Ripple buys crypto infrastructure startup in its second acquisition of 2023

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Cryptocurrency company Ripple announced on Friday it will acquire Fortress Trust, a startup specializing in crypto infrastructure, giving it a license in Nevada and allowing it to expand beyond its core bread and butter of blockchain-enabled payments.

Ripple did not disclose the terms of the deal. Fortress Trust was founded in 2021 by Scott Purcell. An entrepreneur who has a background in equity crowdfunding and debt financing, Fortress Trust is aimed at helping large enterprises to interact with digital currency. Purcell, who was previously CEO of Prime Trust (a crypto custodian) shut down the company after BitGo backed out of a deal to buy it. Ripple is best known as a firm that specializes in cross-border payments. The company uses a blockchain-based messaging system, akin to SWIFT, to approve speedy transactions between a network of banks and other financial institutions.

Ripple’s partners include Britain’s Modulr, Singapore’s Nium and Japan’s SBI Remit.

The company also uses XRP, a cryptocurrency it owns a significant portion of and has become closely associated with, for cross-border payments between banks and other financial institutions.

XRP didn’t move substantially on the news. The token was up about 0.4% in the past 24 hours, trading at a price of 50 cents.

Ripple has struggled in recent years, with the U.S. Securities and Exchange Commission targeting the firm with a lawsuit alleging XRP should be considered a security and that its executives sold over $1 billion worth of the token to investors in an illegal securities offering.

Ripple had previously partnered with MoneyGram, which used XRP in a pilot to make instant transfers, using XRP as a “bridge” currency to move funds without the need for pre-funded accounts. MoneyGram and Ripple ended their partnership with each other in March 2020 after the lawsuit. “

Ripple’s business has been gaining momentum, especially outside of the U.S. where its majority of clients are located. Stu Alderoty told CNBC that he believes the answer is yes. Fortress is Ripple’s second acquisition of the year. A Ripple spokesperson refused to comment on the amount of the deal, but stated that it was less than what Ripple spent to purchase Metaco. Ripple invested in Fortress Trust’s seed round of funding.

Ripple stated that the deal will “support our existing business lines, specifically improving customer experience in our payment and liquidity solutions. Ripple acquired a Nevada Trust with the acquisition of Fortress Trust. This trust adds to its list of global regulatory permits. The company told CNBC previously that it was also looking to get an e-money license with the Irish central bank. The company told CNBC previously it was also looking to get an e-money license with the Irish central bank.

“Longer term, we anticipate there will be ways we can leverage the technology to support new initiatives on our roadmap and enable Ripple to serve a broader segment of customers and use cases,” a Ripple spokesperson told CNBC via email.

Ripple is one of many players in the so-called “crypto custody” space, meaning it’s focused on helping companies and individual users store their tokens in a secure, decentralized address without requiring all the technical knowhow.

Fortress Trust uses application programming interfaces, or APIs — programs that allow different apps to interact with each other — to allow companies to pull data from other bits of software, such as wallets holding cryptocurrencies and nonfungible tokens.

Per Fortress’s website, the startup works 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. “