Gibraltar-based Xapo Bank Expands into Bitcoin-Backed Lending, Offering Loans of Up to $1M

Xapo Bank, a Gibraltar-based financial institution, is stepping into Bitcoin-backed lending, offering loans of up to $1 million to long-term BTC holders.

Gibraltar-based Xapo Bank is introducing a unique service by offering Bitcoin-backed loans of up to $1 million to long-term BTC holders.

As announced today, eligible clients can now access U.S. dollar loans without selling their Bitcoin. The move marks a comeback for crypto lending following the failures of Celsius and BlockFi last year.

While trust in borrowers was affected by those events, there’s been increasing demand for Bitcoin-backed loans, especially from high-net-worth individuals and institutional investors needing liquidity, Seamus Rocca, Xapo’s CEO, explained.

“At Xapo, we are keenly aware of the trust that has been placed in us by our clients and the broader industry. It is a trust we do not take lightly, especially in light of the recent events that have unfolded, casting a shadow of doubt on the stability and reliability of some crypto lending platforms,” Rocca added.

The bank will provide instant alerts if BTC prices experience a significant drop, allowing borrowers to quickly top up collateral or make repayments to avoid liquidation. Xapo also includes risk management tools and claims to have “proactive security features” in place.

Announced earlier this month, Bitcoin developer Blockstream secured a multibillion-dollar investment to launch new institutional funds, two of which will focus on BTC lending.

Founded in 2013, Xapo Bank transitioned from a Bitcoin wallet to an e-money wallet and operates as a “digital-first” retail bank and virtual asset service provider (VASP) custodian. It guarantees USD deposits up to €100,000 and uses multi-party computation (MPC) technology for security.

Having secured a UK banking license through a passporting scheme operated by the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA), Bank of England, and Gibraltar authorities, Xapo is the first UK bank to offer interest-bearing bitcoin and fiat accounts.

The bank’s platform provides a 1% interest rate on bitcoin without any staking, lending, or locking up of assets. Users can also spend bitcoin via Xapo’s debit card, send GBP payments to UK accounts, invest in S&P 500 stocks, acquire select cryptocurrencies, and access stablecoin payment rails with USD accounts.

Fintech firms have faced difficulties in securing UK licenses, but Xapo Bank, regulated by the Gibraltar Financial Services Commission since 2021, meets the UK’s regulatory standards.