I am sure you have heard about Coinbase. It is one of the best services which offers wallet & exchange, offering a simple and intuitive user experience. They are also in the public eye for their efforts of expanding the amount of cryptocurrency in their custody. They are about to store 5% of all the BTC in the world, after a deal with Xapo.
Xapo is a company that started from Wences Casares’ interest in cryptocurrency. Given Argentina’s frequent financial fluctuations, he loved the idea of Bitcoin and decided to buy his first coins in 2011. Not being able to find a way to store them, he created a vault for his own use. Shortly after, his friends also wanted to use this vault and this is what became the starting point of Xapo in late 2013. Afterwards, in March 2014, they opened operations with the public.
The funny thing is Xapo was very renowned in the early days of Bitcoin, and even I myself opened my first wallet account with them.
Now, in 2019, they are still famous for storing their richest clients’ holdings in a secret Swiss ex-military bunker, found underneath a mountain (read more here). In order to understand how big they are on this segment, let’s take as an example crypto investment company CoinShares. They have more than $500 million at Xapo, and their CEO Ryan Radloff says, “You couldn’t pay me to keep it with a bank.”
Now, let’s take a look at what was the deal between the two companies. For $55 million, Coinbase bought the custodial interests of Xapo. This means the former now has $7 billion crypto holdings in custodial management. Take it as you will, but this is a very big number for one single company.
This move is part of Coinbase’s aggressive push to increase their custodial management operations. According to a media outlet, Coinbase found itself in a bidding war for the Xapo custodial interests. They were forced to outbid Fidelity, an investment services company.
What is certain is that Xapo is not ending its operations, as they will continue their exchange services. Its founder, Wences Casares, will continue to serve as CEO. He says that the company has been looking to sell its custodial interests for several months, in order to focus on the exchange service.
Coinbase is now storing crypto “on behalf of more than 120 clients in 14 different countries, making it the largest […] institutional custodian in the world”. Moreover, Brian Armstrong, co-founder & CEO of Coinbase, says that they are “seeing $200-400M a week in new crypto deposits come in from institutional customers”.
I am looking forward to seeing how Coinbase will continue their efforts to expand their custodial management operations. This move has been very interesting, so what are they planning next?
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