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?
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.
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.