Fiona Nanna, ForeMedia News

5 minutes read. Updated 11:51PM GMT Fri, 11th October, 2024

San Francisco-based blockchain startup Ripple made a bold move on Thursday by launching crypto custody services for banks and financial technology (fintech) firms, marking a significant shift in its business model. The newly formed Ripple Custody division will offer a comprehensive suite of services that allow institutions to securely store digital assets on behalf of their clients, with features aimed at simplifying the management and protection of these assets.

This strategic expansion into crypto custody is part of Ripple’s ongoing effort to diversify beyond its core business of payment settlements via the RippleNet platform. By venturing into the burgeoning custody sector, Ripple hopes to capture a slice of a rapidly growing market that plays a crucial role in securing and managing the private keys used to authorize transactions for digital currencies.

Ripple’s custody services will come with pre-configured operational settings, integrated risk monitoring for anti-money laundering (AML) compliance, and a user-friendly interface designed to enhance engagement. This new line of business enables Ripple to compete with established players like Coinbase, Gemini, and Fireblocks, who already offer similar services in the digital asset custody space.

Custody: A Fast-Growing Segment in the Crypto Market

The crypto custody market has emerged as a critical sector, providing essential services such as safeguarding digital assets, facilitating payments and settlements, and ensuring regulatory compliance. According to the Boston Consulting Group, the market is expected to balloon to at least $16 trillion by 2030.

Ripple’s decision to enter this market could position the company as a key player, with Ripple Custody already reporting over 250% year-over-year customer growth in 2024. Its client base spans major financial institutions, including HSBC, Societe Generale, DBS, and the Swiss arm of BBVA, and operates across seven countries.

Ripple Custody’s services will also allow its clients to tokenize real-world assets — such as fiat currencies, commodities like oil and gold, and even real estate — using Ripple’s XRP Ledger blockchain. The integration with the XRP Ledger provides firms access to Ripple’s decentralized exchange, enabling fast, low-fee trading without intermediaries.

Expanding Ripple’s Ecosystem

Ripple’s pivot towards crypto custody is a natural progression as it seeks to expand its ecosystem. With features like seamless integration with the XRP Ledger, the company aims to offer secure and scalable solutions for growing fintech and crypto businesses. According to Aaron Slettehaugh, Ripple’s Senior Vice President of Product, the new capabilities are designed to better serve high-growth businesses in the crypto space.

Ripple’s entry into this market is also backed by recent acquisitions aimed at bolstering its custody services. In 2023, Ripple acquired Metaco, a firm specializing in crypto storage and management, and followed it up with the acquisition of Standard Custody & Trust Company in 2024. These strategic moves have solidified Ripple’s commitment to becoming a leader in the crypto custody domain.

Challenges in the Crypto Space

Ripple’s move into the custody space comes at a time when its core product, the XRP cryptocurrency, faces significant challenges. The price of XRP saw a sharp decline recently, following the U.S. Securities and Exchange Commission’s (SEC) filing to appeal a court ruling that XRP should not be considered a security when sold to retail investors. Ripple, which has long contested the SEC’s allegations that it conducted an illegal securities offering, is the largest holder of XRP coins. This ongoing legal battle has cast uncertainty over the future of the cryptocurrency, despite Ripple’s determination to expand its services.

Ripple’s focus on diversifying its offerings into the more stable and high-growth area of digital asset custody may help mitigate the risks associated with its dependence on XRP and its regulatory entanglements.

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Ripple has launched crypto custody services for banks and fintech firms through its new Ripple Custody division, aiming to diversify beyond payment settlements. Explore how this move positions Ripple in the growing digital asset market.