Xapo Bank Debuts Bitcoin Loans, Calls Out ‘Predatory’ Crypto Lenders

Gibraltar-based private bank Xapo said Tuesday it is now accepting members’ Bitcoin as collateral for loans.

The new service allows customers to access up to $1 million in Bitcoin-backed debt, except for those located in the UK and Australia, Gadi Chait, a Xapo investment manager, told Decrypt.

“We think it’s a great piece of collateral to lend against,” Chait added, referring to the asset that Xapo has safeguarded on behalf of customers since 2013.

As Wall Street firms like Cantor Fitzgerald develop their own Bitcoin financing businesses, Chait said Xapo is expanding its “one-stop shop” to give customers more options in most regions.

Xapo was among the first crypto banks to establish a physical headquarters in Europe, settling down in the British overseas territory of Gibraltar during crypto’s pandemic-era boom. 

Last year, the firm said it gained regulatory approval in the UK, allowing it to provide interest-bearing Bitcoin accounts, among other banking services, to customers in the region.

Within the U.S., Bitcoin-backed lending has recently made a return. While companies like Coinbase ceased issuing Bitcoin-backed loans in 2023, the San Francisco-based exchange restarted them in January, tapping a decentralized lending protocol called Morpho.

Some asset managers are using decentralized finance, or DeFi, to earn yield from Bitcoin-backed loans as well. Among them is Bitwise, which recently made an allocation on Maple Finance, the lending protocol said earlier this month.

Xapo, of course, is a centralized entity. The bank’s customers need approval, and their corresponding Bitcoin is held “in a vault until the loan is repaid” over a period of time that can last as long as a year, according to a statement.

The crypto lending industry was among the buzziest corners of crypto heading into 2022.

But following a series of high-profile bankruptcies that culminated in the collapse of FTX, the practice fell out of favor with market participants while drawing regulatory heat in the U.S.

 “Many long-term Bitcoin holders have steered away from crypto-asset-backed lending after seeing predatory lending practices and products they couldn’t count on,” Xapo CEO Seamus Rocca said in a statement. “That’s why we’re doing things differently.”

Xapo was founded by Wences Casares, an entrepreneur born in Argentina. In 2015, LinkedIn co-founder Reid Hoffman described him as “Patient Zero for Bitcoin in Silicon Valley” and among the earliest Bitcoin devotees in the U.S., per Entrepreneur.

Edited by Sebastian Sinclair