Bitcoin-focused Xapo Bank maintains 3,000% liquidity ratio to secure customer assets Bitcoin-focused Xapo Bank maintains 3,000% liquidity ratio to secure customer assets
Joey Garcia recounts how Xapo Bank’s foresight in 2014 established Gibraltar as a Bitcoin regulatory pioneer.
3 min read
Updated: Aug. 2, 2024 at 12:02 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
The Evolution of Crypto Regulation: Insights from Joey Garcia of Xapo Bank
In a recent interview, Joey Garcia, Director and Head of Regulatory Affairs and Public Relations at Bitcoin-focused Xapo Bank, shared his journey and insights into the evolution of digital assets regulation. Joined by CryptoSlate Senior Analyst James Van Straten, Garcia provided a detailed account of the challenges and milestones in shaping regulatory frameworks for digital assets.
The Early Days of Crypto Regulation
Joey Garcia’s journey with Xapo Bank began in 2014 when he met Wences Casares, a renowned figure in the digital assets space. Casares approached Garcia with the idea of establishing a regulatory framework for cryptocurrencies in Gibraltar. Garcia recalls,
“Wences came to see me in 2014 and said, you know, law and regulation in this whole universe doesn’t exist. If you can convince a small jurisdiction to move quickly and adapt, it’s a great opportunity.”
Despite initial skepticism and resistance from authorities, Garcia and his team persisted. Their efforts culminated in the development of a regulatory framework that came into effect at the end of 2017, making Gibraltar one of the first jurisdictions to establish a comprehensive approach to digital asset regulation.
Building a Robust Framework
Garcia emphasized the importance of creating a prudential regime that goes beyond basic compliance. “We built out a framework that was a year and a half ahead of the FATF’s recommendations,” he explained. This forward-thinking approach positioned Gibraltar as a leader in the regulatory space and attracted major players in the digital assets industry.
The framework was designed to address the complexities of the evolving crypto landscape. Garcia shared his experience of working with various countries, conducting gap analyses, and providing training to regulatory authorities. “I’ve done gap analyses and assessments in countries like Singapore, Cambodia, Thailand, and many others,” he noted. This extensive experience has given Garcia a unique perspective on the global regulatory environment.
Xapo’s Unique Value Proposition
Xapo Bank’s commitment to security and compliance sets it apart in the cryptocurrency industry. Garcia highlighted Xapo’s transition from being the largest Bitcoin wallet provider to a fully licensed bank. “We always have been a Bitcoin wallet provider, but we wanted to offer more. So, we obtained a full bank license to provide secure and reliable financial services,” he said.
Xapo’s emphasis on security is evident in its operations. The bank maintains a high liquidity ratio and ensures that customer assets are fully collateralized. “At Xapo, we are required to have 100% liquidity coverage, and we are actually at around 3,000%,” Garcia stated, emphasizing the bank’s robust financial position.
Navigating Global Regulatory Challenges
Garcia’s role extends beyond Xapo Bank. As a specialist consultant to the United Nations, he provides training and assessments to regulatory authorities worldwide. He discussed the importance of understanding local contexts and addressing unique regulatory challenges in different countries. “In Vietnam, for instance, the authorities initially believed that DeFi didn’t exist. But when I showed them the data, they were number one in DeFi adoption,” he recounted.
This hands-on experience has shaped Garcia’s approach to regulation. He advocates for a pragmatic and informed approach that considers both global standards and local realities. He emphasized,
“It’s about time and education. We need to inform people about the differences between regulated custodians and other platforms.”
The Future of Crypto Regulation
Looking ahead, Garcia envisions a future where regulatory frameworks continue to evolve in response to the dynamic nature of the crypto industry. He believes that trust and reliability will be crucial factors in the adoption of crypto services. He remarked,
“Your longstanding reputation within the industry is one of the most important things. It just takes time, especially in this industry, to see who the real winners are and who the truth-tellers are.”
Xapo Bank aims to be a secure pillar in the financial ecosystem, offering unique services that bridge the gap between traditional finance and digital assets. As Garcia put it,
“We want to offer secure and safe access to US dollar accounts and Bitcoin. It’s about protecting and growing your wealth in a bank environment that you can’t really match in any other way.”
Joey Garcia’s insights provide a compelling narrative of the challenges and opportunities in the world of crypto regulation. His work with Xapo Bank and various regulatory authorities highlights the importance of a proactive and informed approach to shaping the future of digital finance.
Author 
James Van Straten
James fervently appreciates data, technology, and trend-spotting. As a tech and liberty maximalist, he hails Bitcoin as the 21st century's paramount invention.
Editor Editor 
Liam 'Akiba' Wright
Also known as "Akiba," Liam is a reporter, editor and podcast producer at CryptoSlate. He believes that decentralized technology has the potential to make widespread positive change.
