At Xapo, we believe that Bitcoin’s permissionlessness, censor-resistance and unseizability are its most important features, without which Bitcoin would not be of much value. The only way to ensure that Bitcoin can remain permissionless, censor-resistant and unseizable is by making sure that anyone can get some bitcoin, store it, and send it without any intermediaries or regulators; if people lose the ability to use Bitcoin freely, it will have lost most of its value.
Yet we designed Xapo as a regulated Bitcoin intermediary. Why did we do that? We did that because Xapo’s mission is to bring Bitcoin to as many people – and to make bitcoin as easy to use for those people – as possible. In order to fulfill that mission and make our customers’ lives simpler, we handle security for our users, the most important part of which is managing the private keys associated with their bitcoin for them. Since we manage those private keys, Xapo is a custodian of its customer’s funds, with a legal obligation to keep those funds safe. Further, the law also requires that we know who our customers are, which is why we cannot provide our service to anonymous persons. If you want to keep control of your private keys or don’t want to provide any information about yourself, Xapo is not the right product for you. Fortunately, there are many great user-controlled wallets out there as an alternative to Xapo, including but not limited to Blockchain.info, Electrum, Bread Wallet, Mycelium, Ledger Wallet and Trezor.
We believe that if every Bitcoin customer had to be responsible for keeping their bitcoins safe, there would be millions of people who would not be using Bitcoin and billions of dollars that would not have been invested into Bitcoin. So we decided to provide a service that makes handling bitcoins secure and convenient. While this means that Xapo must act as a regulated intermediary, it also means that we can provide a number of things for our customers:
- A higher level of security: Xapo maintains over 97% of all its customer’s funds in deep cold storage, providing a higher level of security than most customers could provide for themselves.
- Privacy from the public Blockchain: Xapo makes its customer’s balances and transactions private so they are not public on the Blockchain.
- A convenient and easy to use wallet: Opening an account is as easy as opening an email account, and sending and receiving bitcoin is as easy as sending and receiving an email. If your phone, computer, or password is lost, your bitcoins are always safe.
- Hold any currency, not just Bitcoin: At Xapo, you can very easily convert your bitcoins into dollars, euros, or any other currency in the world, in real time and with no hassle.*
- Buy bitcoins more easily: You can also convert your currency into bitcoins just as easily as the other way around.*
- Use your bitcoins everywhere: Xapo lets you spend your bitcoins at any merchant that accepts credit cards by using the Xapo debit card. You can also use the Xapo debit card to take cash out of the ATM.*
All of these services require that Xapo be a regulated intermediary, and those regulations require that we know who you are and that we understand the purpose for which you are using our service.
We believe that if all Bitcoin companies were regulated intermediaries like Xapo, Bitcoin would not be very valuable because it would lose its permissionlessness, censor-resistance and unseizability. It would end up having the same problems that normal currencies and payment systems have.
But if all Bitcoin regulated intermediaries (like Xapo, Coinbase, BitStamp, Bitfinex, BTCC, and many others) did not exist, only a small fraction of the people using Bitcoin would be using it, and only a fraction of the capital that has gone into Bitcoin would have gone into Bitcoin. In that world, we believe that the price of a bitcoin would be less that $30 per bitcoin, and Bitcoin would forever remain a small corner of the digital economy the way Torrent has remained a small corner of digital entertainment.
For the Bitcoin ecosystem to succeed and become mainstream, we need to have both unregulated user-controlled network nodes and regulated network nodes. The job of the regulated network nodes is to make it easier for as many people and as much capital as possible to flow into Bitcoin, and the job of non-regulated user-controlled network nodes is to make sure that Bitcoin always maintains its permissionlessness, censor-resistance and unseizability. If we all do our jobs well, anyone in the world should be able to get bitcoins and to freely keep, send, or use them without relying on intermediaries.
*Currently available for non-US customers only.