Crypto Ripple Buys Swiss Startup As SEC Campaign Forces Companies To Consider Offshore Moves

  • Blockchain company Ripple has acquired Metaco, a Swiss crypto custody services company, the company announced Wednesday.
  • The transaction is expected to enhance Ripple’s product suite and give it access to an attractive list of clients that includes Citi and BNP Paribas.
  • It would also help the company increase its presence abroad at a time when it is fighting a lawsuit from the Securities and Exchange Commission.

Ripple CEO Brad Garlinghouse speaks during the Milken Institute’s global conference in Beverly Hills, Calif., on October 19, 2021.

Kyle Grillot | bloomberg | Getty Images

Blockchain company Ripple said on Wednesday that it has acquired Metaco, a Swiss company that securely holds digital assets on behalf of customers, in a bid to expand its international presence and broaden its range of services.

News of the deal, one of the largest acquisitions in the crypto industry in the past year or so, comes as the San Francisco-based startup continues to contest a lawsuit from the US Securities and Exchange Commission.

It also comes as the cryptocurrency industry as a whole faces a host of challenges, from higher interest rates and tougher funding terms to mass layoffs and declining company valuations.

“This is the largest deal we’ve seen in the last year,” Brad Garlinghouse, CEO of Ripple, told CNBC on Tuesday’s call.

Garlinghouse said Ripple invested $250 million in cash from its balance sheet to fund the acquisition.

He added, “While others are closing their doors or facing layoffs, I think it’s a really important signal to the industry, it’s also a signal that Ripple is in a strong position — we’re going to take offense.”

The Ripple boss said the deal was a sign that it is still possible to make large deals even with the pressures the broader market is facing.

Garlinghouse said the deal will help the company increase its presence overseas at a time when the SEC is cracking down on major players in the industry — including Ripple.

The cryptocurrency giant, valued at $15 billion in its latest private funding round, faced a great deal of regulatory uncertainty after the Securities and Exchange Commission sued the company and two of its executives accusing them of unregistered securities.

The regulator’s main assertion is that XRP, a closely related Ripple cryptocurrency, is similar to a security that had to be registered with the agency before it could be issued and sold to investors.

For its part, Ripple denies that XRP should be treated as collateral.

Founded in 2015 in Switzerland, Metaco provides a range of services aimed at helping financial institutions store, trade, issue and manage digital currencies in a secure manner.

“We’ve partnered with this sector — banks and payment service providers in our entire history,” Garlinghouse said, adding that Metaco “is a good fit in terms of strategic opportunity.”

“There are a lot of deals that people have been trying to take during this crypto winter — I think that would really be a sign of the crypto spring.”

Safe custody of cryptocurrencies in segregated accounts has become a high priority for financial institutions seeking a role in the industry in the wake of the collapse of FTX and several other prominent crypto platforms.

Metaco counts several major financial firms as clients including Citi, BNP Paribas, BBVA, and Societe Generale.

Cryptocurrency firms are playing poker with the US Securities and Exchange Commission, issuing bold threats to leave the country after tough enforcement action from the agency.

The major players are hoping that the SEC and Washington, D.C., will take what cryptocurrency watchers see as scams seriously and soften the hard line regulators have taken on the industry.

Garlinghouse said last week that the company will spend $200 million in total to defend itself against the SEC’s lawsuit.

The company’s legal battle with the US agency is expected to conclude later this year.

In an interview with CNBC the Tuesday before 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 be heard [a decision] Sometime either two to four or five months from now,” Garlinghouse said.

Gary Gensler, chair of the Securities and Exchange Commission, made it clear that the regulator has no intention of backing down from tough enforcement action in the crypto space. Gensler insisted that the current securities laws are indeed appropriate for cryptocurrency.

However, some industry executives believe the regulator’s actions are misguided. Many crypto industry insiders have called for a clear regulatory framework from the US Congress to help give companies clarity on how to operate in a legally sound manner.

The company said Ripple is now the sole shareholder of Metaco. Metaco will continue to maintain its independence and its CEO, Adrien Treccani, will remain CEO.

“This transaction will enable Metaco to leverage Ripple’s size and market strength to reach our goals and deliver value to our clients at a faster 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, as our customers have come to expect.”

He watches: Ripple CEO says Ripple will spend $200 million to fight SEC lawsuit

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