$10 Billion: Bitcoin Storage Service Xapo Reportedly Holds 7% of BTC's Supply in Cold Storage Vaults

Francisco Memoria
  • Bitcoin wallet and cold storage service provider Xapo reportedly holds 7% of the cryptocurrency's supply in its vaults on behalf of wealthy clients.
  • Per reports, this amount equals roughly $10 billion. It's so security-focused it even has a pulse scanner in its vaults, to stop criminals from accessing them using amputated hands.

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.”

Ryan Radloff

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.”

Sean Clark

China No Longer Wants to Ban Crypto Mining Industry

Back in April 2019, China's National Development and Reform Commission (NDRC) was considering restricting or eliminating the crypto mining industry. However, the latest guidance from NDRC no longer mentions crypto mining.

On April 9, Reuters reported that the NDRC had announced on April 8 that it was "seeking public opinions on a revised list of industries it wants to encourage, restrict or eliminate"; this list, which is known as "Guiding Catalogue for the Adjustment of Industrial Structure", has been issued since 2005.

The Guiding Catalogue is "a document supplementary" to the "Interim Regulation on Promoting the Adjustment of Industrial Structure". When it was first issued, it covered "more than 20 industries that include agriculture, water conservancy, coal, power, transportation, information industry, iron and steel, nonferrous metals, petrochemical industry, building materials, machinery, light and textile industries, service industry, environmental and ecological protection, conservation and comprehensive use of resources, and etc," and in total, there were "539 articles in the encouraged category, 190 in the restricted category and 399 in the to-be-eliminated category."

The Reuters report said that the draft version of the Guiding Catalogue had added cryptocurrency mining to the "over 450 activities the NDRC said should be phased out as they did not adhere to relevant laws and regulations, were unsafe, wasted resources or polluted the environment." Apparently, this document "did not stipulate a target date or plan for how to eliminate bitcoin mining, meaning that such activities should be phased out immediately." Until May 7, it was possible for the public to submit their comments on the proposed changes to the list.

The report also quoted the state-owned Securities Times as stating that this draft list “distinctly reflects the attitude of the country’s industrial policy” toward the crypto industry.

Although the People’s Bank of China (PBoC) banned initial coin offerings (ICOs) in September 2017, until now, crypto mining has been legal, though discouraged due to the huge amount of energy it uses. For example, on 4 January 2018, South China Morning Post (SCMP) reported that, according to its unnamed sources, China aimed to "drive cryptocurrency miners out of business by limiting power consumption" because "Chinese officials are concerned that bitcoin miners are taking advantage of low power prices in some areas and affecting normal electricity use in some cases." More interesting, this article also mentioned that the curbs " will also involve other regulators" such as the NDRC. 

However, it appears as though China is no longer interested in the idea of banning the crypto mining industry since the final version of the "Guiding Catalogue for the Adjustment of Industrial Structure" (last updated in 2011), which will go into effect on 1 January 2020, no longer says that crypto mining should be phased out. 

Featured Image Credit: Photo via Pixabay.com