Blockchain Breakthrough: Tether (USDT) Ousts SWIFT for USD Transfers in Major Bank, Paving the Way for a New Era of Financial Revolution

  • Xapo Bank has integrated Tether payment rails instead of SWIFT for funds transfer.
  • The move is set to stir a new era of financial revolution.

In a groundbreaking development, the world of finance has witnessed a shift as Tether (USDT), the popular stablecoin, has ousted SWIFT for USD transfers in Xapo Bank. Building on its successful launch of USDC rails in March, Xapo Bank is taking its services a step further by enabling its members to leverage the world’s most widely adopted stablecoin, USDT, for payments. 

According to the announcement, this move provides an alternative to the traditional SWIFT rails, offering users a faster, more efficient, and cost-effective payment solution.  

Accordingly, Xapo Bank has now become the world’s first Fintech institution to use USDT infrastructure for transferring US dollars between accounts. This step not only highlights Xapo Bank’s commitment to innovation but also demonstrates stablecoins’ rising acceptability in the existing banking system.

Importantly, the integration is entirely compliant with the Markets in Crypto-Assets Regulation (MiCA), demonstrating Xapo Bank’s respect for regulatory standards.

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Unlike traditional banks that practice fractional reserve banking, Xapo Bank operates on a different business model. It does not lend or rely on leveraging its customers’ deposits for profit. Instead, the bank maintains all customer monies in reserve and invests them in short-term liquid assets. 

By doing so, Xapo Bank hopes to pass on the benefits of any interest gained from these investments to its clients, increasing the value and returns connected with their deposits.

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In addition to integrating USDC and USDT payment rails, Xapo Bank has previously integrated with the Faster Payment System (FPS) to support GBP settlement for account deposits and withdrawals. Furthermore, Xapo Bank has announced an integration with Bitcoin’s Lightning Network in collaboration with Lightspark.

The uniqueness of the Tether (USDT) Integration

While commenting on the uniqueness of the bank’s offering, Seamus Rocca, CEO of Xapo Bank emphasized that the service combines the compliance and security of a traditional bank with the speed, efficiency, and versatility of USDT, enabling Xapo Bank to deliver an exceptional banking experience to its members.

Additionally, Xapo Bank, being fully licensed and regulated, offers its members the assurance of deposit protection through its membership in the Gibraltar Deposit Guarantee Scheme. This means that deposits made in USD are guaranteed by Xapo Bank up to the equivalent of €100,000.

To mitigate risks associated with USDT deposits, Xapo Bank automatically converts such deposits into USD and deposits them into the member’s account. This approach ensures that the bank maintains a conservative and secure approach to its operations, prioritizing the protection and stability of its members’ funds.

Notably, the adoption of Tether (USDT) for USD transfers in Xapo Bank sets a precedent for future developments in the financial industry. As other financial institutions witness the benefits of blockchain technology, they are likely to follow suit, leading to a broader acceptance and integration of crypto in mainstream finance.

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About Author

Godfrey Benjamin is an experienced crypto journalist whose main goal is to educate everyone around him about the prospects of Web 3.0. His love for crypto was birthed when as a former banker, he discovered the obvious advantages of decentralized money over traditional payments.

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