According to the Bitcoin custodian, utilizing the USDC stablecoin will allow members to deposit and withdraw funds without fees.
Bitcoin custodian and licensed private bank Xapo Bank has partnered with financial technology company Circle to integrate USD Coin payment rails as an alternative to SWIFT. Payment rails refer to the infrastructure and technology used to facilitate the movement of funds between parties in a financial transaction. Payment rails come in many forms, including traditional bank wires, credit card networks, and blockchain-based platforms.
Xapo Bank says that the new feature allows its members to bypass the cumbersome and expensive SWIFT payment system through “outrails” added to its existing USDC on-ramps. By utilizing the USDC stablecoin, members can deposit and withdraw funds from Xapo without fees and benefit from a one-to-one conversion rate from USDC to the U.S. dollar. In addition, all USDC deposits are automatically converted to the dollar, enabling members to earn an annual interest rate return of up to 4.1%.
According to the announcement, Xapo Bank is a fully licensed and regulated bank and a member of the Gibraltar Deposit Guarantee Scheme (GDGS), which protects depositors’ dollar deposits up to $100,000. Additionally, Xapo Bank shared that it does not engage in the staking of any cryptocurrency deposits, and all deposits are automatically converted to the dollar upon receipt by the bank. Xapo claims this reduces exposure to any risks associated with the fluctuating crypto markets.
Xapo claims its business model differs from traditional banks as it does not engage in lending activities and does not rely on fractional reserve banking to generate profits. Instead, the private bank maintains all customer funds in reserve and invests them in “short-term, highly liquid assets” to pass on the earned interest to its customers.
As previously reported by Cointelegraph, Moody’s Investors Service haswarned that USDC’s depeg could negatively impact the adoption of stablecoins and lead to increased regulatory scrutiny. The credit rating agency argued that the traditional banking sector’s recent turmoil and the depegging of USDC could increase resistance to fiat-backed stablecoins.
USDC’S depeg occurred following the sudden collapse of Silicon Valley Bank on March 10. The collapse of SVB was a significant risk event for USDC issuer Circle Internet Financial, which had $3.3 billion in assets tied up in the bank.
Source: Cointelegraph.com
