Crypto company Ripple on Tuesday, April 8, announced that it has agreed to acquire prime brokerage firm Hidden Road.
The value of the mentioned deal is $1.25 billion. This acquisition will be the largest in the history of the crypto company as of today.
Hidden Road was founded in 2018. This company offers consumer clearing, prime brokerage, and financial services across foreign exchange, digital assets, derivatives, swaps, and fixed income. The firm currently clears more than $3 trillion annually in markets with over 300 institutional clients, including hedge funds.
The acquisition announced on Tuesday is one of the largest deals in the digital asset area to date. The amount of this business agreement exceeds that of the deal, under which Stripe acquired Bridge, a platform that simplifies the process of taking payments through stablecoins for businesses, for $1.1 billion.
Ripple chief executive officer Brad Garlinghouse stated that the deal was concluded after Hidden Road found itself constrained due to the limitations of the balance sheet and began looking for external capital. During a conversation with media representatives, he stated that this was a big deal not only for his company but for the entire industry as a whole. In the relevant context, Brad Garlinghouse noted that the cryptocurrency area is increasingly focusing on traditional finance, against which the need for top-level infrastructure is emerging. According to him, it is necessary to be able to support financial institutions that want to come in.
Ripple was last valued at $11.3 billion. This indicator was recorded last year during the share buyback. The company stated that after the completion of the deal, Hidden Road plans to use its RLUSD stablecoin, launched in December, as collateral for its prime brokerage products.
Brad Garlinghouse said that collateral plays a key role. Hedge funds and other institutional investors typically require collateral to take out loans or complex trading positions such as short selling, he said.
The acquisition of Hidden Road by Ripple still requires the necessary regulatory approvals. Brad Garlinghouse stated that he expects this deal to close no later than the third quarter of the current year.
It’s worth mentioning that Ripple scored a major victory last month. In this case, it is implied that the United States Securities and Exchange Commission dropped a protracted legal case against the company, in which it was accused of conducting an illegal securities offering.
Also, as noted by the media, the cryptocurrency area as a whole received a positive boost after Donald Trump’s victory in the US presidential election last November. Mr. Trump has repeatedly made statements about the benefits of digital currencies and vowed a favorable policy towards the relevant industry.
Responding to a question about whether a more favorable regulatory environment for cryptocurrencies has given Ripple an additional impetus for the takeover of prime brokerage, Brad Garlinghouse noted that such deals make much more sense when there is a supportive regulatory environment – unlike the legal tactics of open warfare.
It is worth mentioning that in the past, the crypto chief has been critical of the Securities and Exchange Commission and its former leader Gary Gensler, who oversaw aggressive legal actions against several crypto companies, including Ripple.
As we have reported earlier, Ripple and Unicâmbio to Power Brazil-to-Portugal Payments.
