Gibraltar-based Xapo Bank is stepping into Bitcoin-backed lending, offering loans of up to $1 million to long-term BTC holders. The bank announced today that eligible clients can now access U.S. dollar loans without selling their Bitcoin.

Xapo CEO Seamus Rocca said Bitcoin’s borderless nature, liquidity, and 24/7 availability make it an ideal form of collateral. Unlike some past lending platforms, Xapo ensures that BTC used as collateral won’t be rehypothecated, meaning the bank won’t re-use or lend out customer assets. Instead, Bitcoin collateral is stored in Xapo’s institutional-grade vault.

The bank is targeting long-term BTC holders, offering repayment plans of 30, 90, 180, or 365 days with no penalties for early repayments. The service is available in multiple regions, including Europe and Asia, but excludes U.S. residents due to regulatory restrictions.

Xapo’s move comes as crypto lending attempts a comeback following the collapse of major players like Celsius and BlockFi in 2022. Rocca noted that borrower trust took a hit after those failures, but demand for Bitcoin-backed loans is growing, particularly among high-net-worth individuals and institutional investors seeking liquidity.

To address risk concerns, Xapo provides instant alerts if BTC prices drop, allowing borrowers to top up collateral or make repayments to avoid liquidation. The bank also offers risk management tools and proactive security features.

The resurgence of crypto lending isn’t limited to Xapo. Earlier this month, Bitcoin developer Blockstream secured a multibillion-dollar investment to launch new institutional funds, two of which focus on BTC lending.

Founded in 2013, Xapo Bank transitioned from a Bitcoin wallet to an e-money wallet and now operates as a “digital-first” retail bank and virtual asset service provider (VASP) custodian. It guarantees USD deposits up to €100,000 and uses multi-party computation (MPC) technology to enhance security.

Xapo has become the first UK bank to offer interest-bearing bitcoin and fiat accounts after securing a UK banking license through a passporting scheme operated by the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA), Bank of England, and Gibraltar authorities.

The bank’s platform offers 1% interest on bitcoin without the need to stake, lend, or lock up the assets. Users can spend bitcoin via Xapo’s debit card, send GBP payments to UK accounts, invest in S&P 500 stocks, acquire select cryptocurrencies, and access stablecoin payment rails with USD accounts.

Securing UK banking licenses has been challenging for fintech firms, but Xapo Bank, regulated by the Gibraltar Financial Services Commission since 2021, now meets the UK’s regulatory standards.