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(Kitco News) - Xapo Bank, a crypto-friendly bank based in Gibraltar that is backed by SoftBank, DST Global Partners and Rabbit Capital, has announced its plans to expand across India and the rest of South Asia in an effort to increase cryptocurrency services in the region.
The bank revealed its expansion plans on Thursday, saying that it has begun offering its full suite of crypto and financial services to Indian customers, including a USD offshore savings account that earns 4.1% interest and a Bitcoin (BTC) wallet that offers 1% on Bitcoin deposits.
According to the bank’s website, BTC interest is paid out daily in Satoshis, the smallest unit of Bitcoin. In addition to basic banking services, Xapo also offers crypto-to-fiat conversions, immediate stablecoin-to-fiat exchanges, and facilitates British pound or euro transfers.
“Xapo Bank’s decision to accept members across South Asia, including India, represents an opportunity to provide our hybrid banking and investment solutions to its large underserved populations, bridging an important gap in the region’s financial systems,” said Seamus Rocca, CEO of Xapo Bank. “This is in line with the positive shifts we are witnessing in Asia’s evolving crypto landscape, as well as our mission to make transacting transparently and securely from anywhere in the world as simple as it can be for our members.”
Xapo has been one of the more active crypto banks in the industry in 2023, pushing to expand its services and add new integrations amid the worst global banking crisis since 2008.
In early March, Xapo announced that it partnered with Lightspark, a company focused on building infrastructure for the Lightning Network (LN), to integrate the Bitcoin scaling solution into its banking services.
With this integration, Xapo users are now able to instantly pay for small purchases of up to $100 at any vendor that accepts Lightning payments and forego the high transaction fee and long confirmation time typically associated with Bitcoin.
High transaction costs have been a major barrier to entry for people living in impoverished regions, so the addition of LN support will help make using BTC for daily transactions more feasible.
"The average transaction confirmation time of one hour combined with potentially large fees during periods of high usage make the Bitcoin network unsuitable for small daily payments such as groceries,” Rocca said. “By integrating with the hyper-efficient Lightning Network, we are the first bank in the world to streamline this process and allow our members to pay for small purchases with Bitcoin without having to convert to USD first.”
Later in March, Xapo became the first licensed bank in the world to integrate the payment rails for the USD Coin (USDC) stablecoin as an alternative to SWIFT. The integration allows the bank's users to convert USDC to USD at a 1:1 rate, and all USDC deposits held at the bank are now automatically converted to USD, which means that depositors will be able to receive a 4.1% annual interest rate return on their deposits.
“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 bank said at the time.
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Xapo’s expansion to India comes at an opportune time, as the world’s most populous nation has been methodically opening its economy to cryptocurrencies over the past few years.
Currently, there is a 30% tax on all crypto trading profits and a 1% tax deducted at source (TDS) on all crypto transactions. In March, the government of India announced that all digital asset-related activities are now subject to Anti-Money Laundering (AML) laws, which means crypto exchanges, NFT marketplaces and custody service wallet providers are now legally responsible for monitoring suspicious financial activities.
All businesses that facilitate digital asset transactions are required to register with the Financial Intelligence Unit (FIU) and comply with other mandatory processes under the Prevention of Money Laundering Act (PMLA).
India is also well on its way to creating a central bank digital currency (CBDC), with the digital rupee currently in its pilot testing phase. The CBDC pilot is ongoing in 15 cities, with more than 100,000 customers and 10,000 merchants participating in the trial. A total of 13 banks are helping to facilitate the test. If the pilot goes smoothly, the RBI is looking to have the full-scale launch of a digital rupee for retail use by the end of 2023.
