- Xapo Bank offers up to $1M in Bitcoin-backed loans with a 20%-40% loan-to-value ratio.
- Xapo’s loans provide flexible repayment terms and no penalties for early repayment.
- Xapo’s Bitcoin-backed loans aim to help long-term holders access liquidity without selling BTC.
Gibraltar-based wealth manager Xapo Bank has launched Bitcoin-backed loans as a way for BTC holders to obtain financial liquidity through borrowing without selling their BTC holdings. This new product uses Bitcoin as collateral enabling borrowers to secure loans of up to $1 million while preserving their ownership of Bitcoin assets. The initiative establishes a solution that benefits Bitcoin investors who need financial liquidity to fulfill property acquisitions, upgrade assets, or covering other financial needs.
A New Liquidity Solution for Bitcoin Holders
Xapo Bank enables Bitcoin holders to secure loans through a Bitcoin-backed loan program which accepts Bitcoin holdings as collateral. Customers can borrow up to 40% of Bitcoin’s market value through flexible payment timelines of 30, 90, 180, or 365 days. Notably, the bank offers flexible terms without penalties for early repayment, making it an attractive option for those who may need liquidity but are committed to holding their Bitcoin long-term.
Xapo CEO Seamus Rocca ensured customers about the product’s safety through loan-to-value ratios between 20% and 40%, which protect Bitcoin holdings from substantial risks. Borrowers can avoid liquidation risks only if the Bitcoin price maintains above $40,000 during a major market downturn. The lending platform stands apart from other crypto platforms because it uses lower levels of leverage, which protects users from excessive risk.
The Rise of Crypto-Backed Loans Amid Industry Setbacks
The Bitcoin-backed loan market experienced a renewed interest since several high-profile crypto lenders failed in 2022. Companies like BlockFi and Celsius, which previously offered similar products, faced significant challenges, including bankruptcy and fraud investigations. Crypto lending platform failures eliminated market confidence because they exposed risks from rehypothecation and inadequate financial disclosure standards.
Xapo Bank, however, is trying to act as much safer and more secure platform than other rivals. Compared to its competitors Xapo does not participate in repledge of pledged assets, which means that Bitcoin collateral remains untouched while the company utilizes the institutional grade solutions for storage. This has enabled the bank to build up confidence in the crypto lending niche, thereby getting more high networth customer and institutional investors.
Global Reach and Eligibility Criteria
Xapo allows pre-approved clients to access loans through Bitcoin deposits where the length of Bitcoin amount and duration of Bitcoin holdings. The service uses a precise methodology to serve long-term Bitcoin investors who want money access without selling their holdings. U.S. residents cannot access the offering that Xapo provides across Europe and Asia.
Since the organization expanded to serve customers in the United Kingdom, Xapo’s banking services have operated under license from the Gibraltar Financial Services Commission. As a vital part of its expansion efforts, Xapo shows its dedication to supporting the cryptocurrency ecosystem by launching the Bitcoin fund in partnership with Hilbert Group.