* Assange has been holed up in Ecuador Embassy since 2012

* Says he fears extradition to US over release of secret cables

* Magistrate to rule on his arrest warrant on Feb. 6 (Adds details from court)

By Michael Holden

LONDON, Jan 26 (Reuters) - WikiLeaks founder Julian Assange, holed up in the Ecuadorean Embassy in London for over five years because he fears extradition to the United States, will learn next month if he has succeeded in having a warrant for his arrest dropped.

Assange, 46, fled to the embassy in the wealthy Knightsbridge district of the British capital in 2012 after skipping bail to avoid being sent to Sweden to face an allegation of rape, which he denied.

The Australian-born Assange had feared Sweden would hand him over to the United States to face prosecution over WikiLeaks' publication of a large trove of classified military and diplomatic documents - one of the largest information leaks in U.S. history.

In May last year, Swedish prosecutors dropped their investigation into the allegation and withdrew their European Arrest Warrant (EAW). But British police have insisted Assange would still be arrested for breaching bail conditions should he leave the embassy.

On Friday, Assange's lawyer, Mark Summers, told Westminster Magistrates' Court that the withdrawal of the EAW meant the British bail arrest warrant could no longer apply.

"We say it's lost its purpose and its function," he said.

Summers' argument was a technical one: that the purpose of the arrest warrant was to allow underlying legal proceedings to continue and not for bringing someone to court to face a separate bail offence.

FORFEITED BAIL

In 2012, Assange and his guarantors forfeited more than 110,000 pounds ($156,000) when he skipped bail and his defence team said he had already spent 5-1/2 years in conditions which were "akin to imprisonment".

"In all the circumstances, it is respectfully submitted that any public interest in maintaining this warrant ... has now been spent," his lawyers said in written papers to the court.

When asked if a successful ruling could enable Assange to walk free, a spokesman for the Crown Prosecution Service (CPS)said, "Hypothetically yes, that would be our interpretation."

In court, CPS lawyer Aaron Watkins said it would be "absurd" if a defendant were to be effectively rewarded for managing to evade proceedings for sufficiently long that existing court proceedings happened to fall away.

He said Assange's lawyers were simply trying to look at British laws and then construct an argument which would allow their client to walk free from the embassy.

To some, Assange is a cyber hero who exposed government abuses of power. To others, he is a criminal who undermined the security of the West by exposing secrets.

British police have said the charge of skipping bail is a much less serious offence than rape, but he could still face a one-year prison sentence if convicted, which in effect would mean six months behind bars.

Ecuador said this month it had given citizenship to Assange, hours after the British government refused a request for him to be given diplomatic status, which could have given Assange immunity from arrest should he try to leave the embassy.

England Chief Magistrate Emma Arbuthnot said she would make her ruling on the arrest warrant on Feb. 6. (Writing by Michael Holden, Kate Holton and Costas Pitas; editing by Mark Heinrich)

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