Acquisition of Xapo’s Institutional Business
A lot of consumers who were enthusiastic about crypto in 2016/17 believe that the market now is still in a bearish slump. Well, that’s definitely not the case on the institutional side of the market. While the consumer sentiment recently has been somewhat subdued, large institutional investors, or, as they are called, smart money, seem to be quietly filling up their coffers with crypto assets.
Coinbase, the world’s leading crypto on-ramp and exchange behemoth, announced yesterday that it has acquired Xapo’s institutional business. This move propelled Coinbase’s already booming custody business into the top spot in the industry. Now Coinbase Custody controls over $7B in AUC (assets under custody) from 120 clients across 14 different countries.
Xapo is a New York DFS-regulated company offering a multi-currency digital wallet and card that operates in the global market. It was founded by Wences Casares, a well-known season entrepreneur. Xapo is backed by a number of prominent VC funds, including Fortress, Benchmark, Greylock Partners and Pantera.
Institutional Crypto Adoption Solved
In his tweet announcing the acquisition CEO of Coinbase, Brian Armstrong stated the the adoption of crypto by the institutional investors is now certain. Proof? His custodian team sees $200-400M in weekly institutional crypto deposits.
Lucrative Business for Coinbase
In the past we have reported that Coinbase custody business comes at a price, but not an unprecedented one for the institutional investors:
– Setup Fee: $100,000
– AUC Fee: 10 bps/month
– Minimum Balance: $10,000,000
So a quick back of the envelope calculation tells us that Coinbase will generate $84M annual revenue from the AUC fees alone. That is no pocket change.
Positive News for Tokens Offers by the Custodian
This spike in the custodial assets under management will surely benefit tokens offered by Coinbase. Coinbase Custody supports 90+ percent of crypto by market capitalization and more tokens are being added periodically. You can find a full list of the custody supported tokens on their website here.
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