diff --git a/lightningd/Makefile b/lightningd/Makefile
index 1bbe7b086..986819c06 100644
--- a/lightningd/Makefile
+++ b/lightningd/Makefile
@@ -107,7 +107,7 @@ check-makefile: check-lightningd-makefile
 check-lightningd-makefile:
 	@for f in lightningd/*.h lightningd/*/*.h; do if ! echo $(LIGHTNINGD_HEADERS_NOGEN) $(LIGHTNINGD_HEADERS_GEN) "" | grep -q "$$f "; then echo $$f not mentioned in LIGHTNINGD_HEADERS_NOGEN or LIGHTNINGD_HEADERS_GEN >&2; exit 1; fi; done
 
-lightningd/lightningd: $(LIGHTNINGD_OBJS) $(LIGHTNINGD_OLD_OBJS) $(LIGHTNINGD_OLD_LIB_OBJS) $(LIGHTNINGD_LIB_OBJS) $(LIGHTNINGD_JSMN_OBJS) $(CORE_OBJS) $(CORE_TX_OBJS) $(BITCOIN_OBJS) $(WIRE_OBJS) $(CCAN_OBJS) $(LIGHTNINGD_HSM_CONTROL_OBJS) $(LIGHTNINGD_HANDSHAKE_CONTROL_OBJS) $(LIGHTNINGD_GOSSIP_CONTROL_OBJS) $(LIBBASE58_OBJS) libsecp256k1.a libsodium.a
+lightningd/lightningd: $(LIGHTNINGD_OBJS) $(LIGHTNINGD_OLD_OBJS) $(LIGHTNINGD_OLD_LIB_OBJS) $(LIGHTNINGD_LIB_OBJS) $(LIGHTNINGD_JSMN_OBJS) $(CORE_OBJS) $(CORE_TX_OBJS) $(BITCOIN_OBJS) $(WIRE_OBJS) $(CCAN_OBJS) $(LIGHTNINGD_HSM_CONTROL_OBJS) $(LIGHTNINGD_HANDSHAKE_CONTROL_OBJS) $(LIGHTNINGD_GOSSIP_CONTROL_OBJS) $(LIBBASE58_OBJS) libsecp256k1.a libsodium.a libwallycore.a
 
 clean: lightningd-clean
 
diff --git a/lightningd/hsm/Makefile b/lightningd/hsm/Makefile
index d0a8b4d78..e0584b581 100644
--- a/lightningd/hsm/Makefile
+++ b/lightningd/hsm/Makefile
@@ -37,9 +37,11 @@ $(LIGHTNINGD_HSM_OBJS) $(LIGHTNINGD_HSM_CLIENT_OBJS): $(LIGHTNINGD_HEADERS)
 
 $(LIGHTNINGD_HSM_CONTROL_OBJS) : $(LIGHTNINGD_HSM_CONTROL_HEADERS)
 
+$(LIGHTNINGD_HSM_OBJS): $(CORE_TX_HEADERS)
+
 lightningd/hsm-all: lightningd/lightningd_hsm $(LIGHTNINGD_HSM_CLIENT_OBJS)
 
-lightningd/lightningd_hsm: $(LIGHTNINGD_HSM_OBJS) $(CORE_OBJS) $(BITCOIN_OBJS) $(WIRE_OBJS) $(CCAN_OBJS) $(LIBBASE58_OBJS) libsecp256k1.a libsodium.a libwallycore.a
+lightningd/lightningd_hsm: $(LIGHTNINGD_HSM_OBJS) $(CORE_OBJS) $(CORE_TX_OBJS) $(BITCOIN_OBJS) $(WIRE_OBJS) $(CCAN_OBJS) $(LIBBASE58_OBJS) lightningd/utxo.o libsecp256k1.a libsodium.a libwallycore.a
 	$(CC) $(CFLAGS) -o $@ $^ $(LDLIBS)
 
 lightningd/hsm/gen_hsm_client_wire.h: $(WIRE_GEN) lightningd/hsm/hsm_client_wire_csv
diff --git a/lightningd/hsm/hsm.c b/lightningd/hsm/hsm.c
index 11fc8b594..67d803581 100644
--- a/lightningd/hsm/hsm.c
+++ b/lightningd/hsm/hsm.c
@@ -135,14 +135,25 @@ static u8 *handle_ecdh(struct client *c, const void *data)
 static u8 *init_response(struct conn_info *control)
 {
 	struct pubkey node_id;
+	u8 *serialized_extkey = tal_arr(control, u8, BIP32_SERIALIZED_LEN), *msg;
+
 	node_key(NULL, &node_id);
-	return towire_hsmctl_init_response(control, &node_id);
+	if (bip32_key_serialize(&secretstuff.bip32, BIP32_FLAG_KEY_PUBLIC,
+				serialized_extkey, tal_len(serialized_extkey))
+	    != WALLY_OK)
+		status_failed(WIRE_HSMSTATUS_KEY_FAILED,
+			      "Can't serialize bip32 public key");
+
+	msg = towire_hsmctl_init_response(control, &node_id, serialized_extkey);
+	tal_free(serialized_extkey);
+	return msg;
 }
 
 static void populate_secretstuff(void)
 {
 	u8 bip32_seed[BIP32_ENTROPY_LEN_256];
 	u32 salt = 0;
+	struct ext_key master_extkey, child_extkey;
 
 	/* Fill in the BIP32 tree for bitcoin addresses. */
 	do {
@@ -154,7 +165,79 @@ static void populate_secretstuff(void)
 		salt++;
 	} while (bip32_key_from_seed(bip32_seed, sizeof(bip32_seed),
 				     BIP32_VER_TEST_PRIVATE,
-				     0, &secretstuff.bip32) != WALLY_OK);
+				     0, &master_extkey) != WALLY_OK);
+
+	/* BIP 32:
+	 *
+	 * The default wallet layout
+	 *
+	 * An HDW is organized as several 'accounts'. Accounts are numbered,
+	 * the default account ("") being number 0. Clients are not required
+	 * to support more than one account - if not, they only use the
+	 * default account.
+	 *
+	 * Each account is composed of two keypair chains: an internal and an
+	 * external one. The external keychain is used to generate new public
+	 * addresses, while the internal keychain is used for all other
+	 * operations (change addresses, generation addresses, ..., anything
+	 * that doesn't need to be communicated). Clients that do not support
+	 * separate keychains for these should use the external one for
+	 * everything.
+	 *
+	 *  - m/iH/0/k corresponds to the k'th keypair of the external chain of account number i of the HDW derived from master m.
+	 */
+	/* Hence child 0, then child 0 again to get extkey to derive from. */
+	if (bip32_key_from_parent(&master_extkey, 0, BIP32_FLAG_KEY_PRIVATE,
+				  &child_extkey) != WALLY_OK)
+		status_failed(WIRE_HSMSTATUS_KEY_FAILED,
+			      "Can't derive child bip32 key");
+
+	if (bip32_key_from_parent(&child_extkey, 0, BIP32_FLAG_KEY_PRIVATE,
+				  &secretstuff.bip32) != WALLY_OK)
+		status_failed(WIRE_HSMSTATUS_KEY_FAILED,
+			      "Can't derive private bip32 key");
+}
+
+static inline void bitcoin_pubkey(struct pubkey *pubkey, u32 index)
+{
+	struct ext_key ext;
+
+	if (index >= BIP32_INITIAL_HARDENED_CHILD)
+		status_failed(WIRE_HSMSTATUS_KEY_FAILED,
+			      "Index %u too great", index);
+
+	if (bip32_key_from_parent(&secretstuff.bip32, index,
+				  BIP32_FLAG_KEY_PUBLIC, &ext) != WALLY_OK)
+		status_failed(WIRE_HSMSTATUS_KEY_FAILED,
+			      "BIP32 of %u failed", index);
+
+	if (!secp256k1_ec_pubkey_parse(secp256k1_ctx, &pubkey->pubkey,
+				       ext.pub_key, sizeof(ext.pub_key)))
+		status_failed(WIRE_HSMSTATUS_KEY_FAILED,
+			      "Parse of BIP32 child %u pubkey failed", index);
+}
+
+static inline void bitcoin_keypair(struct privkey *privkey,
+				   struct pubkey *pubkey,
+				   u32 index)
+{
+	struct ext_key ext;
+
+	if (index >= BIP32_INITIAL_HARDENED_CHILD)
+		status_failed(WIRE_HSMSTATUS_KEY_FAILED,
+			      "Index %u too great", index);
+
+	if (bip32_key_from_parent(&secretstuff.bip32, index,
+				  BIP32_FLAG_KEY_PRIVATE, &ext) != WALLY_OK)
+		status_failed(WIRE_HSMSTATUS_KEY_FAILED,
+			      "BIP32 of %u failed", index);
+
+	/* libwally says: The private key with prefix byte 0 */
+	memcpy(privkey->secret, ext.priv_key+1, 32);
+	if (!secp256k1_ec_pubkey_create(secp256k1_ctx, &pubkey->pubkey,
+					privkey->secret))
+		status_failed(WIRE_HSMSTATUS_KEY_FAILED,
+			      "BIP32 pubkey %u create failed", index);
 }
 
 static u8 *create_new_hsm(struct conn_info *control)
diff --git a/lightningd/hsm/hsm_control_wire_csv b/lightningd/hsm/hsm_control_wire_csv
index e51d6b3de..33137e2c8 100644
--- a/lightningd/hsm/hsm_control_wire_csv
+++ b/lightningd/hsm/hsm_control_wire_csv
@@ -4,6 +4,8 @@ hsmctl_init_load,2
 
 hsmctl_init_response,100
 hsmctl_init_response,0,node_id,33
+hsmctl_init_response,33,bip32_len,2
+hsmctl_init_response,35,bip32_seed,bip32_len*1,u8
 
 # ECDH returns an fd.
 hsmctl_hsmfd_ecdh,3
diff --git a/lightningd/hsm/hsm_status_wire_csv b/lightningd/hsm/hsm_status_wire_csv
index 807b5bb75..9636af65f 100644
--- a/lightningd/hsm/hsm_status_wire_csv
+++ b/lightningd/hsm/hsm_status_wire_csv
@@ -3,6 +3,7 @@ hsmstatus_init_failed,0x8000
 hsmstatus_writemsg_failed,0x8001
 hsmstatus_bad_request,0x8002
 hsmstatus_fd_failed,0x8003
+hsmstatus_key_failed,0x8004
 
 # Clients should not give a bad request but not the HSM's decision to crash.
 hsmstatus_client_bad_request,1
diff --git a/lightningd/hsm_control.c b/lightningd/hsm_control.c
index da756fbca..f18b2ab48 100644
--- a/lightningd/hsm_control.c
+++ b/lightningd/hsm_control.c
@@ -9,14 +9,23 @@
 #include <inttypes.h>
 #include <lightningd/hsm/gen_hsm_control_wire.h>
 #include <lightningd/hsm/gen_hsm_status_wire.h>
+#include <wally_bip32.h>
 
 static void hsm_init_done(struct subdaemon *hsm, const u8 *msg,
 			  struct lightningd *ld)
 {
-	if (!fromwire_hsmctl_init_response(msg, NULL, &ld->dstate.id))
+	u8 *serialized_extkey;
+
+	if (!fromwire_hsmctl_init_response(hsm, msg, NULL, &ld->dstate.id,
+					   &serialized_extkey))
 		errx(1, "HSM did not give init response");
 
 	log_info_struct(ld->log, "Our ID: %s", struct pubkey, &ld->dstate.id);
+	ld->bip32_base = tal(ld, struct ext_key);
+	if (bip32_key_unserialize(serialized_extkey, tal_len(serialized_extkey),
+				  ld->bip32_base) != WALLY_OK)
+		errx(1, "HSM did not give unserializable BIP32 extkey");
+
 	io_break(ld->hsm);
 }
 
@@ -57,6 +66,7 @@ static enum subdaemon_status hsm_status(struct subdaemon *hsm, const u8 *msg,
 	case WIRE_HSMSTATUS_WRITEMSG_FAILED:
 	case WIRE_HSMSTATUS_BAD_REQUEST:
 	case WIRE_HSMSTATUS_FD_FAILED:
+	case WIRE_HSMSTATUS_KEY_FAILED:
 		break;
 	}
 	return STATUS_COMPLETE;
diff --git a/lightningd/lightningd.h b/lightningd/lightningd.h
index 410d36dab..a2ea7b031 100644
--- a/lightningd/lightningd.h
+++ b/lightningd/lightningd.h
@@ -30,6 +30,9 @@ struct lightningd {
 
 	/* All peers we're tracking. */
 	struct list_head peers;
+
+	/* Public base for bip32 keys. */
+	struct ext_key *bip32_base;
 };
 
 /* FIXME */