Bitcoin storage service provider Xapo, a cryptocurrency startup that’s been on the market since 2014, reportedly holds about 7 percent of Bitcoin’s total supply in its vaults. The amount is being held in cold storage on behalf of clients, and equals about $10 billion.
According to Bloomberg, Xapo’s chief executive officer Wences Casares has spent the past several years pitching bitcoin to Silicon Valley millionaires and billionaires. Xapo itself has built a network of underground vaults, which span across five continents, including one in a decommissioned military bunker, to keep the bought bitcoins in cold storage.
Citing two unnamed clients, Bloomberg reports that the wallet and cold storage provider has an estimated $10 billion worth of bitcoin in its vaults. If the figure is accurate, it means Xapo – a four-year-old startup – has more “deposits” than 98 percent of the over 5,600 banks in the United States.
The company is reportedly overseen by the self-regulating Financial Services Standards Association, which ensures its members comply with anti-money laundering (AML) rules. Cryptocurrency funds praise its storage concept, despite the arguably centralized setup it has.
CoinShares’ CEO Ryan Radloff, the CEO of cryptocurrency investment firm CoinShares, which reportedly has over $500 million worth of bitcoin stored at Xapo, was quoted as saying:
“Everyone who isn’t keeping keys themselves is keeping them with Xapo. You couldn’t pay me to keep it with a bank.”
Xapo’s backers now include LinkedIn co-founder Reid Hoffman and billionaire investor Michael Novogratz, who recently defended bitcoin in the scaling debate, noting its market cap “dwarfs bitcoin cash.” Their bet, Bloomberg notes, is that bitcoin is here to stay.
The cryptocurrency storage service’s business model is a successful one. Bitcoin’s late 2017 surge saw various criminals attempt to enter the market, which led bitcoin tycoons to resort to drastic measures, including fortifying their homes, hiding their identities, and studying self-defense.
Per Bloomberg’s report, it takes Xapo two days to retrieve bitcoin from its vaults. Before making transactions, it verifies the client’s identity and authenticates the request before conducting it.
First Block Capital, the first fully registered cryptocurrency firm in Canada, picked Xapo as its custodian after months of due diligence, which included a tour to the startup’s Swiss vault. Sean Clark, the firm’s founder, noted that the vault’s fingerprint scanners were even equipped with a pulse reader that would prevent amputated hands from being used. He was quoted as saying:
“Every part of their DNA is geared to security. Whenever we make big transfers they FaceTime us, we have duress words, if it’s big enough they’ll fly out to see us.”