Xapo founder Wences Casares arrives to attend the morning session of the Allen & Company Media & Technology Conference on July 12, 2018 in Sun Valley, Idaho. David Paul Morris—Bloomberg via Getty Images
Let's make this a Friday flashback to the world of cryptocurrencies in 2013. It's hard to believe how different things were back then. Ethereum didn't exist and regulators didn't know or care what cryptocurrencies were. And Bitcoin became the first virtual currency. Starting at $13, he's a big ride that will go up to $1,000 by the end of the year. At the time, the industry was defined by extraordinary people who believed in Bitcoin with a passion that seemed understandable and, in some cases, crazy to outsiders.
One of my favorite people from this era was Wences Casares, founder of Xapo, one of the first cryptocurrency custodians. Casares, a charismatic Argentine with movie star looks, is today taken for granted as one of the original members of the Bitcoin OG gang that built the Bitcoin industry (he almost certainly knew Satoshi). He is considered to be a member of the virtual currency royal family who worked with But as a technology reporter, I thought his startup premise was ridiculous. The company promised to store Bitcoin in a bunker buried under a mountain in Switzerland.
This over-security was partly a marketing strategy, but many early cryptocurrencies feared money-printing governments and reckless banks just as you and I fear snakes and wildfires. It also reflected the founders' sense of paranoia. In Mr. Casares' case, his paranoia was understandable given that his home country of Argentina experienced a series of full-scale currency collapses, with evil rulers causing economic ruin.
Long story short, Xapo’s crazy storage scheme worked, and the startup soon expanded into other crypto services. In 2019, Mr. Casares sold the custodial portion of Xapo's business to Coinbase (which does not use a Swiss banker) for $55 million and stepped back to assume an elder statesman role of sorts, while was operated by someone else as a kind of virtual currency bank. The bank is still in existence today, with 25,000 Bitcoins (worth about $1.3 billion!) remaining on its balance sheet. This reminds us that many of the early cryptocurrency founders were extremely wealthy.
Today, Xapo is a very different kind of company, but Mr. Casares remains chairman. I spoke to Joey Garcia, the company's top lawyer. He explained the current business model. Banks pay interest on both customers' cash and Bitcoin, but never lend or touch virtual currencies. It has a $150 annual service fee (Axios has a detailed overview of exactly how it works) and has a network of overseas licenses. The company did not release figures showing how many customers use it or how much revenue it generates, but said its largest customer base is in Argentina and Latin America.
Although Xapo has also moved away from its founding policy of letting customers oversee the custody process themselves, its current focus on fully backed reserves held in highly secure accounts certainly reflects It reflects the original spirit of Casares. For those of us living in the US, much of this content is academic, as it is very unlikely that regulators will approve that business model. But with Xapo, he is one of the few early founders (others include Jesse Powell of Kraken, Brian Armstrong of Coinbase, and Barry Silbert of DCG) who have built thriving businesses. It's always fun to look back on Casares.
jeff john roberts
jeff.roberts@fortune.com
@jeffjohnroberts
decentralized news
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meme-o-the-moment
Let the campaign season begin:
