Xapo Bank Launches Bitcoin-Backed Loans, Targeting Mainstream Adoption

Xapo Bank announced a new loan service that lets customers use their Bitcoin as collateral, marking another step in cryptocurrency's move toward

Xapo Bank, a name that has come up frequently in discussions about Bitcoin, has announced a new service that might interest BTC holders.

As reported by Blockware, the private bank, known for its early adoption of cryptocurrency, has launched a loan service where qualified members can borrow up to $1 million against their Bitcoin holdings.

The service will not be available to clients in the UK, Australia, or New York, and it appears to cater to high-net-worth individuals or institutions.

The news arrives as major Wall Street firms are also entering the Bitcoin financing space. Financial powerhouse Cantor Fitzgerald has reportedly created a Bitcoin finance division.

According to sources, the company has partnered with crypto companies Anchorage Digital and Copper.co to aid its expanding global Bitcoin operation.

The bank, which received regulatory approval in the UK last year, will also provide interest-bearing BTC accounts in addition to standard banking services.

The private bank's new service will allow customers to access up to $1 million in Bitcoin-backed debt.

The service, which is being launched in partnership with Morpho Labs, will allow US users, excluding those in New York, to borrow up to $100,000 in USDC stablecoins.

Max Branzburg, Coinbase’s vice president, explained that the product is designed to enhance the utility of crypto in a decentralized setting.

The service bypasses credit checks and generates no service fees, streamlining the borrowing process. However, borrowers will need to monitor 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 utilize decentralized finance (DeFi) protocols, Xapo presents a more traditional, centralized approach. Customers must undergo 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, acknowledged that many long-term crypto holders grew 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 mainly aid Bitcoin holders in acquiring cash without selling their assets and generating taxable transactions.