Coinbase Ready to Acquire of Xapo’s Bitcoin Custody Service Business
Coinbase is reportedly in talks with crypto wallet provider Xapo for the purposes of acquiring the firm’s bitcoin custody service.
Sources close to the development have reportedly shared details of the negotiations with The Block reported on Thursday, May 16.
According to the sources, Coinbase has staged its takeover bid for the Xapo custody service for the last several weeks. And apparently, the U.S exchange hasn’t been alone in trying to acquire the service. As noted in The Block, Fidelity Digital Assets, the digital currency arm of global financial services firm Fidelity Investments has also been in the race.
For Coinbase, acquiring the Xapo bitcoin custody service presents a great opportunity to add to its own custody service offering.
Once the deal is sealed, Coinbase is expected to pay Xapo an estimated $50 million, all in cash. Further to that, the deal will see it get contingent earn-out.
Hong Kong-based Xapo began its operations in 2014 and has been one of the most popular providers of a bitcoin (BTC) wallet. The company also offers its users access to cold storage vault services and a BTC-based debit card solution.
Xapo is reported to hold assets under custody amounting to over $5.5 billion, with a number of investment firms and other top industry players backing it over the years. Among those to invest in the firm are VC firms Greylock Partners and Index Ventures.
The others are Digital Currency Group, Blockchain Capital and Winklevoss Capital.
Coinbase Custody launched its service in July 2018 and targeted institutional investors who the platform said would participate via staking services as well as through distributed governance.
Coinbase CEO Brian Armstrong revealed during a discussion at Consensus that the company’s custody service had attracted $1 billion in the 12 months it has been in operation.
The custody solution boasts security and compliance, with support from Electronic Transaction Clearing (ETC), a FINRA-registered broker-dealer.
According to Armstrong, Coinbase Custody had also managed to sign up 70 institutions.
The U.S. exchange has also sought to expand its services to more locations, announcing earlier this week that it would offer access to the USD Coin (USDC) stablecoin in 85 countries.
At the same time, Coinbase’s global expansion efforts have seen it launch its services in an additional 50 jurisdictions including key markets in Brazil and South Africa.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.