Xapo Bank Launches Bitcoin-Backed USD Loans for Hodlers

Xapo Bank, a global cryptocurrency-friendly bank based in Gibraltar, has introduced a new Bitcoin-backed USD loan product aimed at long-term Bitcoin holders, or "hodlers." This move is part of the bank's strategy to revive the crypto lending sector, which has faced significant challenges in recent years.

The new lending product allows qualifying clients to access loans of up to $1 million, with repayment schedules ranging from 30 to 365 days. There are no penalties for early repayment, providing flexibility for borrowers. The loans are designed for individuals who wish to access liquidity without selling their Bitcoin holdings, leveraging the unique properties of Bitcoin as collateral.

One of the key features of Xapo's Bitcoin loan product is its commitment to not rehypothecate the loan collateral. This means that the Bitcoin used as collateral is not reused or lent out by the bank. Instead, the collateral is securely stored in Xapo's BTC vault using institutional multiparty computation (MPC) custody, ensuring the safety and security of the assets.

Eligibility for the loan product is based on several criteria, including the amount and duration of Bitcoin holdings. Xapo specifically targets long-term Bitcoin holders with a long-term investment strategy. The offering is available to global investors in various regions, excluding residents of the United States.

Xapo Bank is regulated by the Gibraltar Financial Services Commission under the Financial Services Act 2019. The bank has also successfully passported its banking license in the United Kingdom, granting its Xapo Bank App full access to the country. However, it is important to note that while Xapo’s lending is offered across the European Union, crypto lending is not covered by local regulations like the Markets in Crypto-Assets framework.

The launch of Xapo's Bitcoin-backed USD loans comes at a time when the crypto lending industry is recovering from a major crisis in 2022. The collapse of major lending providers like Celsius and BlockFi, following the historic Terra crash and subsequent bear market, significantly eroded trust in the crypto lending space. Borrowers today are more cautious and prioritize platforms with a proven track record in Bitcoin custody and secure, transparent solutions.

Xapo Bank's CEO, Seamus Rocca, highlighted the growing demand for Bitcoin-backed loans, particularly among high-net-worth individuals and institutional investors who seek liquidity without selling their Bitcoin holdings. The bank offers risk management tools and proactive protection to prevent automatic liquidations, ensuring that customers receive instant notifications in the event of a Bitcoin price drop, allowing them to take necessary actions to maintain their loan status.

Xapo is not the only firm exploring lending products in the current market. Other companies, such as Blockstream, have also secured significant investments to launch new institutional funds, including those offering BTC lending. This indicates a renewed interest and confidence in the crypto lending sector, despite the challenges faced in recent years.