Xapo Bank, a wealth manager catering to long-term Bitcoin (BTC) holders, has announced the introduction of Bitcoin-backed loans, offering its members access to up to $1 million in cash without needing to sell their BTC holdings. This service is designed for individuals seeking substantial loans for purposes such as property upgrades or purchasing vehicles, leveraging their Bitcoin as collateral.

The resurgence of crypto-backed loans comes after a period of turmoil in the crypto lending sector, marked by notable collapses and bankruptcies. Xapo Bank differentiates itself from traditional exchanges by focusing on wealth management rather than trading-oriented services. CEO Seamus Rocca emphasized that their lending approach aims to avoid encouraging excessive leverage, which he believes poses significant risks for investors, contrasting it with the practices of some exchanges that prioritize facilitating high-risk trading.

To protect customers' Bitcoin, Xapo employs a conservative loan-to-value (LTV) ratio of 20%-40%. According to Rocca, this framework ensures that borrowers' Bitcoin would only face liquidation if the price were to fall below $40,000. Xapo Bank operates under a Gibraltar-regulated banking license that extends to the U.K.

Initially established in 2013, Xapo gained recognition for its secure Bitcoin storage solutions, including Swiss mountain bunkers. The bank has recently expanded its offerings to include Ether (ETH). When Xapo explored Bitcoin-backed lending, the anticipated average loan size was around $50,000. However, it became evident that some long-term holders desired larger loans, with those holding approximately $5 million in Bitcoin seeking loans of $1 million or more. Xapo can accommodate even larger loans on a case-by-case basis. The interest rate on dollar loans is approximately 10%, according to Rocca.

The primary motivations for clients seeking these loans include property improvements, vehicle purchases, and various other financial needs. Rocca noted that Bitcoin holders with a strong belief in its future price appreciation are often reluctant to sell their holdings. The ability to access liquidity through Bitcoin-backed loans from a trusted institution offers an appealing solution for managing expenses such as home renovations or school fees.

Xapo provides flexible repayment schedules of 30, 90, 180, or 365 days, without early repayment penalties. Additionally, a loan health tracker offers real-time updates on loan status and potential risks, as stated in the company's press release.