A potential return to crypto-backed lending products could be on the cards as Gibraltar-based Xapo Bank launches new options.
The lending option will target long-term Bitcoin holders who might need access to cash but don’t want to sell their digital assets. Many crypto holders choose to sit on their investments by holding them in secure Bitcoin wallets.
While the best crypto wallets will facilitate easy access and use, there are still many consumers who see crypto as an investment opportunity and choose to sit on it rather than use it as an active digital currency.
How the Loans Will Work
Xapo Bank now offers US Dollar loans of up to £1 million to customers and their product differs from previous crypto-backed loan products. They offer no collateral re-usage on BTC assets and store the collateral in their purpose-built crypto-vault which uses MPC (multiparty computation custody.
The product offers flexible terms with repayment schedules available from just 30 days, up to 90, 180, and 365 days. Customers will also benefit from there being no penalties attached to early repayments.
Eligibility
As with any financial product, eligibility factors will come into who can apply for these loans. Consumers will be pre-approved for the loans based on eligibility criteria established by XapoBank.
The most significant factor that will affect eligibility is how much Bitcoin holdings the consumer has and how long they have held it for. Long-term holdings will be preferred, with the product being made available to global investors, excluding the United States.
Could this Signal a Return to Crypto Lending
This is not the first time crypto lending products have been offered to consumers, but it has taken 3 years for the industry to recover from the bear market in 2022 which led to the collapse of lenders including BlockFi and Celsius.
The collapse of the crypto lending industry resulted in a loss of trust that Xapo Bank is working hard to restore. By offering a product that removes asset rehypothecation and providing customers with a variety of risk management tools and protection against automatic liquidation, Xapo Bank is beginning to gain the trust of consumers.
The Current Crypto Climate
The end of 2024 and the beginning of 2025 saw cryptocurrencies, and Bitcoin in particular, enjoy record-breaking valuations. This came as a result of political backing, particularly in the US.
Plans for America to implement a transparent regulatory framework for crypto businesses have seen renewed confidence in digital currencies. While recent values have dropped, they still remain relatively high across the board and this has seen greater adoption across consumers and businesses.
With more businesses around the world beginning to accept cryptocurrencies because of the countless benefits to international transactions, the industry is starting to appeal to those who might have previously seen it as a fad.
Speculation about the US Federal Reserve stepping in to stabilize markets and rumours of the White House planning to invest heavily in Bitcoin has experts predicting another Bitcoin price boom, which could be great news for lenders and consumers.