Xapo Bank has recently announced a groundbreaking loan service that allows customers to use their Bitcoin as collateral. This initiative marks another significant step in the transition of cryptocurrency toward mainstream financial services.
The new service offers qualified members the opportunity to borrow up to $1 million against their Bitcoin holdings, though it’s important to note that clients in the UK and Australia are currently excluded from this offering.
Major Wall Street Firms Join Bitcoin Financing Race
Xapo Bank has established itself as an early adopter in the conventional banking sector, particularly during the BTC frenzy driven by the pandemic. Notably, it was among the first banks to open a physical headquarters in Europe, situating itself in Gibraltar, a British overseas territory.
As cryptocurrency gains traction in the United States, established financial institutions are increasingly entering the market. Cantor Fitzgerald, a well-known financial firm, has even launched a dedicated Bitcoin finance division.
According to reports, the company has formed partnerships with crypto specialists Anchorage Digital and Copper.co to bolster its expanding global Bitcoin operation.
Last year, Xapo Bank received a regulatory license in the UK and began offering interest-bearing BTC accounts alongside traditional banking services.
Xapo Bank Debuts Bitcoin Loans, Calls Out ‘Predatory’ Crypto Lenders
The private bank’s new service allows customers to access up to $1 million in Bitcoin-backed debt.
Read more: https://t.co/rBhwnAHu7g pic.twitter.com/qPtcWOrDgA— Mars Signals (@MarsSignals) March 18, 2025
Coinbase Revives Bitcoin-Backed Loans Through New Partnership
Coinbase has also jumped back into the world of digital currency-backed loans after previously pausing the service in 2023. The company has now partnered with Morpho Labs to utilize decentralized lending protocols.
Under this partnership, their current service allows US users (excluding those in New York) to borrow up to $100,000 in USDC stablecoins.
Max Branzburg, Coinbase’s Vice President, mentioned that this product aims to enhance the utility of cryptocurrency in a decentralized setting. The service simplifies the borrowing process by eliminating credit checks and fees; however, borrowers must vigilantly monitor their collateral value to prevent liquidation.
Additionally, the new Coinbase service operates on Base, the company’s Ethereum layer-2 network. When customers secure loans, their crypto collateral is automatically converted into Coinbase Wrapped Bitcoin (cbBTC), a token that is one-to-one backed by BTC in Coinbase custody.
Centralized Vs. Decentralized: Different Approaches To Crypto Lending
There is a clear distinction between the centralized and decentralized approaches to cryptocurrency lending. While Xapo Bank represents a traditional, centralized model that requires customer approval and holds Bitcoin “in a vault until the loan is paid back” (with loan terms extending up to one year), decentralized services like Coinbase leverage protocols that streamline the borrowing process.
Seamus Rocca, CEO of Xapo, highlighted that many long-term crypto holders have grown wary of crypto-backed lending due to the prevalence of “predatory lending and faulty products” in the marketplace. He emphasized, “That’s why we’re doing things differently.”
Ultimately, these loans provide Bitcoin holders with a means to access cash without needing to sell their assets, thereby avoiding potentially taxable transactions.
Featured image from Gemini Imagen, chart from TradingView
