In an exciting development for the world of cryptocurrency, Xapo Bank has launched a pioneering service that enables customers to use their Bitcoin as collateral. Signifying another stride towards establishing digital currencies within mainstream financial services, this facility permits eligible members to borrow up to $1 million against their Bitcoin assets. However, this option is currently not available for UK and Australian clients.
Cryptocurrency Continues March towards Mainstream Adoption: Wall Street Giants Enter the Bitcoin Financing Fray
Renowned as an early adopter within the traditional banking sector, Xapo Bank has been a trailblazer during the cryptocurrency boom incited by the recent pandemic. It was among the first few banks to establish a physical headquarters in Europe, specifically in Gibraltar, a British overseas territory.
The rising popularity of cryptocurrency in the United States has piqued the interest of mainstream financial juggernauts. Notably, the prestigious bank Cantor Fitzgerald has dedicated a section of its operations to Bitcoin finance. As per inside reports, Cantor Fitzgerald has allied with digital currency companies, Anchorage Digital and Copper.co, to aid its burgeoning global Bitcoin initiative.
In the previous year, Xapo Bank secured a regulatory license in the UK, and in a significant move, began offering interest-bearing BTC accounts apart from its standard banking services.
Coinbase Makes a Comeback with Bitcoin-Backed Loans in a New Partnership
Digital currency giant Coinbase, which had previously put a halt to its digital currency-backed loans service in 2023, has marked a return to lending through a strategic alliance with Morpho Labs. In a boost to the decentralized lending protocol, it enables US users (excluding New York residents) to borrow up to $100,000 in USDC stablecoins.
Cryptocurrency Lending: The Centralized vs Decentralized Dilemma
While Xapo Bank has chosen a more traditional, centralized route to cryptocurrency lending, some services have thrown their weight behind decentralized finance (DeFi) protocols. Xapo’s approach requires clients to first obtain approval from the bank. Once approved, the customer’s Bitcoin is securely stored in a vault until the loan repayment is complete, with loan terms stretching up to one year.
Seamus Rocca, Xapo’s CEO, acknowledged the wariness amongst many long-term cryptocurrency holders towards crypto-backed lending after witnessing predatory lending and defects in the market. He emphasised that Xapo Bank is committed to “doing things differently.” Essentially, these services mainly assist Bitcoin holders to secure cash without selling their assets and generating taxable transactions.
FAQs
What is Xapo Bank’s new Bitcoin loan service?
Xapo Bank’s new service lets customers borrow up to $1 million against their Bitcoin holdings. This service signifies another stride towards establishing digital currencies within mainstream financial services. However, this option is currently not available for UK and Australian clients.
What is the approach of Xapo Bank towards crypto lending?
Xapo Bank has chosen a more traditional, centralized route to cryptocurrency lending. Clients need to first obtain approval from the bank, after which their Bitcoin is securely stored in a vault until the loan repayment is complete, with loan terms stretching up to one year.
What advantages does crypto-backed lending provide to Bitcoin holders?
Crypto-backed lending services primarily assist Bitcoin holders in securing cash without having to sell their assets, thereby avoiding generating taxable transactions.
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