Key Points
- Xapo Bank is offering Bitcoin-backed USD loans to provide flexible liquidity options for customers.
- The bank also partnered with Hilbert Group to launch a $200 million Bitcoin fund and expanded its crypto suite.
Xapo Bank, a Gibraltar-based wealth manager, has introduced a new feature for its customers: USD loans backed by Bitcoin. This strategic move aims to discourage the selling of Bitcoin and provide more flexible liquidity options for its clients.
Customers can access up to $1 million in credit by using their Bitcoin as collateral. Depending on the loan size, clients can have up to a year to repay the loan and can receive as much as 40% of their Bitcoin’s value in USD.
Addressing Market Uncertainty
The company, which primarily focuses on Bitcoin custody, noticed a trend among its customers. During periods of market uncertainty, customers often liquidate their crypto holdings first. This pattern intensifies the existing sell pressure and negatively impacts Bitcoin, the largest cryptocurrency by market cap.
By offering Bitcoin-backed USD loans, Xapo Bank aims to encourage long-term Bitcoin holding while providing quick liquidity when necessary.
Learning from Past Mistakes
In 2022, crypto-native lenders like BlockFi and Celsius attempted to offer similar products but ultimately failed. Investigations later revealed that these companies falsified financial records to stay in business, leading to their downfall and a prolonged bear market. This shook confidence in crypto lenders.
However, Xapo Bank operates differently. Unlike BlockFi and Celsius, Xapo is a fully licensed bank with a structure similar to traditional institutions. This stark difference could lead to different outcomes for Xapo.
In addition to providing Bitcoin-backed USD loans, Xapo Bank has also made other significant moves. In August 2024, the bank partnered with trading firm Hilbert Group to launch a $200 million Bitcoin fund. In 2023, Xapo expanded its crypto suite, allowing clients to buy tokens like Ethereum and Cardadon.
