Crypto wealth manager Xapo Banks is offering U.S. dollar loans backed by Bitcoin to expand liquidity options for customers.
Gibraltar-based Xapo Bank has provided Bitcoin-backed Bitcoin USD loans to deter BTC selling and enable flexible liquidity paths for its qualifying customers.
Users of Xapo Bank have the ability to gain access to credit of up to one million dollars by using their Bitcoin as collateral. Customers will have up to a year to repay the loan, depending on the size of the loan, and they will be eligible to receive up to forty percent of the value of their Bitcoin in United States dollars.
The company, which primarily focuses on Bitcoin custody, claims that customers typically liquidate their cryptocurrency holdings first when the market is uncertain. This pattern adds to existing sale pressure and ultimately impairs the largest cryptocurrency by market valuation.
Offering BTC-backed U.S. dollar loans attempts to encourage long-term BTC holding while offering rapid cash when needed. In 2022, crypto-native lenders like BlockFi and Celsius promised comparable solutions.
However, in the end, neither of the companies was able to produce, and it was later discovered that they had fabricated their financial records in order to maintain their existence.
The collapse of these companies was a contributing factor in the prolonged bear market, which in turn shook confidence in cryptocurrency lenders.
Nevertheless, Xapo functions as a fully licensed bank with a structure that is comparable to that of traditional banks, in contrast to companies such as BlockFi and Celsius, which served as regulated corporations.
Given this, it is possible that the significant difference will result in different outcomes for Xapo. Additionally, in August of 2024, Xapo Bank collaborated with the trading firm Hilbert Group to establish a Bitcoin fund with a capitalization of two hundred million dollars.
Additionally, Xapo Bank expanded its cryptocurrency suite in 2023, making it possible for customers to purchase tokens such as Ethereum and Cardano.
