Gibraltar-based private bank Xapo said Tuesday it is now accepting members’ Bitcoin as collateral for loans.
The new service allows customers to access up to $1 million in Bitcoin-backed debt, except for those located in the UK and Australia, Gadi Chait, a Xapo investment manager, told Decrypt.
“We think it’s a great piece of collateral to lend against,” Chait added, referring to the asset that Xapo has safeguarded on behalf of customers since 2013.
As Wall Street firms like Cantor Fitzgerald develop their own Bitcoin financing businesses, Chait said Xapo is expanding its “one-stop shop” to give customers more options in most regions.
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The Bank of Korea has ruled out the inclusion of Bitcoin in its foreign exchange reserves, citing concerns over the crypto's price volatility. In response to a March 16 inquiry from Representative Cha Gyu-geun of the National Assembly’s Planning and Finance Committee, the central bank pointed out the risks of Bitcoin’s price fluctuations, which can make it an unreliable asset for reserves. It marks the first time the central bank has clarified its position on the potential use of the crypto for...
Xapo was among the first crypto banks to establish a physical headquarters in Europe, settling down in the British overseas territory of Gibraltar during crypto’s pandemic-era boom.
Last year, the firm said it gained regulatory approval in the UK, allowing it to provide interest-bearing Bitcoin accounts, among other banking services, to customers in the region.
Within the U.S., Bitcoin-backed lending has recently made a return. While companies like Coinbase ceased issuing Bitcoin-backed loans in 2023, the San Francisco-based exchange restarted them in January, tapping a decentralized lending protocol called Morpho.
Some asset managers are using decentralized finance, or DeFi, to earn yield from Bitcoin-backed loans as well. Among them is Bitwise, which recently made an allocation on Maple Finance, the lending protocol said earlier this month.
No More Debanking? Fed Chair Says US Banks 'Perfectly Able' to Serve Crypto Customers
The Federal Reserve signaled Wednesday that servicing the cryptosphere shouldn’t be off-limits for U.S. banks, whether that involves catering to customers or pioneering new services. Fed Chair Jerome Powell said during a Wednesday press conference that the U.S. central bank is “not against innovation,” and that “banks are perfectly able to serve crypto customers, as long as they understand and can manage the risks.” “A good number of our banks that we regulate and supervise do that,” Powell cont...
Xapo, of course, is a centralized entity. The bank’s customers need approval, and their corresponding Bitcoin is held “in a vault until the loan is repaid” over a period of time that can last as long as a year, according to a statement.
The crypto lending industry was among the buzziest corners of crypto heading into 2022.
But following a series of high-profile bankruptcies that culminated in the collapse of FTX, the practice fell out of favor with market participants while drawing regulatory heat in the U.S.
“Many long-term Bitcoin holders have steered away from crypto-asset-backed lending after seeing predatory lending practices and products they couldn't count on,” Xapo CEO Seamus Rocca said in a statement. “That’s why we’re doing things differently.”
Xapo was founded by Wences Casares, an entrepreneur born in Argentina. In 2015, LinkedIn co-founder Reid Hoffman described him as “Patient Zero for Bitcoin in Silicon Valley” and among the earliest Bitcoin devotees in the U.S., per Entrepreneur.
Edited by Sebastian Sinclair
