Bitcoin Custodian Xapo Set to Receive Banking License in Gibraltar

Digital wallet and crypto custody provider Xapo is set to win a banking license from Gibraltar. The bank is the first such entity in Europe to have a physical branch, in Grand Casemates Square, at the heart of Gibraltar's city center. 

“Xapo have now established themselves in Gibraltar as a fully-fledged bank,” Gibraltar’s Finance Minister Albert Isola told Decrypt.

He clarified that the firm, which already holds an e-money license in Gibraltar, is in the final stage of being granted a fully accredited institution license, which will give it all the powers of a regular bank. 

“Xapo have been licensed [here] for some time, and obviously what happens when you get to know the jurisdiction—the regulator gets to know you—firms will always be extending their licenses to cover more and more different things. And that progressed to a full accredited institution license,” said Isola. 

The news comes after a flurry of US crypto companies announced banking charters. Last week, Anchorage was awarded the first federal banking charter given to a crypto platform in the United States, and at the end of last year, crypto exchange Kraken and financial services provider Avanti were both granted specialist state banking charters from the US state of Wyoming.  

Xapo’s Bitcoin Pedigree

Xapo is one of the earliest Bitcoin custodians and was established in 2013 by Argentinian serial entrepreneur and Bitcoin bull Wences Casares, who sits on the boards of PayPal and Facebook’s planned crypto offering Diem (formerly Libra).

In May 2020, Xapo announced via a blog post that the platform was “expanding beyond Bitcoin to become a digital bank,” and expected to launch before the end of 2020. Decrypt reached out to Xapo to ask how the launch is progressing, and we’ll update once they respond. 

But the new strategy has also meant leaving the US market; in December, Casares told Coindesk that Xapo would be ending its service to US customers from March 2021. 

Instead, the company plans to focus on clients “mostly in emerging markets,” who have no access to international private banking services, but have between $30,000 and $1 million in funds, Casares told Coindesk.  

In fact, Xapo began to wind down its US operations even earlier. It sold its institutional custody businesses to crypto exchange Coinbase for $55 million in August 2019, while holding onto its exchange business, which allows ordinary consumers to buy and sell crypto.

“Serving the US market would require quite a lot of effort, time and investment, it would require a separate organization within Xapo to support it and it would still yield a worse product than what we can offer internationally,” Casares told Coindesk in December.

Setting up on “The Rock”

Xapo reportedly shifted its headquarters to Gibraltar in May 2020. But it’s not the first move for the firm, which has been based in Hong Kong, California and Switzerland, where it was famously said to keep its Bitcoin funds in a secret vault under the mountains.

Gibraltar has long been ahead of the curve within the digital assets space; it introduced legislation to regulate digital ledger technology at the beginning of 2018 and has now granted over a dozen operating licenses to crypto companies, including exchanges eToro, Huobi, Bitso, and LMAX. 

Isola explained that regulators are still monitoring Xapo. But a quick search shows that the new bank already has Swift and BIC codes in place. While, on the website of the Gibraltar Financial Services Commission, the page for “Xapo Bank Gibraltar Limited” is ready and waiting, so it’s not clear what’s causing the delay to launch. 

Perhaps they’re digging under Gibraltar’s famous Rock to make a new vault.

This story has been updated with details of Xapo's physical branch.