Payward Acquires Magic Labs’ Wallet Technology
Payward, the parent company of Kraken, announced on July 27 that it has signed a binding agreement to purchase the wallet-as-a-service segment of Magic Labs. This strategic move aims to enhance its service offerings. The specific financial details of the deal have not been made public, but both firms anticipate that the deal will complete in a matter of weeks, pending standard closing conditions.
Focus on Non-Custodial Wallet Technology
This acquisition focuses on the embedded, non-custodial wallet technology developed by Magic Labs, which has since rebranded to Newton Labs. While the acquisition is in motion, Newton Labs will continue to operate independently, shifting its focus towards its Newton Protocol—a system designed for managing policy and authorization in blockchain transactions.
Payward intends to incorporate Magic’s advanced wallet technology into its platform, Payward Services, which is already a comprehensive infrastructure solution catering to banks, fintech startups, and cryptocurrency exchanges. This integration will enable partners to seamlessly introduce self-custody wallet solutions into their offerings without the need to juggle multiple infrastructure providers.
Magic Labs’ Achievements and Transition Plans
The wallets provided by Magic Labs are classified as non-custodial, giving users direct control over their digital assets rather than relying on Payward for their custody. It’s important to note, however, that the experience and blockchain networks supported may differ across businesses utilizing this infrastructure.
Since its inception in 2018, Magic Labs has successfully powered over 60 million wallets, facilitating more than $10 billion in stablecoin transactions, and supporting over 200,000 developers in the cryptocurrency space. Following the acquisition, Sean Li, CEO of Newton Labs, stated that existing wallet users can expect Payward to take over services starting August 1, ensuring a smooth transition without requiring any action from current customers. Nonetheless, the finalization of the acquisition still hinges on the completion of the stated conditions.
Funding and Future Developments
Previously, Magic Labs attracted over $80 million in funding, with a significant $52 million investment round in May 2023 led by PayPal Ventures, alongside contributions from firms like Cherubic and Synchrony.
Looking ahead, Newton Labs is set to concentrate its efforts on evolving the Newton Protocol, which entered its mainnet beta phase on June 23. This innovation involves verifying transaction compliance with specific security, identity, compliance, and risk regulations prior to on-chain settlement, culminating in a cryptographic record of decisions made on policy.
Their initial offering, VaultKit, is tailored for decentralized finance vaults, enabling operators to enforce policy checks during management actions. Currently, the system supports blockchain networks such as Ethereum and Base, working with risk and security partners including RedStone and Chainalysis.
Broader Strategy and Market Response
This acquisition of Magic Labs is part of a broader strategy by Payward to diversify its operations beyond the core Kraken exchange. Recent moves include the acquisition of Bitnomial, a CFTC-regulated derivatives firm, in May, along with the purchase of Reap, a Hong Kong-based stablecoin payment firm in July, initially valued at $600 million, which expanded its payment capabilities. Additionally, Payward previously acquired NinjaTrader for $1.5 billion and Backed Finance, further enhancing its offerings in trading, payments, and custody services.
The market’s response to the acquisition remains unrecorded since both Payward and Newton Labs are privately held, leaving the upcoming steps focused on the closure of the asset purchase and subsequent user migration and integration of wallet technology into Payward Services.
