Xapo Bank Unveils $1M Bitcoin-Backed Credit Line to Curb BTC Sell-Offs

In a bold move shaking up crypto finance, Gibraltar-based Xapo Bank has unveiled a $1 million Bitcoin-backed credit line.

In a move that could shake up crypto finance, Gibraltar-based Xapo Bank has launched a $1 million credit line backed by Bitcoin. The product is designed to provide liquidity to users without forcing them to sell their BTC, a strategic play in today’s volatile market.

Why Bitcoin Holders Get A New Liquidity Lifeline

Xapo Bank is aiming to reduce Bitcoin sell-offs during price swings. In times of uncertainty, users tend to liquidate crypto first, deepening market downturns.

The bank’s offering will see dollar loans collateralised by BTC, encouraging long-term holding while meeting urgent cash needs. “Selling Bitcoin feels wrong if you believe in its future,” CEO Seamus Rocca said.

This comes after crypto lending giants like BlockFi and Celsius imploded in 2022 amid fraud allegations, deepening a prolonged bear market. However, Xapo is a fully licensed bank operating under traditional financial regulations. This structure, combined with conservative risk tactics, might be crucial for rebuilding trust in crypto-backed loans.

A Small Portion Of Crypto For A Large Loan

The bank will cap loans at 20%-40% of a customer’s Bitcoin value. For example, a $100,000 BTC stash unlocks up to $40,000. Real-time loan health trackers will alert users to risks, while liquidation triggers only if Bitcoin plummets below $40,000.

Moreover, they offer flexible repayment terms of 30 to 365 days and no early fees add flexibility.

The service is tailored for HODLers making major purchases. Clients were previously applying for loans to buy homes, cars, or fund education without selling BTC. While expecting $50,000 grant requests on average, Xapo has now approved a $1 million credit line and handles even larger sums case-by-case.

“Life happens,” Rocca added. “Upgrading a kitchen or paying tuition shouldn’t mean sacrificing your crypto future.”

Is This Crypto Lending’s Second Chance?

Despite past failures, crypto-backed loans appear to be making a comeback. Earlier this year, Coinbase also reintroduced Bitcoin loans, signaling renewed confidence in the market.

With a 10% interest rate and Gibraltar’s regulatory oversight, Xapo’s offering might appeal to cautious optimists seeking a balance between innovation and tradition.

As it stands, Xapo’s gamble depends on whether it can balance new technologies with the conservative values of traditional finance. By learning from its predecessors’ mistakes and prioritising user trust, it might yet be able to change the landscape of crypto lending. And for Bitcoin loyalists, accessing cash without selling might just be the lifeline they’ve been waiting for.