Xapo Bank Launches Bitcoin-Backed Loans Up to $1 Million, Following Coinbase's DeFi Lending Restart

Xapo Bank recently introduced a service allowing customers to borrow up to $1 million using Bitcoin as collateral, excluding clients in the UK and Australia. This move aligns with the increasing integration of cryptocurrency into mainstream finance. Xapo, known for its early adoption of crypto, established a physical headquarters in Gibraltar during the pandemic. Traditional financial firms like Cantor Fitzgerald are also entering the Bitcoin space. Coinbase, which previously halted its digital currency-backed loans in 2023, has restarted lending via a partnership with Morpho Labs, offering US users (excluding New York) up to $100,000 in USDC stablecoins. Coinbase's VP, Max Branzburg, highlighted the aim to enhance crypto's utility in a decentralized setting, streamlining borrowing without credit checks or fees. Their service operates on Base, converting collateral to Coinbase Wrapped Bitcoin (cbBTC). Unlike decentralized finance (DeFi) protocols, Xapo employs a centralized approach, requiring bank approval and storing Bitcoin in a vault until loan repayment, with terms up to one year. CEO Seamus Rocca emphasized their cautious approach, distinguishing it from past "predatory lending." These services enable Bitcoin holders to access cash without selling their assets.