U.S. cryptocurrency giant Coinbase and global asset manager Fidelity have been engaged in a fierce battle to acquire crypto custody firm Xapo. Coinbase has prevailed and it’s currently in advanced talks to acquire the startup, according to a report by The Block, which cited sources with privileged information on the deal.
Coinbase will acquire Xapo for $50 million, the sources revealed. The deal hasn’t been finalized yet and the negotiations are being kept secret. If the deal goes through, Coinbase will not only pay the $50 million in cash but also pay a ‘contingent earn-out for remaining with the company.’
Xapo, founded and led by Argentinian crypto die-hard Wences Cesares, has quietly amassed a huge list of clients since its founding in 2012. The firm is reported to hold over $5.5 billion of assets under custody in its cold storage vault custody of Bitcoin Core (BTC). With BTC currently trading at $7900, this amounts to over 690,000 BTC. The report further points out that Xapo custodies 226,000 BTC for the Grayscale Bitcoin Trust, a product offered by the wholly owned subsidiary of the Digital Currency Group.
Xapo has raised $40 million since its founding. The startup has been backed by some leading VC firms including Index Ventures and Greylock Partners. It has also received funding from crypto-focused investment firms including the Digital Currency Group, Blockchain Capital and Winklevoss Capital.
The startup has yet to make public its revenues. However, unlike some other crypto custodians, it doesn’t charge its customers for storing their BTC. Rather, it generates revenue by enabling over-the-counter trading using the BTC under its custody.
Coinbase has been the undisputed leader in the crypto custody business for quite some time,