Xapo Bank has made waves in the financial world by launching a new loan service that allows customers to leverage their Bitcoin as collateral, a significant step towards integrating cryptocurrency into mainstream finance.
On March 19, 2025, the Gibraltar-based bank announced the service, permitting qualified members to borrow up to $1 million against their Bitcoin holdings. However, customers from the UK and Australia are notably excluded from this offering.
As one of the first banks to establish a physical presence in Europe amid the pandemic's cryptocurrency boom, Xapo has positioned itself as a pioneer in the banking sector. The bank has earned a reputation for adopting cryptocurrency services early, having set up its headquarters in Gibraltar, a British overseas territory, during a time of increasing interest in Bitcoin.
In conjunction with Xapo’s development, established banking institutions are taking keen interest in the burgeoning cryptocurrency arena. For instance, Cantor Fitzgerald has unveiled its Bitcoin finance section and partnered with crypto companies such as Anchorage Digital and Copper.co, essentially aiding in its expansion within the global Bitcoin market.
Last year, Xapo Bank received a regulatory license in the UK, which allowed it to offer interest-bearing Bitcoin accounts alongside traditional banking services.
Meanwhile, the cryptocurrency lending landscape is becoming increasingly competitive. Coinbase, a leading cryptocurrency exchange, which had previously halted its digital currency-backed lending services in 2023, has recently rekindled its offerings through a strategic partnership with Morpho Labs. This new service, tailored for U.S. users (excluding those in New York), allows customers to borrow up to $100,000 in USDC stablecoins.
Max Branzburg, Coinbase’s vice president, emphasized the aims of this service, stating that it seeks to enhance Bitcoin’s utility in decentralized settings. This updated lending model streamlines borrowing processes by eliminating the need for credit checks and additional fees, although customers are cautioned to monitor their collateral values to prevent liquidation.
The new Coinbase offering operates on Base, the company’s Ethereum layer-2 network. When loans are taken out, the crypto collateral is converted into Coinbase Wrapped Bitcoin (cbBTC), which is a token that Coinbase ensures is backed one-to-one with the Bitcoin held in its custody.
Despite the rise of decentralized finance (DeFi) lending initiatives seen in services such as Coinbase’s, Xapo Bank sticks to a more traditional, centralized lending approach. Here, customers must receive approval from the bank, and their Bitcoin is securely stored “in a vault until the loan is paid back,” with loan terms extending up to one year.
Seamus Rocca, CEO of Xapo, shared insights about the cautious attitude many long-term crypto holders now have towards crypto-backed lending following negative experiences with “predatory lending and faulty products” in the past. “That’s why we’re doing things differently,” Rocca stated, emphasizing Xapo’s commitment to offering responsible lending practices.
The new Bitcoin-backed loans from Xapo Bank and the reintroduction of lending services by Coinbase reflect a growing trend that permits Bitcoin holders to access liquidity without liquidating their assets, thus avoiding taxable transactions. As the landscape of cryptocurrency finance continues to evolve, both private and public sectors are clearly embracing opportunities aimed at the continuously growing interest in digital currencies.
This renewed focus on responsible crypto lending may signal a transformative shift in how individuals and institutions engage with cryptocurrency in their financial lives.
