Xapo Bank will now accept USDC deposits and withdrawals
The Bitcoin custodian claims that using the USDC stablecoin will allow members to deposit and withdraw funds without incurring fees.
Xapo Bank, a certified private bank and cryptocurrency custodian, has teamed with financial technology company Circle to integrate USD Coin payment rails as an alternative to SWIFT. Payment rails are the infrastructure and technology that enable the transfer of funds between parties in a financial transaction. Traditional bank wires, credit card networks, and blockchain-based systems are all examples of payment rails.
According to Xapo Bank, the new functionality allows its members to avoid the time-consuming and costly SWIFT payment system by adding “outrails” to its current USDC on-ramps. Members who use the USDC stablecoin can deposit and withdraw funds from Xapo without incurring fees and benefit from a one-to-one conversion rate from USDC to US dollar. Furthermore, all USDC deposits are promptly converted to dollars, allowing users to earn yearly interest rates of up to 4.1%.
Xapo Bank is a fully licensed and regulated bank that is a member of the Gibraltar Deposit Guarantee Scheme (GDGS), which insures depositors’ dollar accounts up to $100,000, according to the release. Furthermore, Xapo Bank stated that it does not stake any cryptocurrency deposits and that all deposits are automatically converted to dollars upon receipt by the bank. According to Xapo, this limits exposure to any risks linked with volatile cryptocurrency markets.
Xapo argues that its business strategy differs from typical banks in that it does not engage in lending and does not create profits through fractional reserve banking. Instead, the private bank holds all customer cash in reserve and invests them in “short-term, highly liquid assets” in order to pass on the interest gained to its clients.
As previously reported by sources, Moody’s Investors Service has cautioned that the USDC’s depreciation might have a detrimental influence on stablecoin adoption and lead to increasing regulatory scrutiny. The credit rating agency said that the recent turbulence in the traditional banking sector, as well as the depegging of USDC, could boost resistance to fiat-backed stablecoins.
The USDC was depegged as a result of the abrupt failure of Silicon Valley Bank on March 10. The failure of SVB was a major risk event for USDC issuer Circle Internet Financial, which had $3.3 billion in assets in the bank.