Coinbase Custody, the custody arm of iconic crypto exchange Coinbase, has officially acquired the institutional business of custody provider Xapo, and with $7 billion under custody, the firm says it has become the largest crypto custodian in the world, according to a press release.
1/ Today, Coinbase Custody has completed an acquisition of Xapo’s institutional businesses. With over $7 billion in assets, we’re now the most popular place for institutions to store cryptocurrency. Read more here https://t.co/bL3oj1Pyfl
— Coinbase Custody (@CoinbaseCustody) August 16, 2019
The news confirms weeks of speculation over the exchange’s intentions with Xapo, with Coinbase Custody having in early August swallowed Xapo’s largest client, crypto-asset manager Grayscale Investments who at the time reported having $2.7 billion under management.
A source familiar with the deal said that Coinbase’s $55 million offer for the acquisition was enough to outbid fellow custody giant Fidelity Digital Assets, Fortune reported.
Coinbase Custody, young for an incumbent
Xapo’s debut in 2014 with a Swiss bunker cold storage vault for Bitcoin—backed, nonetheless, by Silicon Valley heavyweights including Index Ventures and Greylock Partners—gave the firm heavy clout with institutions at a time cryptocurrency was seen as anything but institutional. Prior to losing Grayscale to Coinbase Custody, the firm reportedly held $5.5 billion worth of cryptocurrency.
Coinbase Custody was launched in July 2018 as a standalone offshoot of Coinbase, pitched by the San Francisco-based exchange as a regulated custody offering for institutions using Coinbase’s “battle-tested cold storage for crypto assets”.
Prior to the acquisition in July this year, Coinbase Custody claimed to hold more than $2.5 billion worth of crypto from roughly 100 institutional clients including heavyweight crypto venture funds a16z crypto and Polychain Capital.