The budding blockchain behemoth Coinbase bought a company called Xapo’s “custody business,” which stores Bitcoin securely in a vault under a mountain in Switzerland, for $55m.
After the deal closes, Coinbase will have more than $7B in crypto assets under management — potentially storing as many as 5% of all Bitcoins in circulation.
But wait a second… why, exactly, does a crypto company need a physical vault built underneath a Swiss mountain?
Digital currencies still need physical custodians
Unlike wire transfers at banks — which leave digital trails and can therefore be recovered when stolen — blockchain-based transactions leave no trace… and are therefore nearly impossible to trace.
So the safest place to store crypto keys — strings of letters and numbers used to access cryptocurrencies — is not online (where they can be hacked without a trace) but in offline, IRL vaults.
Now “custodians” like Xapo, which offer physical vaults that consumers want to store their crypto-cash safely, are becoming common.
And these Bitcoin vaults have something to prove
Crypto companies are focused on attracting institutional investors who’ve been reluctant to trade cold, hard cash for digital dollar-replacements.
One way to win over wary wealth-managers is to make these custody services seem suuuuper secure — so, the more they look like evil supervillain lairs from James Bond movies, the better.
Xapo certainly fits the bill: The ultra-secure vault, which is built in an old Swiss military bunker, is hidden in an undisclosed location and protected from nuclear explosions, electromagnetic pulse (EMP) attacks.