Crypto wealth manager Xapo Bank has launched a Bitcoin-backed loan service, allowing eligible customers to borrow up to $1 million in U.S. dollars without selling their bitcoin (BTC).
The initiative, announced in a March 18 X post, aims to provide flexible liquidity options while discouraging BTC liquidation during market fluctuations.
Notably, Xapo Bank’s offering enables pre-approved members to use their BTC holdings as collateral. Customers can borrow up to 40% of their BTC’s value and will have up to one year to repay the loan.
The approval process is described as quick, with funds disbursed in under a minute and no additional fees.
Eligibility and Availability
The service is targeted at long-term BTC holders who meet specific criteria, including the amount of BTC owned and the duration of holdings. For context, the program is designed for investors with a long-term Bitcoin investment strategy.
As outlined on the bank’s website, the loans are available to customers in Europe and Asia but exclude U.S. residents due to regulatory restrictions. Xapo Bank operates under the Gibraltar Financial Services Commission’s oversight, ensuring compliance with local financial regulations.
Reducing Bitcoin Sell Pressure
Xapo Bank’s decision to offer BTC-backed loans is partly driven by market behavior. The company noted that investors often sell BTC during economic uncertainty, adding downward pressure on the asset’s price.
By providing an alternative liquidity option, Xapo Bank aims to support long-term BTC holders and reduce unnecessary sell-offs.
Hence, this service ensures they can access cash without selling their BTC and impacting market prices.
Regulatory and Risk Considerations
Xapo Bank is licensed under Gibraltar’s Financial Services Act 2019 and is regulated under the Financial Services (Consumer Credit) Act 2011 for lending services. Loans are issued by Xapo Credit Limited, a subsidiary specializing in consumer credit solutions.
Despite the advantages, BTC-backed loans carry risks. If Bitcoin’s price declines significantly, borrowers may need to provide additional collateral or risk liquidation of their BTC holdings.
