Xapo Bank Launches Bitcoin-Backed Loans Up To $1 Million For Long-Term Holders
New Lending Service Targets Bitcoin Long-Term Investors
Xapo Bank has introduced Bitcoin-backed loans of up to $1 million, allowing customers to access liquidity without selling their Bitcoin holdings according to an announcement made on March 18, 2025. CoinDesk The Gibraltar-based wealth manager, known for its Bitcoin custody and interest-bearing account offerings, has expanded its services to include Bitcoin-backed US dollar loans aimed specifically at long-term Bitcoin holders.
The new lending product enables qualifying Xapo Bank members to access loans secured by their Bitcoin holdings with flexible repayment schedules of 30, 90, 180, or 365 days and "conservative" loan-to-value ratios of 20% to 40%. The Block This cautious approach to collateralization provides substantial protection against market volatility, with Xapo CEO Seamus Rocca noting that Bitcoin would need to crash below $40,000 for borrowers to face liquidation risks. CoinDesk
Rebuilding Trust in Crypto Lending
The launch comes as the crypto lending industry works to recover from the significant setbacks experienced during the 2022 market crash, which saw major platforms like Celsius and BlockFi collapse. Rocca addressed this troubled history directly, stating: "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." Decrypt
Xapo Bank's approach differs markedly from previous lending models that contributed to industry instability. The company emphasizes safety through its conservative loan-to-value requirements and transparent loan terms. A key distinction of Xapo's Bitcoin loan product is that the bank does not rehypothecate the loan collateral provided by users, meaning their lending mechanism does not involve the re-usage of borrowers' Bitcoin assets. Cointelegraph
How Xapo's Bitcoin-Backed Loans Work
For eligible customers, the loan process begins with a calculation of their borrowing limit within the Xapo Bank app. The platform provides full transparency regarding final repayment amounts and interest rates. Upon approval, funds are instantly deposited into the member's USD bank account, with the corresponding Bitcoin held in a vault until the loan is repaid. The Block
The conservative loan-to-value ratio of 20-40% serves as a protective measure for both the borrower and the bank. Customers can borrow up to 40% of their Bitcoin's market value TronWeekly through the various repayment timelines offered. This approach provides substantial protection against Bitcoin's price volatility.
Notably, borrowers have the option to repay early without incurring any penalties or early repayment fees, and a real-time loan health checker provides updates on the status of a loan and potential risk factors. The Block This feature allows borrowers to monitor their position and take proactive steps if Bitcoin prices begin to decline.
The Growing Bitcoin-Backed Lending Market
The introduction of Xapo Bank's Bitcoin-backed loans comes amid significant growth in the crypto lending sector. According to industry data, Bitcoin's deep market liquidity sets it apart from other assets used as loan collateral, with global trading volume consistently dwarfing altcoins and even some traditional commodities. Blockworks
The Bitcoin loan market is experiencing robust expansion, with market size estimated to reach USD 45.27 billion by 2030, growing at a CAGR of 26.4% from its current value of USD 8.58 billion. EIN Presswire This growth reflects increasing institutional adoption and growing confidence in Bitcoin as a viable form of collateral.
Traditional financial institutions are also becoming more interested in this market. In July 2024, Cantor Fitzgerald announced the launch of a $2-billion investment in a Bitcoin lending program, signaling significant growth in the Bitcoin lending space. Osler This move by established financial players demonstrates the growing legitimacy of Bitcoin-backed lending.
Benefits for Long-Term Bitcoin Holders
The primary advantage of Bitcoin-backed loans is that they allow holders to access liquidity without selling their Bitcoin assets. This preserves ownership of digital assets while potentially benefiting from future price increases, allowing users to meet current financial needs while maintaining their long-term investment strategy. Cointelegraph
For many Bitcoin investors, selling is often viewed as a last resort, particularly for those who believe in its long-term appreciation potential. As Xapo CEO Rocca explained, "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." CoinDesk
Additionally, Bitcoin-backed loans can provide tax advantages. By borrowing against Bitcoin holdings rather than selling them, users can potentially circumvent capital gains taxes that would be incurred from a sale, optimizing their financial approach while reducing tax liabilities. Cointelegraph
Market Context and Future Outlook
Xapo's entry into the Bitcoin-backed lending market comes during a period of significant recovery and transformation in the crypto lending industry. According to a recent report, the crypto lending market is now valued at $36.5 billion, though this remains 43% below its all-time high reached in late 2021. Ccn
The landscape has changed dramatically since the 2022 collapse of major lending platforms. A new cohort of centralized players—including Tether, Galaxy, and Ledn—has stepped in to fill the void left by failed lenders like Celsius, Genesis, and BlockFi. Ccn This change in leadership suggests a more stable and mature approach to crypto lending.
While centralized finance (CeFi) platforms like Xapo Bank are making a comeback, decentralized finance (DeFi) remains the primary force in crypto lending, now accounting for 63% of total borrowing, up from 33% during the previous bull run. Ccn This trend indicates growing confidence in permissionless, transparent lending protocols.
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