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Crypto custodian BitGo says Xapo clients are ‘extremely’ concerned about Coinbase deal

Cryptocurrency custodian BitGo is eyeing the business that's heading to rival Coinbase Custody via an ongoing acquisition of Xapo's institutional business. 
In a blog post on Wednesday, BitGo said that Xapo's clients are “extremely concerned,” and that they don't see Coinbase Custody as a "comparable service," as the cryptocurrency exchange moves to acquire Xapo. In response to those concerns, BitGo said it is now offering “qualifying” clients 12-months of no-fee custody service. The offer is valid through the end of September, per the announcement.
Earlier this month, cryptocurrency assets manager Grayscale Investments moved $2.7 billion worth of cryptocurrencies from Xapo to Coinbase Custody. Market observers speculated that the move was part of Coinbase-Xapo deal, although a representative at the time would not confirm that was the case to The Block.
In any case, BitGo says that Xapo clients, who apparently reached out to the firm are "concerned about the safety of their digital assets."
As  The Block reported  in May, Coinbase was in late talks to acquire parts of Xapo's business. The cryptocurrency exchange was in a neck-to-neck race with Fidelity Digital Assets for the deal, according to a source. BitGo also considered the deal. 
We've reached out to a Coinbase representative during non-business hours and will update this story if the person offers comment.
Xapo reportedly holds around 7,00,000 bitcoins (worth $7.3 billion in today’s price) under its custody via a cold storage vault. Xapo also does not charge customers a fee for storing their bitcoin, rather it generates revenue by enabling over-the-counter (OTC) trades for customers using bitcoins under its custody.
BitGo, on the other hand, reportedly has $2 billion in assets under its custody and charges fees. But the firm’s CEO Mike Belshe told The Block recently that as the competition in the space increases, fees for custody won’t just fall, but actually crash to zero. “I do believe it’s driving towards a very low price, maybe zero,” Belshe said.
Ali Hassan, a former Goldman Sachs trader turned crypto hedge fund manager, however, told The Block at the time that fees will reduce, but it will “never be free.”

The cryptocurrency custody market has indeed been seeing increased competition. Earlier this year, financial services giant Fidelity ventured into the space. Much-awaited crypto exchange Bakkt is also set to launch with its own storage capabilities, having acquired Digital Asset Custody Company in April.

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