Bitcoin Custodian Xapo Bank Integrates USDC Deposits And Withdrawals
Xapo Bank, a licensed private bank and custodian for Bitcoin, has collaborated with the fintech firm, Circle, to incorporate USDC payment rails as a substitute for SWIFT.
Xapo Bank To Allow Users Bypass SWIFT With USDC Integration
Payment rails refer to the underlying infrastructure and technological framework that enables funds transfer between parties involved in a financial transaction. Payment rails can take on various forms, such as blockchain-based platforms, credit card networks, and traditional bank wires.
“We are delighted to announce that we are the world’s first bank to integrate fully with USDC. This will allow our members to transfer and receive USDC directly from their USD accounts, with no fees charged,” Xapo Bank tweeted on March 21st.
According to Xapo Bank, the newly introduced feature enables its members to circumvent the laborious and costly SWIFT payment system by incorporating “outrails” into its current USDC on-ramps.
Xapo users can utilize the USDC stablecoin integration at no added cost. This is quite different from the SWIFT system, which has higher charges. Moreover, members can take advantage of the platform’s fast conversion rate, which allows them to convert USDC to USD.
Furthermore, all USDC deposits are converted to USD automatically, allowing members to earn up to 4.1% as a yearly interest rate return. As stated in the report, Xapo Bank has obtained full licensing and regulation as a bank and is also a member of the Gibraltar Deposit Guarantee Scheme.
This scheme protects USD deposits, with a maximum of $100,000.
Increased Regulatory Scrutiny For Stablecoins
Meanwhile, Xapo Bank has clarified that it does not stake cryptocurrency deposits. Instead, it automatically converts all deposits into dollars upon receipt.
According to Xapo, this approach is intended to minimize exposure to risks that may arise from fluctuations in cryptocurrency markets. Xapo further explained that its business model differs from conventional banks.
First, it does not engage in lending activities or depends on fractional reserve banking to generate profits. Instead, the private bank preserves all clients’ funds in reserve and invests them in “short-term, highly liquid assets.”
Afterward, the bank will give the earned interest to its clients. According to previous reports, Moody’s Investors Service has cautioned that the de-pegging of the USDC may have adverse effects on stablecoin adoption and may result in escalated regulatory oversight.
Also, the credit rating agency contended that the recent turbulence in the traditional banking industry and the USDC crisis could intensify opposition to fiat-backed stablecoins.
Meanwhile, the USDC stablecoin has since recovered its USD peg.
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