Xapo Bank, catering to long-term bitcoin holders, has announced that it is granting its members BTC-backed loans of up to $1 million.
Following a turbulent period marked by notable failures and bankruptcies within the crypto sector, crypto lending has begun to make a resurgence. Companies like the U.S.-listed exchange Coinbase are reintroducing bitcoin-backed loan services, which they suspended earlier this year.
Seamus Rocca, the CEO of Xapo, emphasizes the distinct nature of their wealth-management offerings compared to traditional exchange services, which focus more on trading.
“When exchanges provide secured lending, it’s primarily to promote leverage,” Rocca remarked in an interview. “However, leverage introduces a significant risk of financial loss, even for seasoned investors. Exchange platforms often overlook this, as their focus is on facilitating transactions more akin to gambling.”
The firm has implemented a conservative loan-to-value ratio between 20% and 40%, ensuring the safety of customers’ bitcoin. As per Xapo, based on their Gibraltar-regulated banking license, borrowers wouldn’t face liquidation unless the bitcoin price plummets below $40,000.
Established in 2013, Xapo originally served as a wallet and custodian for bitcoin, famously securing assets in Swiss mountain bunkers—a safer alternative for long-term cryptocurrency holders. Ether (ETH) has also recently been integrated into their offerings.
During the initial phases of their bitcoin-backed lending trials, the average expected loan size was around $50,000. However, it quickly became apparent that some long-term holders preferred larger amounts: those with approximately $5 million in bitcoin collateral expressed interest in loans of up to $1 million. For even larger loans, Xapo is prepared to consider requests on an individual basis. Rocca mentioned that the interest rate for these dollar loans hovers around 10%.
Common reasons for seeking such loans include purchasing or upgrading property, acquiring a new vehicle, and other miscellaneous expenses.
“For bitcoin holders confident in the asset’s price appreciation, parting with any of it can be challenging,” Rocca stated. “Yet, life can necessitate liquidity: whether you want to renovate your kitchen or pay school fees, having the ability to access some cash through a trusted source is a very attractive option for our clients.”
Xapo is providing flexible repayment terms of 30, 90, 180, or 365 days, with no fees for early repayments. Additionally, a loan health tracker is offered, supplying real-time updates on loan status and associated risks, according to a press release.