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Xapo Bank becomes first licensed bank to integrate USD Coin payment rails

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(Kitco News) - Amid the slowly spreading global banking contagion – which was originally blamed on cryptocurrency involvement before it spread to the likes of Credit Suisse and First Republic – Xapo Bank, a leading Bitcoin custodian, has become the first licensed bank in the world to integrate the payment rails for the USD Coin (USDC) stablecoin as an alternative to SWIFT.

According to a press release from Xapo, the private bank collaborated with Circle, the firm responsible for the issuance of USDC, to complete the integration and enable USDC payments.

“By adding outrails to its existing USDC onramps, Xapo Bank is enabling members to bypass costly and time consuming SWIFT payments and instead deposit and withdraw via the stablecoin with no fees charged by Xapo Bank,” the press release said.

Xapo is promising a 1:1 conversion rate from USDC to USD, and all USDC deposits held at the bank will automatically be converted to USD, which means that depositors will be able to receive a 4.1% annual interest rate return on their deposits.

While it's not protected by FDIC insurance, Xapo Bank is a member of the Gibraltar Deposit Guarantee Scheme (GDGS), which guarantees its members’ USD deposits up to $100,000 USD equivalent.

In an effort to steer clear of the regulatory hurdles that other crypto platforms such as Coinbase and Kraken have faced, Xapo Bank does not offer any crypto deposit staking services and “does not have any exposure to surrounding crypto markets as all deposits are automatically converted to USD held by the Bank,” the release said.

It also differs from traditional banks in that it doesn’t issue loans, and therefore does not rely on fractional reserve banking as its core business model to make money.

"Xapo Bank was built to protect members' savings,” said Seamus Rocca, CEO of Xapo Bank. “Unlike many traditional banks, we do not offer customer loans and therefore, all of our customers' money is held dollar for dollar on our balance sheet. It is invested in very short dated, highly credit rated, money market instruments and short term bonds. We are passing that benefit to our customers in the form of a 4.1% interest rate, paid daily.”

Cheaper and faster BTC payments: Xapo Bank integrates with the Lighting Network

To be a member of Xapo Bank, interested parties must pay a $150 membership fee, which the bank uses to pay for overhead costs, Rocca said. More than 80% of all yields generated by the bank are distributed to members.

"Xapo Bank's USDC payment rails mark a watershed moment in financial history, combining the speed and cost efficiency of the digital dollar, with the security guarantees of a licensed private bank,” Rocca said. “Enabling auto converted USDC deposits and withdrawals at Xapo Bank gives crypto members a safe haven for their savings. Running 24/7 including weekends, we eliminate the anxiety of keeping your money in exchanges and the hassle of expensive off ramps into traditional banks.”

This development is part of Xapo Bank’s ongoing effort to grow its payment rail options. Last week, the bank announced that it had integrated with the Faster Payment System (FPS) to activate support for GBP settlement for account deposits and withdrawals. The bank also announced an integration with Bitcoin's Lightning Network, in collaboration with Lightspark, in early March.

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