By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) - Swiss digital currency exchange ShapeShift AG said on Wednesday it has acquired Seattle-based KeepKey Holder LLC, a maker of devices known as digital wallets, in an all-bitcoin deal.
Financial terms were undisclosed. KeepKey's wallet, which sells for about $100, stores digital currencies.
As bitcoin and other crypto-currencies have gained in popularity, a group of companies such as KeepKey has emerged to serve a growing need to protect these assets from online theft.
ShapeShift's chief executive officer, Erik Voorhees, said in an interview the acquisition allows the company to provide its users a "cohesive experience" in which they can exchange digital assets and store them at the same time.
KeepKey integrated ShapeShift's application more than a year ago.
"Amid heightened interest in the concept of digital currencies, a simple, user-friendly cold storage wallet" with the ability to facilitate trading or exchanging for another crypto-currency is key to wider adoption, said Voorhees.
"Cold storage" refers to keeping digital assets completely offline, disconnected from the internet and thus minimizing the incidence of hackings. Bitcoin, litecoin, and ether are digital assets and when they are stored in online devices, such as a laptop or smartphone, there is increased risk of theft.
By using KeepKey together with ShapeShift exchange, chances of a cyber attack are greatly diminished, Voorhees said.
"With ShapeShift, users don't need to leave funds at an exchange," he said. "With KeepKey, users don't need to leave funds on any computer whatsoever. We see a future in which keys are kept on hardware, and noncustodial exchange occurs directly from the hardware."
This means users can hold their coins on the hardware device and exchange them on demand within the wallet, without even visiting a website, he said.
ShapeShift's volume has jumped about 1,500 percent over the last year, Voorhees said. Last month, he estimated the company's volume at about $280 million.
"This is in line with the sharp growth in the digital currency space," he said.
Bitcoin on Tuesday hit a record $4,400 <BTC=BTSP> on the BitStamp platform. It last traded at $4,314.
Total market capitalization of the digital currency space was $141 billion on Wednesday.
ShapeShift, based in Zug, Switzerland, was launched in 2014. It raised $10.6 million early this year in a Series A funding led by Berlin-based Earlybird Venture Capital, Voorhees said.
(Editing by Matthew Lewis)