Ripple CEO Brad Garlinghouse speaks during the Milken Institute Global Conference in Beverly Hills, California on October 19, 2021.
Kyle Grillot | Bloomberg | Getty Images
Blockchain firm Ripple said on Wednesday it has acquired Metaco, a Swiss firm that keeps digital assets safe on behalf of clients, in a bid to expand its international footprint and broaden its range of services.
News of the deal, one of the biggest acquisitions in the crypto industry in the last year or so, comes as the San Francisco-based startup continues to contest a lawsuit from the United States Securities and Exchange Commission.
It also comes as the crypto industry as a whole faces a host of challenges, from higher interest rates and tighter funding conditions to mass layoffs and declining company valuations.
“This is the biggest deal we’ve seen in the last year,” Ripple CEO Brad Garlinghouse told CNBC on a call Tuesday.
Ripple invested $250 million in cash from its own balance sheet to fund the acquisition, Garlinghouse said.
“At a time when others are closing their doors or facing redundancies, I think it’s a really important signal for the industry, it’s also a signal that ripple is in a strong position – we’re going to be on the offensive,” he added.
Ripple’s boss said the deal was a sign that it was still possible to do significant business even with the pressure facing the broader market.
From crypto winter to crypto spring?
Garlinghouse said the deal would help the company increase its presence overseas at a time when the Securities and Exchange Commission is cracking down on major industry players — including Ripple.
The crypto titan, valued at $15 billion in its latest private funding round, has faced a lot of regulatory uncertainty after the SEC sued the company and two of its executives accusing them of unregistered securities.
The regulator’s main contention is that XRP, a cryptocurrency closely associated with Ripple, is akin to a security that should have been registered with the agency before it was issued and sold to investors.
Ripple, for its part, denies that XRP should be treated as a security.
Founded in 2015 in Switzerland, Metaco offers a range of services aimed at helping financial institutions securely store, trade, issue and manage digital currencies.
“We’ve partnered with that segment — banks, payment providers, throughout our history,” Garlinghouse said, adding that Metaco “fits well in terms of the strategic opportunity.”
“There are a lot of trades that people have been trying to make during this crypto winter – I think this is really going to be a sign of a crypto spring.”
Safe custody of crypto in segregated accounts has become an increased priority for financial institutions looking to play in the industry in the wake of the collapse of FTX and many other notable crypto platforms.
Metaco counts several major financial companies as clients including Citi, BNP Paribas, BBVA and Societe Generale.
The outcome of the SEC process is expected in “months”
Crypto companies have been play a game of poker with the US SEC, with bold threats to leave the country after tough enforcement actions by the agency.
Major players hope the SEC and Washington take what crypto watchers see as scams seriously and soften the hard line regulators have taken on the industry.
Garlinghouse said last week that the company will have spent $200 million totally defends itself against the SEC process.
The company’s legal battle with the US agency is expected to end sometime later this year.
In an interview with CNBC Tuesday ahead of the news, Garlinghouse said he expects the company to get a result in the legal battle within months.
“I think the most likely scenario is that we will hear (a decision) sometime either two to four or five months from now,” Garlinghouse said.
Gary Gensler, chairman of the SEC, has made it clear that the regulator has no intention of backing down from its aggressive regulatory actions in the crypto space. Gensler has insisted that existing securities laws are already a good fit for crypto.
However, some industry managers believe that the regulator’s actions are misguided. There have been many insiders in the crypto industry calls for a clear regulatory framework from the US Congress to give companies clarity on how they can operate in a way that is legally sound.
Ripple is now Metaco’s sole shareholder, the company said. Metaco will continue to be independent and its CEO Adrien Treccani will remain as CEO.
“This deal will enable Metaco to leverage Ripple’s scale and market power to achieve our goals and deliver value to our customers at an accelerated pace,” Treccani said in a statement on Wednesday.
“We look forward to continuing to serve unprecedented levels of institutional demand with the utmost excellence in delivery, which our customers have come to expect.”
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