Coinbase Reportedly in Advanced Talks to Acquire Xapo’s Crypto Custody Business

Francisco Memoria

U.S.-based cryptocurrency exchange Coinbase is reportedly in advanced-stage talks to buy cryptocurrency custody provider Xapo, for about $50 million. The deal’s goal would be to boost its custody business and diversify revenue sources

According to a report by crypto news outlet TheBlock, citing sources familiar with the matter, both Coinbase and Fidelity Digital Assets were ‘locked in a neck-and-neck race’ for the crypto custody firm, and Coinbase ended up coming out on top.

Fidelity Digital Assets is Fidelity Investments’ bet to bridge crypto and traditional finance. The firm is reportedly going to start buying and selling the flagship cryptocurrency bitcoin within “a few weeks.” Fidelity Investments is notably one of the largest financial firms in the world, with $7.2 trillion worth of assets under management (AUM).

Coinbase beating Fidelity to the Xapo sale, per the news outlet, shows the cryptocurrency firm is looking to “aggressively diversify its revenue to be less prone to the cyclical nature of cryptocurrency trading.”

Xapo itself has raised a total of $40 million since 2012, and its main product is cold storage vault custody of BTC. According to the report it has $5.5 billion of assets under custody (AUC), which means it has over 700,000 BTC under custody. Bloomberg has in the past reported the company held $10 billion, 7% of BTC’s supply, in its vaults.

The crypto custody firm’s business model revolves around generating revenue enabling over-the-counter (OTC) trades for customers using the bitcoin it has under custody, as it doesn’t charge users to store their funds in its cold storage.

The company has seen firms like the Digital Currency Group, Winklevoss Capital, and Blockchain Capital invest in it, as well as top Silicon Valley VC firms like Greylock Partners and Index Ventures.

If the deal goes through, Xapo will join a number of companies Coinbase has acquired over the last few months. These include Earn and Toshi, which turned to Coinbase Earn and Coinbase Wallet. Earlier this year the firm acquired analytics company Neutrino in a controversial move, as its team was associated with Hacking Team, a group that’s said to have developed software that aided human rights abuses.

P2P Token Trading Platform AirSwap Discloses ‘Critical Vulnerability’

  • Peer-to-peer trading platform AirSwap claims to have identified a "critical vulnerability" in one of its smart contracts. 
  • Ten addresses have been identified so far as being at risk of exploitation. 

Peer-to-peer token trading network AirSwap has disclosed a “critical vulnerability” in a newly released smart contract. 

AirSwap's Critical Vulnerability

According to the disclosure, which was published on Sept. 13, AirSwap’s internal security team identified a potential exploit in a newly released mainnet smart contract. The vulnerability would allow an attacker to “perform a swap without requiring a signature from a counterparty.” 

AirSwap claims that the offending code was only present for twenty-four hours on the network before being identified and removed. However, users of AirSwap Instant between Sept. 11 and Sept. 12 may have been affected by the vulnerability, with the report claiming that 10 accounts have been recognized so far as being at risk. 

AirSwap has published the addresses to the vulnerable accounts, telling all other users that no further action is required. The report also outlines the step-by-step actions taken by the exchange in the aftermath of discovering the vulnerability, including an apology to its client base, 

We would like to deeply apologize to our affected users for any inconvenience these vulnerabilities may have caused, and hope that the important lessons we continue to learn throughout these processes form the basis for a more open, secure, and efficient trading environment.

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