Crypto Industry Sources Say Xapo Wallet Custody Provider May Be Acquired by Coinbase
- Anonymous sources from The Block say that Xapo is being acquired by Coinbase.
- To make this purchase, Coinbase battled against Fidelity Digital Assets as their competitor in the deal, which is worth $50 million.
Most of the world knows Coinbase as the US-based crypto exchange that falls in line with local regulations. However, the company is now gaining attention for a potential acquisition. According to sources cited by The Block, Coinbase may soon be acquiring Xapo, the custody provider, in a deal for $50 million to further advance their own custody business.
CEO of Xapo, Wences Cesares, has consistently been an advocate for Bitcoin since its early days. Even though the sources indicate that the deal isn’t closed, they still requested anonymity from The Block to protect themselves.
These sources state that the last few weeks have been with talks between Xapo, Coinbase, and Fidelity Digital Assets, as the two latter firms battle back and forth for the acquisition. Coinbase has come out victorious, which means that they would pay up $50 million for Xapo in cash, if the terms of the agreement do not change. Since Xapo was created in 2012, the platform has raised $40 million.
In order to bridge the gap between crypto and traditional finance, Fidelity Investments launched Fidelity Digital Assets, bringing in Tom Jessop as their head of corporate business development in the process. Jessop has experience with both traditional finance and blockchain startups, but Coinbase still managed to “beat Fidelity to the sale,” suggesting that Coinbase is trying to create a more diverse array of revenue to avoid the dangers of crypto trading.
The main product from Xapo is the cold storage vault custody that supports Bitcoin. The Block reports that Xapo holds a rumored $5.5 million in assets under custody (AUC), including Bitcoin, which means that the company could have 700,000 BTC in custody, based on the current price.
For Grayscale Bitcoin Trust, Xapo already custodies 226,000 BTC. If those numbers are accurate, the billions of AUC in holdings would be a major increase for Coinbase. However, Xapo does not actually charge customers for their Bitcoin storage, instead allowing OTC trading to bring in revenue.
Coinbase has scored a lot of good deals lately, along with this alleged acquisition of Xapo.
A total of 14 companies have already been acquired by Coinbase, including Earn and Neutrino. However, the company earned a lot of criticism for their acquisition of Neutrino, considering that the leadership of the company had many of the same employees as the highly controversial Hacking Team, which was allegedly involved in the abuse of human rights.