Major US cryptocurrency exchange firm Coinbase is allegedly negotiating the procurement of Xapo’s bitcoin (BTC) custody arm.
According to sources familiar with the issue, Coinbase has been trying to work out a deal with Xapo in a bid to expand its custody business. But the American company isn’t the only one interested in what the crypto wallet provider is offering. Fidelity Digital Assets, the digital currency division of financial giant Fidelity is said to be keen on snapping up Xapo’s BTC business as well.
If they can close a deal with Xapo, Coinbase will be paying the company a staggering $50 million in case, with a conditional earn-out for staying with the company.
Xapo’s $5.5 Billion Assets in Custody
Xapo is based in Hong Kong and was founded in 2014. It provides clients with a BTC wallet, a bitcoin-backed debit card, and a cold storage vault. The firm is supported by industry stalwarts like crypto investment companies Blockchain Capital, the Digital Currency Group and Winklevoss Capital. Venture capital companies like Index Ventures and Greylock Partners are stakeholders as well.
Xapo is said to have $5.5 billion assets in custody.
Brian Armstrong’s Interest in Xapo
It’s not surprising that Coinbase is making a play on Xapo now. Brian Armstrong, Coinbase’s CEO, claimed earlier in May that Coinbase Custody was able to acquire assets of around $1 billion and has them under management. The company was able to achieve this feat a year after it was launched. Armstrong also highlighted the 70 institutions that have signed up for their services during the same period.
Coinbase’s custody service was officially opened to investors in July 2018. The company stated at the time that it would allow its institutional clientele to join in the crypto ecosystem via distributed governance and proof of stake.