Xapo Bank Achieves First in UK with Interest-Bearing Accounts

Xapo Bank has announced that it is the first UK bank to offer interest-bearing accounts for both bitcoin and fiat currencies after successfully passporting its banking license into the UK.

Passporting Scheme

The passporting scheme allows firms from Gibraltar to extend their banking license to the UK, with oversight from the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA), the Bank of England, and Gibraltar authorities.

According to a statement shared with The Block, Xapo’s platform provides users with 1% interest yields on their bitcoin deposits without needing to stake, lend, or lock up the assets. However, the firm has not disclosed the origins of these interest yields.

User Benefits

Xapo users can utilize a variety of financial services:
– Spend bitcoin via Xapo’s debit card
– Send direct GBP payments to UK bank accounts
– Invest in S&P 500 stocks
– Acquire select cryptocurrencies
– Access USD bank accounts for stablecoin payments

Regulatory Landscape in the UK

The UK has seen fintech companies struggle to secure banking licenses in recent years, even as crypto-friendly firms like Revolut have successfully obtained them. Before this, Xapo was regulated by the Gibraltar Financial Services Commission since 2021 but was not recognized as a regulated UK bank until now.

Seamus Rocca from Xapo Bank stated, “This means we are allowed to offer our banking services directly to the UK market. Achieving this is no easy feat and shows we meet the UK’s high regulatory standards. We aim to expand our membership in the UK and help valuable members diversify their wealth through bitcoin and secure banking.”

Transition and Services

Founded in 2013, Xapo has evolved from a Bitcoin wallet service to an e-money wallet, eventually becoming a “digital-first” retail bank and virtual asset service provider (VASP) custodian. The bank ensures USD deposits up to €100,000 and employs multi-party computation (MPC) technology for enhanced security. In May, it further advanced by allowing bitcoin deposits via the Lightning Network in partnership with Lightspark.

Future of Crypto Regulations

The regulatory framework in the UK is still developing. Former UK Prime Minister Rishi Sunak emphasized the need for regulatory clarity for crypto firms. The UK Treasury published final proposals in October to integrate crypto asset activities under the financial services regulatory perimeter for the first time. However, the stance of the new Labour government under Prime Minister Keir Starmer on crypto remains unclear.

Joey Garcia from Xapo Bank highlighted the UK’s emergence as a global hub for crypto innovation, citing its promising regulatory framework and dynamic financial ecosystem. The FCA has estimated that around 10% of the UK’s population held crypto as of June 2023, but has been cautious in its approach, focusing on investor protection alongside innovation. In 2021, the FCA banned certain crypto products for retail investors and introduced new advertising rules, which could complicate the operating landscape for many firms. Despite this, some progress like crypto ETNs for professional investors launching on the London Stock Exchange occurred in May.