Xapo Bank Announces New Bitcoin-Backed Loan Service, Targeting Mainstream Market

Xapo Bank has become known in the conventional banking sector as an early adopter. During the pandemic-driven BTC frenzy, it became one of the first banks to open a physical headquarters in Europe by settling in Gibraltar, a British overseas territory.

Xapo Bank, the financially focused offshoot of cryptocurrency firm Xapo, has introduced a new loan service that permits customers to use their Bitcoin as collateral for borrowing up to $1 million, reports cité par The Block.

This initiative marks another step in cryptocurrency’s broader journey toward mainstream financial services. However, the service excludes clients in the UK and Australia.

The private bank, which opened a physical headquarters in Gibraltar last year, is also offering a Top-up service that allows users to quickly transfer up to €10,000 to their Xapo account from another bank in the SEPA zone.

Major Wall Street Firms Join Bitcoin Financing Race

Xapo Bank is among the early adopters in the conventional banking sector, and it has become known for its proclivity to introduce cryptocurrency products and services.

During the pandemic-driven BTC frenzy, the bank became one of the first to open a physical headquarters in Europe by settling in Gibraltar, a British overseas territory.

The move comes as renowned financial institutions are entering the market with Bitcoin products and services. Cantor Fitzgerald, a major Wall Street firm, has established a Bitcoin finance section.

The firm has partnered with crypto companies Anchorage Digital and Copper.co to help its expanding global Bitcoin operation, according to sources.

Last year, the bank received regulatory license in the UK and started providing interest-bearing BTC accounts in addition to standard banking services.

Xapo Bank Debuts Bitcoin Loans, Calls Out ‘Predatory’ Crypto Lenders

The private bank's new service allows customers to access up to $1 million in Bitcoin-backed debt. Read more: https://t.co/rBhwnAHu7g pic.twitter.com/qPtcWOrDgA

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Coinbase Revives Bitcoin-Backed Loans Through New Partnership

Coinbase previously offered digital currency-backed loans but stopped the service in 2023. The company has now restarted lending through a partnership with Morpho Labs, using decentralized lending protocols.

Their current service allows US users (except those in New York) to borrow up to $100,000 in USDC stablecoins.

Max Branzburg, Coinbase’s vice president, stated that the product aims to improve the crypto’s usefulness in a decentralized setting. The service streamlines borrowing by eliminating credit checks and fees, though borrowers must keep an eye on their collateral value to avoid liquidation.

The new Coinbase service runs on Base, the company’s Ethereum layer-2 network. When customers take out loans, their crypto collateral is automatically converted to Coinbase Wrapped Bitcoin (cbBTC), a token backed one-to-one by BTC held in Coinbase custody.

While some services use decentralized finance (DeFi) protocols, Xapo represents a more traditional, centralized approach. Customers must first get approval from the bank, and their Bitcoin is stored “in a vault until the loan is paid back,” with loan terms extending up to one year.

Seamus Rocca, CEO of Xapo, noted that many long-term crypto holders became wary of crypto-backed lending after witnessing “predatory lending and faulty products” in the market.

“That’s why we’re doing things differently,” Rocca added.

These services mostly help Bitcoin holders to acquire cash without selling their assets and generating taxable transactions.