Coinbase Acquires Xapo’s Bitcoin Custodial Arm, CEO Reveals Ambitious Future Plans

US-based Crypto Exchange Coinbase has announced the acquisition of Xapo’s institutional business. Xapo is a Hong Kong-based cryptocurrency firm that provides wallets, cold storage of Bitcoins and also Bitcoin debit cards. Reportedly, the deal was worth $55 million.

Coinbase.com is one of the most trusted crypto exchanges in the US and Europe. Reportedly, Coinbase outbid Fidelity in the race for Xapo. The report also cited that while some other firms placed higher bids, Coinbase provides the level of “security or regulatory credentials to be acceptable to Xapo’s clients.”

Coinbase Pro and Coinbase Custody service institutional clients (high-volume investors) only. They claim best-in-class security and insurance for their custody platforms.

By acquiring Xapo’s custodial arm, Coinbase now became the largest crypto custodian in the world. It has a total Asset Under Custody (AUC) worth $7 billion and serves over 150 clients in 14 nations.

coinbase custody
Coinbase Custody AUC

Xapo, under CEO Wences Casares, has primarily concentrated its efforts around Bitcoin. Reportedly, it will focus on the retail adoption of Bitcoin.

Future Plans of Coinbase and it’s Custodial Arm

Moreover, Coinbase is planning to expand its custody business to other crypto assets and provide banking services as well. It is planning to include ‘staking’ which align with the recent additions to Coinbase of Tezos and Algorand. The CEO of Coinbase Custody Sam McIngvale told the media,

“Moving forward, the next phase of crypto custody is a much broader suite of services serving a much broader set of crypto assets,”

Sam also hinted at the beginning of a revenue stream from the custody from lending and borrowing. This move will necessarily have Coinbase provide banking and other traditional Financial Service. He said,

“Fundamentally, we have to help our investors earn a return on their assets. You can imagine lending out Bitcoin and earning interest on that,”

Coinbase CEO Brian Armstrong has also reiterated in the past about the addition of more crypto within the Coinbase ecosystem. On Coinbase custody he noted,

”Custody is a critical step toward the institutionalization of crypto economy. 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,”

At the beginning of this year, Coinbase also announced an expansion to Japan. Recently, Nao Kitazawa, Head of Coinbase at Japan told the media in the press release,

What really excites me about Coinbase’s opportunity in Japan is to bring to market a product that redefines the way people think about crypto,

Japan’s regulatory environment is different than the US and Europe. What Coinbase has in store for crypto enthusiasts in Japan, might lead to increased adoption.

What additional services could Coinbase offer in Japan? Please share your views with us.

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