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Contxto – Coinbase is actively seeking to expand its custody services, made evident by its acquisition of Xapo for US$55 million. In turn, this deal increased its assets to over US$7 billion worth of cryptocurrencies.
To make this acquisition happen, Coinbase had to beat the investment giant, Fidelity. Following the win, now Coinbase allegedly has control over 5 percent of all circulating bitcoins in the world.
Prior to this development, the Argentinian startup Xapo gained attention for storing its bitcoins in a vault under a Swiss mountain. Founded in 2013 as a bitcoin trading platform, the custody business model originated from wealthy bitcoin investors needs to securely store their funds somewhere.
Since Xapo’s main interest has always been the retail market, it ultimately decided to sell its business and focus on other endeavors.
The US$55 million acquisition is the result of Coinbase’s strong desire to expand its custody services. However, Xapo will keep ownership of the trading business. What this means is that clients will still be able to buy and sell bitcoins through the platform.
Allegedly, there were even higher bids for the company. Nevertheless, the other competitors didn’t have the necessary credentials to provide the required security for Xapo’s customers.
Coinbase now has control of over 514 thousand bitcoins since most of Xapo’s biggest clients agreed to store their assets through its system. Not all clients have signed over to Coinbase, though.
The remaining accounts have an estimated value of US$3.5 billion. If they decide to embrace Coinbase, the company would be managing 860 thousand bitcoins. Besides that, it already has US$1.3 billion worth of assets under custody with other cryptocurrencies.
All things considered, it’s evident that Coinbase is consistently reaching new heights. Every week, ten new clients allegedly store US$12 million worth of new assets with Coinbase.
”Custody is a critical step toward the institutionalization of the crypto economy,” shared Coinbase’s founder in an interview with Fortune. “It’s likely to start off small, maybe a few billion under custody, but it will grow quickly to a point that it’s a meaningful piece of stable, recurring revenue for the company.”
On the other hand, Xapo will keep it up with the crypto-fueled retail business. Also, the ownership of the Switzerland vault will remain with the company, storing bitcoins for retail clients instead.