com/news/xapo-bank-launches-bitcoin-backed-loans-expanding-services-2503/
https://bitmarkets.com/en/insights/article/bank-launches-bitcoin-backed-usd-loans
Xapo Launches Bitcoin-Backed Lending for Up to $1 Million in Loans
https://cointelegraph.com/news/xapo-bank-bitcoin-usd-loans-long-term-hodler
https://www.binance.com/en/square/post/21794216591642
