Once everybody sends their coins to xapo and nobody withdraws BTC from xapo we are not going to have any transactions.
Mining will continue as you can mine even if there is nobody sending and receiving coins.
Miners will keep on getting their block reward, until this also dries up and then the whole chain might be supported by hobbyists.
Xapo will become some kind of Paypal and Bitcoin....will probably die.
Are you sure that if there are no on chain transactions, then miners can still mine the Bitcoins and get the reward. Because I think mining is basically the verification of the transactions. If there is no on chain transactions, then how can mining be possible?
Note: I Can't believe that people don't read the question and just start spamming unrelated answers. Only Stompix tried to give me the answer to what I actually asked.