Xapo Bank, a Gibraltar-based crypto-friendly bank, has introduced Bitcoin-backed US dollar loans aimed at long-term Bitcoin holders seeking liquidity without selling their BTC.
Up to $1 Million in Bitcoin-Backed Loans
Xapo announced on March 18 that pre-approved clients can now borrow up to $1 million using Bitcoin as collateral. The new lending product targets long-term Bitcoin investors who want to unlock cash while retaining ownership of their BTC.
“Bitcoin is an ideal form of collateral — it’s borderless, highly liquid, available 24/7, and easily divisible, making it uniquely suited for lending,” said Xapo Bank CEO Seamus Rocca.
No Collateral Reuse or Rehypothecation
A key feature of Xapo’s loan product is that it does not engage in rehypothecation — the reuse of collateral to back other loans. Instead, Bitcoin used as collateral is securely stored in Xapo’s institutional-grade vault with multiparty computation (MPC) custody.
Clients can select repayment terms of 30, 90, 180, or 365 days without facing penalties for early repayment.
Eligibility and Regional Availability
The loans are available to pre-approved clients based on the size and duration of their Bitcoin holdings, targeting long-term investors. The service is open to customers in Europe and Asia but excludes US residents due to regulatory restrictions.
Xapo Bank is regulated by the Gibraltar Financial Services Commission under the Financial Services Act 2019. In 2024, it secured a banking license in the UK, granting its app full access to the market. While Xapo’s lending products are available across the European Union, they are not covered under the Markets in Crypto-Assets (MiCA) framework.
Crypto Lending Revival After 2022 Crash
Xapo’s Bitcoin-backed loan launch signals a potential revival of the crypto lending market, which collapsed in 2022 following the Terra crash and the failure of major lenders like Celsius and BlockFi.
“Borrowers today are more cautious, prioritizing platforms with a strong track record in Bitcoin custody and transparent lending practices,” Rocca said. “Demand for Bitcoin-backed loans is growing, particularly among high-net-worth individuals and institutional investors seeking liquidity without selling their BTC.”
Xapo also offers risk management tools to prevent automatic liquidations. In the event of a Bitcoin price drop, clients receive instant notifications, allowing them to either add collateral or make partial repayments to maintain their loan status.
Growing Interest in Crypto Lending
Xapo is not the only player eyeing crypto lending in 2025. In early March, Bitcoin developer Blockstream secured a multibillion-dollar investment to launch three institutional funds, two of which will include BTC lending products.
