The wallet infrastructure layer is being reshaped as large exchanges buy up the technology that could define user onboarding for the next cycle. Kraken parent company Payward has completed an asset purchase of Magic Labs’ embedded wallet business, moving the team and product into Payward Services while Magic Labs itself rebrands to Newton Labs and shifts focus entirely to the Newton Protocol, according to the original report. Financial terms of the deal were not disclosed.
Embedded wallet solutions allow users to interact with blockchain applications without managing separate seed phrases or external wallet software, and they have become a key battleground for exchanges looking to reduce friction. Magic Labs had raised more than $80 million in venture funding, including a $52 million round led by PayPal Ventures in 2023, to build precisely that kind of infrastructure. The acquisition hands Payward a ready-made team and technology stack that can accelerate Kraken’s own non-custodial product roadmap at a time when Web3 applications are demanding more seamless user experiences.
Kraken’s Steady Push Into Wallet Technology
Kraken has been gradually expanding its wallet capabilities beyond its core custodial exchange. In recent years the company launched Kraken Wallet, a self-custody mobile application that supports multiple chains. The purchase of Magic Labs’ embedded wallet business suggests Payward is not content to rely solely on in-house development. Instead, it appears to be buying expertise and intellectual property that can help it compete with other major platforms that have already built comprehensive wallet ecosystems.
The embedded wallet model is particularly attractive because it lets apps and services create wallet-like functionality without forcing users to exit the platform. That matters for institutional clients, gaming platforms, and any developer building consumer-facing crypto products. For Kraken, owning that layer could tighten its integration with decentralized finance protocols and NFT marketplaces, both of which demand smooth onboarding. The broader context is that exchanges are no longer just trading venues; they are becoming full-stack infrastructure providers.
Magic Labs Becomes Newton Labs
Magic Labs will now operate as Newton Labs and concentrate on the Newton Protocol, a project that has been largely separate from the wallet business. The move effectively splits the company in two directions: one part absorbed into a large exchange group, the other chasing a protocol-level play. The decision to sell the wallet unit rather than continue running it suggests the leadership saw a better risk-adjusted path in focusing on core protocol development, especially after raising substantial external capital.
What the Newton Protocol aims to achieve is not detailed in the disclosed material, but a protocol pivot often signals a belief that the underlying technology can generate more value as a standalone network or infrastructure layer rather than as a service business. The rebrand removes the old association and draws a line under the wallet chapter. For venture backers like PayPal Ventures, the move may represent a partial exit of one business line while keeping exposure to a potentially larger protocol opportunity.
Infrastructure Deals Keep Flowing
The transaction fits into a broader pattern of crypto firms absorbing smaller infrastructure plays. Exchanges, custodians, and fintech companies have been picking up wallet providers, staking services, and data analytics firms as the industry matures. High-profile consolidation moves like Bullish acquiring Equiniti for $4.2 billion show that the appetite for infrastructure deals is not limited to startups. Even when price tags stay hidden, the strategic logic often points to a desire to own more of the stack and reduce reliance on third-party services.
For Payward, adding an embedded wallet business can also act as a hedge against regulatory pressure on custodial models. If regulators require stricter separation of customer funds or push for non-custodial alternatives, having a mature embedded wallet offering could become a competitive advantage. It also creates a stronger lock-in effect with developers who build applications that rely on Kraken’s wallet infrastructure, mirroring strategies already visible in ecosystems with high developer activity.
What remains uncertain is the price Payward paid and the exact composition of the deal. Without that information, it is difficult to gauge how much value Magic Labs’ investors realized from the wallet line versus what they are retaining in the Newton Protocol. The separation also raises questions about whether the embedded wallet team will operate with autonomy inside Payward Services or be deeply merged into Kraken’s existing product units. How quickly the acquired technology gets integrated into Kraken’s retail and institutional suite will be an important signal for the market. For now, the acquisition is another data point suggesting that the race to control the wallet layer is only intensifying.
