Ripple announced on Friday that it will acquire Fortress Trust, a startup specializing in crypto infrastructure, granting it a Nevada license and allowing it to expand beyond its blockchain-enabled payments business model.
Ripple did not reveal the parameters of the transaction.
Scott Purcell, an entrepreneur with a background in equity and debt crowdfunding, founded Fortress Trust in 2021 with the intention of assisting large businesses in interacting with digital currencies. Purcell was the former CEO of Prime Trust, a cryptocurrency custodian that ceased operations after BitGo backed out of an acquisition agreement.
Ripple is primarily recognized as a provider of cross-border remittances. Similar to SWIFT, the company employs a blockchain-based messaging system to expedite transactions between a network of banks and other financial institutions.
Ripple’s stakeholders include Britain’s Modulr, Singapore’s Nium and Japan’s SBI Remit.
Additionally, the company employs XRP, a cryptocurrency it owns and has become closely associated with, for international payments between banks and other financial institutions.
XRP didn’t move substantially on the news. In the preceding twenty-four hours, the token’s price increased by 0.4% to 50 cents.
The U.S. Securities and Exchange Commission has filed a lawsuit against Ripple, alleging that XRP should be considered a security and that the company’s executives sold over $1 billion worth of the token to investors in an unlawful securities offering.
Ripple had previously partnered with MoneyGram, which used XRP in a pilot to make immediate transfers without the need for pre-funded accounts, using XRP as a “bridge” currency. In March 2021, MoneyGram and Ripple ended their partnership due to the lawsuit.
A judge ruled in July, however, that the XRP token was “not necessarily a security on its face.”
Recently, Ripple’s business has gained traction, particularly outside the United States, where the majority of its customers are located. Ripple’s chief legal officer, Stu Alderoty, told CNBC, “I believe the answer is yes” when asked if the ruling indicated that American banks would return to using Ripple’s ODL product.
Ripple’s second acquisition of the year is Fortress. In May, the company committed to pay $250 million to acquire Metaco, a Swiss provider of crypto custody services.
A spokesperson for Ripple declined to remark on the size of the transaction, but indicated that it is less than the amount Ripple paid to acquire Metaco. Ripple was a minority investor in the initial funding round of Fortress Trust.
Ripple stated that the transaction would “support our existing business lines by enhancing the customer experience within our payments and liquidity solutions.”
With the acquisition of Fortress Trust, Ripple added a Nevada trust to its growing array of global regulatory permits. A company spokesperson said this would enable the firm to “provide regulated services — for both fiat and crypto — to certain customers in the U.S.”
Ripple already possesses a New York BitLicense, allowing it to engage in regulated virtual currency activities in the state of New York, in addition to 30 money transmitter licenses across the United States and an in-principle Major Payment Institution License from the Monetary Authority of Singapore, the country’s central bank. Previously, the company disclosed to CNBC that it was also seeking an e-money license from the Irish central bank.
A Ripple spokesperson told CNBC via email, “Long-term, we anticipate there will be ways to leverage the technology to support new initiatives on our roadmap and enable Ripple to serve a broader segment of customers and use cases.”
Ripple is one of many participants in the so-called “crypto custody” market, which focuses on assisting companies and individual users in storing their tokens in a secure, decentralized address without the need for technical expertise.
Fortress Trust uses application programming interfaces, or APIs — programs that allow apps to communicate with one another — to enable companies to extract data from other software, such as wallets containing cryptocurrencies and nonfungible tokens.
According to the startup’s website, it collaborates with “crypto exchanges, NFT marketplaces, tokenization platforms, corporate brands, agencies, securities exchanges, real estate, healthcare, neobanks, sports and entertainment celebrities, musicians, influencers, and other innovators.”