I was reading Om Malik’s post on Facebook’s Irrationality of buying Whatsapp.

The irrational rationality behind Facebook’s $16 billion acquisition of WhatsApp

by Om Malik

14 HOURS AGO

22 Comments

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SUMMARY:
The huge price tag attached to Facebook’s purchase of WhatsApp — one of the largest web deals in history — actually makes more sense than you might think at first glance.

And, one of the questions that occurred is whether Facebook will want to store the chat history from Whatsapp? Currently the history is not stored.

WhatsApp communication between your phone and our server is fully encrypted.

We do not store your chat history on our servers. Once delivered successfully to your phone, chat messages are removed from our system.

Even though data sent through our app is encrypted, remember that if your phone or your friend's phone is being used by someone else, it may be possible for them to read your WhatsApp messages. Please be aware of who has physical access to your phone.

Cheers,
WhatsApp Support Team

Facebook has the budget and infrastructure to store chat history.

Here is more information from Arstechnica referencing a Wired article.

On whether governments have demanded access to WhatsApp servers

"There really is no key to give," Koum says. The US National Security Agency, he insists, has no access to users' messages. "People need to differentiate us from companies like Yahoo! and Facebook that collect your data and have it sitting on their servers. We want to know as little about our users as possible. We don't know your name, your gender… We designed our system to be as anonymous as possible. We're not advertisement-driven so we don't need personal databases." This is more than a business position for Koum. "I grew up in a society where everything you did was eavesdropped on, recorded, snitched on," he says. "I had friends when we were kids getting into trouble for telling anecdotes about Communist leaders. I remember hearing stories from my parents of dissidents like Andrei Sakharov, sentenced to exile because of his political views, like Solzhenitsyn, even local dissidents who got fed up with the constant bullshit. Nobody should have the right to eavesdrop, or you become a totalitarian state—the kind of state I escaped as a kid to come to this country where you have democracy and freedom of speech. Our goal is to protect it. We have encryption between our client and our server. We don't save any messages on our servers, we don't store your chat history. They're all on your phone."