Quick take:
- The offer features a conservative loan-to-value ratio of 20% to 40% as a safeguard to customers’ bitcoin.
- Customers can schedule repayments in 30, 90, 180 or 365 days, with no penalties for early repayment.
- There is also a loan health tracker, which provides real-time insights into loan status.
Wealth management firm Xapo Bank has launched a new product, enabling long-term Bitcoin holders to borrow up to $1 million in BTC-backed loans.
According to the announcement, the new product features a conservative loan-to-value ratio of 20% to 40% as a safeguard to customers’ Bitcoin and repayment schedules of 30, 90, 180 or 365 days, with no penalties for early repayment.
The product also features a loan health tracker, which provides real-time insights into loan status.
The announcement comes despite the current bear market, which has defied the optimism provided by the prospect of a clear regulatory framework for the industry and the establishment of multiple strategic bitcoin reserves by governments across the world.
While a variety of crypto exchange platforms including Coinbase, which reintroduced Bitcoin-backed loans in January, offer similar products, Xapo CEO Seamus Rocca explained the difference between his product and those offered by exchanges, highlighting the latter’s focus on trading.
“If an exchange is offering you secured lending, it’s to encourage leverage,” Rocca said in an interview, as reported by CoinDesk. “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.”
Some of the main use cases for the loans that Xapo Bank is targeting include buying or upgrading a property and buying a new car, among others.
“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,” Rocca said. “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.”
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