Xapo Bank launches a bitcoin lending program for up to $1 million

What’s new? Xapo Bank, an asset manager for long-term bitcoin holders, has started offering BTC-backed loans of up to $1 million to clients. The company noted that a conservative loan-to-value ratio of 20-40% protects clients’ bitcoins, as the collateral is only liquidated when bitcoin falls below $40 000 from the current price.

Material by CoinDesk

What else is known? CEO Seamus Rocca emphasized the difference between Xapo Bank’s service and what trading-focused exchanges typically offer:

“If an exchange is offering you secured lending, it’s to encourage leverage. And the moment you have leverage, unless you’re a professional investor — and even when you are a professional investor — the risk of losing money is very high. If you’re an exchange platform, you don’t really care about that. You’re just there to facilitate gambling.”

When bitcoin lending was tested, the average loan size was expected to be around $50 000, but based on customer feedback, the amount has been increased to $1 million with the ability to request a limit increase on a case-by-case basis. The interest rate will be around 10%.

A loan can be taken to buy or upgrade real estate, buy a new car, and meet other needs.

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“If you’re a bitcoin holder and you have conviction that the price of bitcoin is going to go up, selling any of it is difficult to do. But sometimes life gets in the way: You want to upgrade your kitchen, you have school fees to pay. Being able to draw down some liquidity on your bitcoin with someone that you trust is a very appealing product for our customer base,” Rocca emphasized.

Xapo offers repayment schedules of 30, 90, 180, or 365 days with no early repayment penalties, and a real-time loan tracking feature provides information on loan status and potential risks.

Xapo started its activity in 2013 as a wallet and custodian. It is known for storing bitcoins in Swiss mountain bunkers, a secure alternative to self-storage for long-term holders of the largest cryptocurrency. Ethereum storage support was also recently added.

The company holds a banking license from the Gibraltar regulator, which has also been validated in the UK.