Ripple buys Swiss startup Metaco as SEC lawsuit conclusion looms

Ripple buys Swiss startup Metaco as SEC lawsuit conclusion looms

Ripple CEO Brad Garlinghouse speaks during the Milken Institute Global Conference on October 19, 2021 in Beverly Hills, California.

Kyle Grillot | Bloomberg | Getty Images

Blockchain company Ripple announced on Wednesday that it has acquired Metaco, a Swiss company that securely stores digital assets on behalf of its customers, to expand its international footprint and broaden its range of services.

News of the deal, one of the largest acquisitions in the crypto industry in the last year or so, comes as the San Francisco-based startup continues to contest a lawsuit brought by the U.S. Securities and Exchange Commission.

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In addition, the entire crypto industry faces a multitude of challenges, from higher interest rates and tighter funding conditions to mass layoffs and falling company valuations.

“This is the biggest deal we’ve seen in the last year,” Ripple CEO Brad Garlinghouse said in a call to CNBC on Tuesday.

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

“At a time when others are closing their doors or facing layoffs, I think this is a really important signal for the industry. It is also a signal that Ripple is in a strong position – we will go on the offensive,” he added.

Ripple’s boss said the deal was a sign that despite the pressure the broader market is facing, it’s still possible to close big deals.

From Crypto Winter to Crypto Spring?

Garlinghouse said the deal would help the company strengthen its presence abroad at a time when the Securities and Exchange Commission is taking tough action against big industry players – including Ripple.

The crypto titan, valued at $15 billion in its latest private funding round, has faced major regulatory uncertainty after the SEC sued the company and two of its executives, accusing them of unregistered securities.

The regulator’s main claim is that XRP, a cryptocurrency with which Ripple is closely associated, is like a security that should have been registered with the regulator before being issued and sold to investors.

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

Founded in Switzerland in 2015, Metaco offers a range of services designed to help financial institutions securely store, trade, issue and manage digital currencies.

“We’ve worked with this segment — banks, payment providers — throughout our history,” Garlinghouse said, adding that Metaco “is a good fit in terms of the strategic opportunity.”

“During this crypto winter, people have been attempting a lot of deals – I think this is really going to be a sign of a crypto spring.”

After the collapse of FTX and numerous other big-name crypto platforms, keeping cryptocurrencies safe in segregated accounts has become an elevated priority for financial institutions looking to play in the industry.

Metaco counts several large financial companies among its customers, including Citi, BNP Paribas, BBVA and Societe Generale.

SEC lawsuit outcome expected in “months”.

Crypto companies have played poker with the US Securities and Exchange Commission, boldly threatening to leave the country after the agency took tough enforcement action.

Big players are hoping that the SEC and Washington will take what crypto watchers see as bluffs seriously and soften the hard line regulators have taken on the industry.

Garlinghouse said last week that the company spent a total of $200 million defending itself against the SEC lawsuit.

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

In an interview with CNBC Tuesday ahead of the news, Garlinghouse said he expects the company to reach a settlement in the litigation in a few months.

“I think the most likely scenario is that we will hear it [a decision] “Sometime in two, four, five months,” Garlinghouse said.

Gary Gensler, chairman of the SEC, has made it clear that the regulator has no intention of backing down from its aggressive enforcement actions in the crypto space. Gensler has insisted that existing securities laws are already well-suited to crypto.

However, some industry executives believe the regulator’s actions are wrong. Numerous insiders in the crypto industry are calling for a clear regulatory framework from the US Congress to give companies clarity on how they can act legally.

Ripple is now the sole shareholder of Metaco, the company said. Metaco remains independent and its CEO Adrien Treccani remains CEO.

“This deal will allow Metaco to leverage Ripple’s scale and market strength to meet our goals and deliver value to our customers faster,” Treccani said in a statement on Wednesday.

“We look forward to continuing to serve unprecedented institutional demand with the highest excellence in delivery our clients have come to expect.”

REGARD: According to CEO, Ripple will have spent $200 million fighting SEC lawsuit

According to CEO, Ripple will have spent $200 million fighting SEC lawsuit