Altcoin News: Coinbase Acquires Xapo’s Crypto Custody Service for $55 Million
The Coinbase cryptocurrency exchange acquired the custodial service of Xapo, Fortune writes this Friday.
The transaction was carried out as part of the Coinbase plan to aggressively expand its own cryptocurrency storage unit and could lead to the company’s product being used to ensure the safety of 5% of all Bitcoins in circulation.
The acquisition cost Coinbase $55 million. Now the company manages over $7 billion in cryptocurrency assets, a source familiar with the situation said. According to him, Coinbase was able to make Xapo a more attractive offer than the investment company Fidelity.
Xapo was founded in 2013 and will retain the exchange business, within which it allows ordinary customers to buy and sell Bitcoins. Company founder Wences Casares will remain as CEO.
Casares said that servicing stock exchange transactions of retail customers has always been the main task of his company, while the custodian business has developed as an additional service for wealthy bitcoin holders who needed to safely store cryptocurrency.
“It’s hard to do a consumer business well at the same time as an institutional business. Earlier this year, we looked for a home for it,” he said.
Casares also noted that other companies offered larger amounts for the division of his company, but they did not have an adequate level of security or regulatory recommendations. These included, for example, Grayscale Investments, a digital asset management firm.
According to sources, most of the major Xapo customers agreed to transfer their assets to Coinbase, which resulted in the transfer of over 514,000 Bitcoins. The remaining accounts of Xapo’s clients presumably contain assets worth more than $3.5 billion. If Coinbase manages to attract them too, there will be over 860,000 Bitcoins in its vaults. Prior to the acquisition, Xapo Coinbase Custody stored assets in excess of $1 billion.
Rumors about the possibility of a deal between Coinbase and Xapo appeared in May, but it took several months to resolve related issues, including transferring client assets and determining the owner of the Xapo bunker in the mountains of Switzerland. Casares said that the bunker will remain with his company and will be used to store bitcoins for retail customers.
For Coinbase, the acquisition of the Xapo custodian business will be the next step towards the diversification of the main cryptocurrency exchange business. Coinbase CEO Brian Armstrong said that on average the company adds 10 new customers a week and receives $200 million in assets. With the acquisition of the Xapo service, the number of Coinbase Custody customers has exceeded 150.
Coinbase Custody CEO Sam Mackingale noted that over time, the company’s custodian business will support a much wider range of assets and services. Xapo allowed customers to store only Bitcoins, while Coinbase works with dozens of digital currencies. In addition, Coinbase Custody’s new services will include insurance products, regulatory support, and stacking. Also, customers of the company will be allowed to connect investment solutions of third-party suppliers.
Earlier it became known that the British bank Barclays has suspended cooperation with Coinbase.
Author: Marko Vidrih