Ripple CEO Brad Garlinghouse speaks at the Milken Institute Global Conference on October 19, 2021 in Beverly Hills, California.
Kyle Grillo | Bloomberg | Getty Images
Blockchain firm Ripple said on Wednesday it has acquired Metaco, a Swiss firm that securely holds digital assets on behalf of clients, to expand its international footprint and expand its services.
News of the deal, one of the largest acquisitions in the cryptocurrency industry in the past year or so, comes as the San Francisco-based startup continues to contest the SEC lawsuit.
Related investment news
At the same time, the entire cryptocurrency industry is facing a series of challenges, from higher interest rates and stricter financing 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 by phone Tuesday.
Garlinghouse said Ripple has committed $250 million in cash from its own balance sheet to fund the acquisition.
“At a time when everyone else is closing their doors or facing layoffs, I think that’s a really important signal for the industry, and it’s a signal that Ripple is in a strong position — we’re going to attack,” he added.
The Ripple boss said the deal showed that even with the broader market under pressure, it is still possible to make large deals.
From crypto winter to crypto spring?
Garlinghouse said the deal would help the company expand its overseas presence at a time when the SEC is taking tough action against major industry players, including Ripple.
The cryptocurrency giant, valued at $15 billion in its latest private funding round, faces a lot of regulatory uncertainty after the SEC Sued the company and two of its executives alleging they held unregistered securities.
The regulator’s main assertion is that XRP, a cryptocurrency closely related to Ripple, resembles a security that should be registered with the agency before being issued and sold to investors.
For its part, Ripple denies that XRP should be considered a security.
Founded in Switzerland in 2015, Metaco offers a range of services designed to help financial institutions store, trade, issue and manage digital currencies in a secure manner.
“We’ve been working with this space — banks, payment providers — throughout our history,” Garlinghouse said, adding that Metaco “is a great fit in terms of strategic opportunity.”
“In this crypto winter, people have tried a lot of transactions — I think that’s really a sign of crypto spring.”
Following the collapse of FTX and many other prominent crypto platforms, safe custody of cryptocurrencies in segregated accounts has become a priority for financial institutions seeking to make a difference in the industry.
Metaco’s clients include several major financial firms including Citibank, BNP Paribas, BBVA and Societe Generale.
Results of SEC lawsuit expected in ‘months’
Major players want the SEC and Washington to take seriously what cryptocurrency watchers see as bluff and soften the hard line the regulator has taken on the industry.
Garlinghouse said last week that the company will spend a total of $200 million to defend itself against the SEC lawsuit.
The company’s legal battle with U.S. agencies is expected to end later this year.
In an interview with CNBC on Tuesday before the news was released, Garlinghouse said he expected the company to see an outcome in its legal battle within months.
“I think the most likely scenario is that we’ll hear (a decision) sometime in two to four months or five months,” Garlinghouse said.
SEC Chairman Gary Gensler made it clear that the regulator has no intention of abandoning its aggressive enforcement actions in the crypto space. Gensler insisted that existing securities laws are already well suited to cryptocurrencies.
Some industry executives, however, believe the regulator’s actions were wrong. Many crypto industry insiders have been calling on the U.S. Congress to develop a clear regulatory framework to help companies clarify how they can operate in a legal and reasonable manner.
Ripple is now the sole shareholder of Metaco, the company said. Metaco will remain independent and its CEO, Adrien Treccani, will continue as CEO.
“This transaction will allow Metaco to leverage Ripple’s scale and market strength to achieve our goals and deliver value to our customers at a faster rate,” Treccani said in a statement on Wednesday.
“As our clients have come to expect, we look forward to continuing to meet unprecedented institutional demand with the highest level of delivery.”
watch: Ripple will spend $200 million to fight SEC lawsuit, CEO says