How can private banks serve clients holding Bitcoin as a long-term wealth asset?

Private banks can already give clients Bitcoin price exposure through regulated investment products, without holding the asset or lending against it. Serving clients who own Bitcoin directly is different. Some high-net-worth (HNW) and ultra-high-net-worth (UHNW) clients hold Bitcoin for longer and may want to use it like other assets: borrowing against it, earning a return on it and passing it to the next generation.

Seamus Rocca, Chief Executive Officer of Xapo Bank, a Bitcoin-focused bank based in Gibraltar, argues that meeting this demand requires specialist custody, lending expertise and risk controls, including continuous collateral monitoring. A regulated investment product does not need any of this. Private banks therefore face a decision: build these capabilities internally, work with a specialist provider, or limit their Bitcoin offering to investment products.

Xapo's second-quarter 2026 data, published on 5 August 2026, show how that demand plays out among clients who already have custody, fund and lending services. The figures describe one Bitcoin-focused institution's own members, not the wider private-banking market.

What Xapo's data show

Nearly four in five Xapo members, 79%, held more Bitcoin at the end of the second quarter than at the start, including 28% who increased their holdings by more than 5%. Trading activity slowed over the same period. The number of Bitcoin trades fell 2.7% from the first quarter, average purchase and sale sizes declined 12.9% and 20.2%, respectively, and total buy and sell volumes fell 28.7% and 17.2%. Member assets under management (AUM) in Xapo's BTC Fund, formally the Xapo Byzantine BTC Credit Fund and managed by Hilbert Capital, rose 15.1% quarter-on-quarter. The combined value of active Bitcoin-backed loans and loan upsizes increased 3.4%, while new loan openings fell 29.2%. Together, the figures span three distinct activities: holding Bitcoin, trading it and using financial services linked to existing holdings.

Xapo confirmed that member balances are measured in Bitcoin terms, and included assets transferred from elsewhere, so a higher balance does not necessarily mean a member purchased more Bitcoin. It also confirmed that the 3.4% increase reflected the value of active loans and upsizes, not growth in the number of borrowers.

Hilbert Group, the fund's external manager, has separately reported that the BTC Fund held 4,679 BTC at 30 June in its own second-quarter 2026 filing. The figure gives scale to the fund, although Xapo's members remain a self-selected group likely to be more committed to Bitcoin than conventional wealth clients.

Borrowing and yield carry risks the figures do not resolve

For an investor who intends to hold Bitcoin for years, borrowing against it can offer liquidity without a sale, though the investor still carries Bitcoin's downside risk plus the borrowing and collateral risk that comes with any loan. Rocca said Bitcoin's volatility means the safeguards around such lending must be robust, citing “prudent loan-to-value ratios, continuous collateral monitoring and clearly defined liquidation terms”. Xapo applies a maximum initial loan-to-value ratio of 40%, and says Bitcoin pledged as collateral is not lent, staked or otherwise reused while a loan is outstanding. Xapo's BTC Fund generates yield through a different mechanism: lending members' Bitcoin, unsecured, to institutional borrowers. This differs from Bitcoin-backed lending, where a member pledges Bitcoin as collateral for a loan; in the fund, the member's own Bitcoin is lent out, exposing them to the borrower's credit risk. Bitcoin does not generate a return on its own: the yield comes from accepting that risk.

Gadi Chait, Head of Investments at Xapo Bank, said: “Members of the BTC Fund earn yield in kind for one clear reason: they are compensated for taking credit risk on Bitcoin lent, unsecured, to well-established institutional borrowers. The risk is low and carefully managed, so the return is modest by design; we are not chasing yield. That honesty about the trade-off is exactly why demand keeps growing.”

Xapo would not go further on the fund's borrowers either. The gap matters as much as the yield itself: unsecured lending to institutional borrowers carries default risk that sits outside Bitcoin's own price risk. For private banks, giving a client exposure to Bitcoin's price, lending against Bitcoin a client already holds and lending a client's Bitcoin to third parties are three separate activities, each with different risks.

Private banks face a build, partner or wait decision

“For traditional institutions, partnership will be the most practical first step. Bitcoin is not just any asset. Generating a return directly from Bitcoin requires specialist custody, lending expertise and risk controls that take time to develop,” Rocca said.

Rocca's preference for partnership should be read in the context of Xapo's position as a specialist Bitcoin provider. Building the same capability internally means developing custody infrastructure, lending expertise, risk controls and collateral monitoring, plus the regulatory and operational framework to support them. Working with an external provider can reduce the infrastructure a bank has to build, but does not remove the need for its own due diligence, oversight and client protection.

Xapo's own structure illustrates that same mix in practice. Xapo VASP Limited, its Gibraltar-regulated cryptoasset services entity, and Xapo Credit Limited, its licensed lending entity, sit inside the bank's own group, while the BTC Fund itself is run by an external partner, Hilbert Capital, under a dedicated Cayman-domiciled fund structure.

The decision has a longer horizon. “Many see Bitcoin as a long-term store of wealth that they intend to hold for decades or pass to the next generation,” Rocca said.

Bitcoin ownership is controlled through private cryptographic keys, so a custodian holding Bitcoin on a client's behalf takes on responsibility for the security of those keys and for authorising any transfer of the underlying asset. Xapo, for example, manages members' keys using multi-party computation, splitting each key so no single party, including Xapo itself, holds it in full.

Where that is true, custody becomes more than an asset-security question: access, control and succession become relevant, particularly once Bitcoin represents a material share of a family's wealth. Xapo lets members nominate beneficiaries and allocate a percentage of their holdings to each, addressing the transfer of assets held on the platform; broader estate planning still depends on a client's own legal arrangements.

Which path an institution takes depends less on Bitcoin's price than on the size and durability of demand from its own clients. A concentrated group of existing holders may justify some specialist services without generating the volume needed to support in-house technology, operations and compliance costs at scale.

Xapo's second-quarter data show its own members deepening how they use custody, fund and lending services. Whether conventional private banks face sufficient demand to justify similar capabilities remains unresolved.