From CoinDesk · By Will Canny, AI Boost
Xapo customers are using bitcoin as collateral and accumulating BTC through interest on dollar savings, its CEO told CoinDesk.
Experience from previous market cycles is dividing clients between profit-takers and holders reluctant to sell.
Traditional banks’ cautious approach leaves an opening for specialist providers, Seamus Rocca said.
Wealthy bitcoin BTC$84,459.46 holders are increasingly treating their cryptocurrency as an asset to borrow against and generate income from, marking a shift from speculation toward private banking, according to Xapo Bank CEO Seamus Rocca.
At the Gibraltar-based bank, customers are seeking cash without selling their bitcoin, putting some of their holdings into income-generating investments, or accumulating more BTC through interest paid on dollar savings, he said.
“Customers are looking for yield and alpha,” Rocca told CoinDesk in an interview, pointing to demand from funds and family offices for accumulation and income products.
The behavior reflects bitcoin’s growing maturity, he said. Five or six years ago, the cryptocurrency was primarily viewed as a trading and speculative asset. Today, more holders want financial services built around their existing wealth.
Xapo grew out of a bitcoin custody business known for its Swiss bunker storage. Its customers include early adopters who have experienced several halvings (the periodic reductions in new bitcoin issuance), and the rallies and downturns surrounding them.
The bank charges an annual membership fee of $1,000, combining dollar banking with access to bitcoin custody, investments and borrowing.
Two camps of bitcoin wealth
Experience has pushed those customers in different directions.
Some of the earliest adopters became more willing to take profits as bitcoin reached record prices, having watched gains disappear in previous downturns, Rocca said. Others, including investors who entered around 2018 and 2019, remain determined to hold and prefer borrowing against their coins when they need liquidity.
For the profit-takers, selling does not necessarily mean abandoning bitcoin. Some keep the proceeds in dollar savings accounts and receive interest in BTC, gradually rebuilding their cryptocurrency holdings while retaining cash.
Rocca said about 45% of Xapo customers use that feature.
Xapo currently advertises a variable base rate of 4.1% on dollar savings, paid in bitcoin, alongside a temporary 4.6% introductory rate for eligible new members. It’s a separate bitcoin credit fund that targets annual returns of up to 4% through lending, exposing investors to credit and counterparty risk.
The common thread is the demand to make existing wealth productive.