Xapo Bank launches interest-bearing Bitcoin accounts in the UK

Xapo Bank has expanded its services to the UK, offering interest-bearing accounts in bitcoin and fiat following the successful acquisition of its banking license. This move marks a significant milestone, making Xapo the first UK bank to offer such accounts.

The passporting mechanism allows Gibraltar-based companies to extend their banking licences to the UK, with oversight by The Financial Conduct Authority (FCA)the Prudential Regulation Authority (PRA), the Bank of England and the Gibraltar authorities.

Xapo Bank pioneers the launch of interest-bearing bitcoin accounts in the UK

Xapo Bank’s platform offers a 1% interest yield on bitcoin without the need to stake, lend or lock up assets. However, the source of this interest yield remains unspecified. Users can also use Xapo’s debit card to spend bitcoin, make direct payments in sterling to UK bank accounts, invest in S&P 500 stocks, purchase selected cryptocurrencies and access stablecoin payment channels through US dollar bank accounts.

Fintech companies have recently faced difficulties in obtaining banking licenses in the UK. Despite this, UK regulators granted a new banking license to the cryptocurrency-supporting app Revolut. Since 2021, Xapo Bank is regulated by the Gibraltar Financial Services Commission and offers limited services in the UK, but until now it was not recognized as a regulated UK bank.

“This achievement allows us to offer our banking services directly to the UK market,” said Seamus Rocca of Xapo Bank. “This milestone demonstrates our adherence to the UK’s rigorous regulatory standards. We look forward to expanding our membership in the UK, helping our customers diversify their wealth through bitcoin and secure banking.”

Founded in 2013, Xapo Bank evolved from a bitcoin wallet to an e-money wallet and eventually to a “digital-first” retail bank and Virtual Asset Service Provider (VASP) custodian. The bank employs multi-party computing (MPC) technology in conjunction with a physical bunker, guaranteeing USD deposits up to €100,000. MPC improves on multi-signature techniques by splitting wallet keys between multiple parties.

In May, Xapo Bank partnered with Lightspark, co-founded by former PayPal president David Marcus, to enable bitcoin deposits via the Lightning Network.

UK regulatory environment

In June 2023, former Conservative UK Prime Minister Rishi Sunak called for greater regulatory clarity regarding the registration and operations of cryptocurrency companies, with the aim of making the UK a global Web3 hub. Progress has been made, with the UK Treasury publishing its final proposals for cryptocurrency regulation in October, aiming to integrate cryptocurrency activities into the financial services regulatory framework.

However, the direction of cryptocurrency policy under the new Labour government and Prime Minister Keir Starmer remains uncertain. “The UK is rapidly emerging as a global hub for cryptocurrency innovation, supported by a robust regulatory framework, a vibrant financial ecosystem and a wealth of talent,” commented Joey Garcia, Director and Head of Regulatory and Public Affairs at Xapo Bank. “Our passport highlights the unique market access for Gibraltar-regulated firms, supported by the Bank of England’s commitment. Xapo Bank is eager to focus on the UK for membership growth as we expand our banking license.”

The FCA estimated that around 10% of the UK population owned crypto assets as of June 2023. The regulator has taken a cautious stance to protect investors while encouraging innovation. In 2021, the FCA banned the sale of derivatives and exchange-traded products to retail investors. New regulations on cryptocurrency advertising, in place since last October, have created challenges for some firms, leading to exits from the market.

Despite these challenges, the UK’s approach to cryptocurrency regulation is evolving. In May, the London Stock Exchange launched cryptocurrency ETNs for professional investors, reflecting ongoing regulatory developments in the sector.

Xapo Bank has become the first licensed bank in the UK to offer a combined USD and bitcoin (btc) interest-bearing account.twitter.com/hashtag/Xapo?src=hash&ref_src=twsrc%5Etfw”>#Xapo twitter.com/hashtag/bitcoin?src=hash&ref_src=twsrc%5Etfw”>#bitcoin https://t.co/FsQd62Q9pL

—Cryptonews.com (@cryptonews) twitter.com/cryptonews/status/1820443973963731123?ref_src=twsrc%5Etfw”>August 5, 2024

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