Xapo bank integrates Bitcoin Lightning Network amid turmoil in crypto banking sector

Coinbase-owned Xapo bank announced its integration with the Bitcoin (BTC) Lightning Network on March 2, becoming the first fully licensed bank to integrate with the Lightning Network.

This integration came at a time when two leading crypto banks – Silvergate and Signature – were experiencing problems with their operations. Considering the current situation in the crypto banking sector, Xapo’s integration can be seen as a demonstration of the bank’s bullish sentiment towards the field.

Xapo on Lightning Network

Xapo was founded in 2013 as a wallet and cold storage. In 2021, it became the first company ever to hold BTC to secure a banking license, thus becoming a bank. Crypto exchange Coinbase’s custody arm, Coinbase Custody, acquired Xapo in 2019. At the time, Xapo had about $7 billion in custody, making Coinbase Custody the largest crypto custodian in the world.

To launch the integration, Xapo partnered with Lightspark, a company that provides infrastructure services for companies looking to integrate with the Lightning Network.

The integration allows Xapo Bank users to pay for purchases up to $100 using BTC at any provider that accepts Lightning Network payments. Considering the significant improvements the Lightning Network brings in terms of speed and affordability, Xapo prides itself on being the first fully licensed bank to offer near-instant BTC payments.

Commenting on the integration, Xapo Bank CEO Seamus Rocca said:

“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.

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.”

Turmoil in the crypto banking sector

Silvergate and Signature Banks have been experiencing problems since the FTX collapse and things seem to be getting worse for them.

Silvergate

On March 8, Silvergate Bank announced that it would cease banking operations pursuant to regulations. The journey that led to Silvergate ceasing operations began on March 1, when the bank said it would delay filing its annual 10-K report by two weeks. Silvergate stock reacted to this by registering a 32% drop in the following hours.

While announcing the delay of the 10-K report, the bank also said it has faced inquiries from regulators about its relationship with the failed exchange FTX. Following this news, several companies that worked with Silvergate cut ties with the bank. Although Silvergate has planned a joint recovery plan with the Federal Deposit Insurance Corporation, it still decided to cease operations.

Signature

The signature bank’s problems started in September 2022, months after the FTX collapse. Signature’s mid-Q3 report revealed that the bank lost $4.27 billion in payouts “driven by the recent crypto winter.”

In December, the bank decided to change its outlook and announced that it would shrink its crypto-linked deposits by $8 to $10 billion. With the announcement, the bank stated that it was “not just a crypto bank” and wanted to “come across loud and clear.” In January, Signature announced another update to its crypto transactions and introduced a minimum transaction limit of $100,000.

Although Signature was keen to change its outlook to “not just a crypto bank”, it emerged with its crypto services during the fall of Silvergate. It currently serves several crypto companies.

Disclaimer: Our authors’ opinions are solely their own and do not reflect the opinion of CryptoSlate. None of the information you read on CryptoSlate should be taken as investment advice, nor does CryptoSlate endorse any project that may be mentioned or linked to in this article. Buying and trading cryptocurrencies should be considered a high-risk activity. Do your own due diligence before doing anything related to the content of this article. Finally, CryptoSlate takes no responsibility if you lose money trading cryptocurrencies.

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