Hong Kong-based Xapo, a company known for helping the super rich protect billions in Bitcoin using secret underground vaults, just earned a license to operate in New York to expand its business.
New York’s notoriously stingy Department of Financial Services (DFS) is handing Xapo a BitLicense, making it only the sixth company to earn the coveted license in three years. The license grants a company the ability to conduct Bitcoin and cryptocurrency related activities.
According to the announcement from the DFS, Xapo will be able to offer New Yorkers a “digital wallet and a vault service, which is intended as a safe and insured method to store Bitcoins.”
Xapo says it has created the world’s most secure Bitcoin wallet and debit card, and currently safeguards an estimated $10 billion in Bitcoin.
What Xapo does is store the private, cryptographic keys that allow customers to unlock and access their particular Bitcoin. These private keys are stored in various vaults across five continents in “cold storage”, a method that keeps the Bitcoin offline, disconnected from the internet, on Xapo’s private computers.
For customers with millions in Bitcoin, Xapo’s service guarantees that their private keys remain safe against digital hacking and ensures they won’t get lost. Without private keys, customers can forever lose access to Bitcoin and other cryptocurrencies. For wealthy families, entrusting commercial companies with private keys also gives a Bitcoin investor a reliable way to pass on their crypto fortune after death.
The five other companies that have obtained a BitLicense are Circle Internet Financial, Coinbase, bitFlyer USA, Genesis Global Trading and XRP II. Obtaining a BitLicense is not only burdensome and costly, it’s slow. The requirement includes an exhaustive look at a company’s financials, policies and security practices.
A number of crypto companies that have launched in New York ended up re-locating to start their businesses out-of-state in order to avoid the rigorous selection process.
A limited number of exchanges, such as Gemini and Paxos, are allowed to operate in New York by the approval of the DFS alone – without a BitLicense.
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