Ripple has recently made headlines with its $1.25 billion acquisition of Hidden Road, a move that underscores its strategy of controlling key transaction rails and integrating its cryptocurrency, XRP, along with its stablecoin, Ripple USD (RLUSD). This approach has drawn intriguing parallels to the investment methodologies seen in the likes of Japanese investment firm SoftBank.
With the acquisition happening on April 8, Ripple will harness RLUSD as collateral in its prime brokerage products, and Hidden Road is set to migrate its post-trade operations onto the XRP Ledger, the blockchain infrastructure that supports XRP and a range of Ripple’s institutional services.
Austin King, founder and CEO of Omni Network, offers insight into this direction, having previously sold his startup, Strata Labs, to Ripple in 2019. King likens Ripple’s acquisition strategy to that of SoftBank, which is known for its aggressive investments and acquisitions rather than solely relying on in-house development.
The SoftBank Model in Ripple
SoftBank became a household name in the investment world through pivotal deals, particularly its early investment in Yahoo and its groundbreaking $20 million bet on Alibaba, which later skyrocketed to $60 billion upon Alibaba’s public listing. This strategic recycling of profits into new ventures has allowed SoftBank to create an ecosystem of synergies across its varied investments, notably in telecommunications and semiconductors.
According to King, Ripple is adopting a similar playbook but with a spotlight on financial services rather than a diversified portfolio. “Instead of venture bets on tech giants, it is XRP that underpins this strategy of infrastructure acquisition and synergy creation,” he explained.
Both companies exhibit a reliance on substantial capital to fuel their growth. SoftBank has its renowned $100 billion Vision Fund, while Ripple has a treasure trove of XRP and cash, holding approximately 4.56 billion XRP (valued around $11 billion) as of March 31.
This strategy of acquisition is integral to expanding the use of XRP and RLUSD in conventional financial systems, embedding them into custody, brokerages, and payment channels—a concept King describes as a ‘token-fueled flywheel.’
Ripple Joins the Crypto M&A Arms Race
Unlike SoftBank’s broad industry interests spanning telecommunications and media, Ripple is honing in on building a comprehensive financial infrastructure. It has made notable acquisitions like custody firms Metaco and Standard Custody to fortify its operational framework. With Hidden Road bringing 300 institutional clients clearing a total of $3 trillion annually, this acquisition significantly enhances Ripple’s market reach.
Ripple’s trajectory coincides with a burgeoning M&A trend within the US crypto landscape. As the regulatory environment evolves—with scrutiny easing—crypto firms are seizing the opportunity to expand aggressively. For instance, Kraken’s acquisition of NinjaTrader for approximately $1.5 billion highlights this trend, alongside Coinbase’s acquisition of Deribit for nearly $2.9 billion.
Brad Garlinghouse, CEO of Ripple, has emphasized a future where Ripple intends to explore further acquisitions, potentially moving into realms that extend from backend financial services to engaging directly with consumer payments. This ambition aligns with the company’s reported efforts to acquire Circle for $4 billion to $5 billion, a bid that was reportedly turned down.
While the regulatory landscape for stablecoins remains unpredictable, Ripple’s positioning has the potential to reshape its role in the market, particularly as it explores further opportunities to absorb competing stablecoin firms.
With Big Picture visionaries like King predicting a future where all banks will integrate stablecoins, it’s evident that Ripple is not only expanding its presence but also striving to define the next wave of financial services innovation.
