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Crypto custodian Coinbase Custody acquires Xapo Institutions

Fri, 16 Aug 2019, 05:27 am UTC

Coinbase Custody, the crypto custodian service launched by Coinbase, has acquired the institutional business of Xapo, a leading crypto custody provider.

Earlier in May, reports had suggested that Coinbase was in talks to acquire Xapo for about $50 million.

In its official announcement, Coinbase Custody said that with the acquisition of Xapo Institutions, it has become the “world’s largest and most trusted steward of digital assets.” Coinbase reportedly paid $55 million for the acquisition, according to Fortune.

Founded in 2014, Xapo is licensed and regulated by the Gibraltar Financial Services Commission (GFSC) as an "Electronic Money Institution". It is also a holder of the New York BitLicense. Backed by Ribbit Capital, Digital Currency Group, Pantera Capital and others, the startup has raised $40 million to date.

Xapo Institutions was built specifically to meet the needs of businesses and financial institutions. Xapo said that its institutional business offers the same advanced security of its secure bitcoin storage platform but with the flexibility needed to better manage corporate accounts.

“Xapo was founded with the mission of making Bitcoin more secure and accessible. Coinbase will extend Xapo’s legacy and bring it yet another step closer to achieving its mission,” Coinbase said.

“It’s with huge pride that we welcome Xapo’s Institutional customers to Coinbase. Their legacy, knowledge and experience will help to make our mission of creating an open financial system for the world a reality.”

Coinbase, which received BitLicense back in January 2017, officially launched its custodian service for institutional investors in mid-2018. In just over one year since launch, the custodian service has grown to over $7 billion in Assets Under Custody (AUC).

Earlier this month, Grayscale Investments selected Coinbase Custody to be the new custodian for its digital asset holdings. Coinbase Custody will serve as the custodian for Grayscale’s single-asset investment products including digital currencies and publicly listed funds such as Grayscale Bitcoin Trust, Grayscale Ethereum Trust, and Grayscale Ethereum Classic Trust.

Xapo’s Clients Approach BitGo

In an online post dated August 14, cryptocurrency custodian BitGo said that Xapo clients started to reach out to the company as they “are concerned about the safety of their digital assets” due to the acquisition of the latter’s institutional business.

“That’s why we’re announcing that through the end of September, qualifying clients can custody their assets with BitGo Trust, the first qualified custodian purpose-built for digital assets with no custody fees for the next year,” BitGo said.

According to The Block, Fidelity Digital Assets and BitGo were both eyeing to acquire Xapo’s institutional business, which finally went to Coinbase Custody.

[Update: The third paragraph has been edited to mention that Coinbase paid $55 to acquire Xapo Institutions, as reported by Fortune.]

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