Ripple's takeover of Metaco: what impact on the custody market?

Anyone who follows crypto news still remembers the shock of last May's announcement that Ripple had bought Metaco.

Beyond the acquisition price, $250 million (in Bear market 🤯), it was above all the merits of the deal that prompted comments and questions.

👉 Why is Ripple getting its hands on a specialist in the "curation" of digital assets for businesses?

The US company, known for its XRP token, was quick to explain that the acquisition - the largest in its history - would allow it to "strengthen its business" with enterprises.

Not everyone was convinced by this explanation, but some saw it as the translation of its diversification strategy beyond cross-border payments, which has historically been its core business.

But, beyond Ripple, it was above all Metaco, which works with several dozen financial institutions, such as Citi or BBVA, that the questions focused on.

👉 Will Metaco manage to keep its customers, mainly in finance, when Ripple is a direct competitor to many of them?

👉 How will Metaco's customers react when Ripple has been in the sights of the US stock exchange regulator (SEC) for several years now?

"When we saw the takeover by Ripple, we thought it was going to be very complicated for Metaco, that they would find it hard to continue doing business as before," recalls a competitor, who asked to remain anonymous.

But, six months on, is this really the case?

To answer this question, we need to take the subject in both the short and medium/long term.

In the short term:

Six months after the announcement, the situation for Metaco, and the corporate custody market as a whole, has not really changed.

"We remain a technology partner of choice for financial institutions looking to position themselves in the digital asset market," says a spokesperson for Metaco, which is one of the pioneers in the sector. The Lausanne-based company was launched in 2015.

This form of status quo is not so surprising, for several reasons:

Firstly, because when you are a company and you have started working with a partner like Metaco, "you don't slam the door overnight", recalls a French banker. There are contracts, sometimes for more than a year, and these are binding, unless you pay hefty compensation 💰.

Secondly, because some companies consider that breaking a contract would be tantamount to throwing away months of development and therefore investment, both financial and human. "It takes time to implement a custody solution," explains Stanislas Barthélémy, blockchain and cryptoassets consultant at KPMG.

Finally, and quite simply, because customers are quite happy working with Metaco. "We are very happy with our partnership with them. They provide us with the safe technology solution to host the private keys," explains Jean-Marc Stenger, CEO of SG Forge, which is Société Générale's blockchain subsidiary.

Metaco has the advantage of having developed a "tailor-made" digital asset custody offering that appeals to companies in the traditional world. "From the outset, they wanted to target companies that were not crypto-native with an offer that could be adapted to suit their needs, which has proved to be a real strength," explains an expert in the field.

Other players such as Ledger and Fireblocks, which have more standardised solutions that are above all better suited to 100% crypto players, are having more difficulty attracting banks and traditional businesses.

"Ledger Enterprise (corporate offering, ed. note) offers a very interesting product. But it's not compatible with the processes and architecture of a banking institution where you have to be able to have absolute control of all the flows", explains a French banker.

Metaco's only real competitor in the traditional corporate segment is actually Taurus, which is also a Swiss company founded by former traditional financiers.

Launched shortly after Metaco, in 2017, Taurus has created a services platform for businesses that want to manage digital assets.

"We have services ranging from the issuance to the custody of digital assets", explains Victor Busson who is the marketing manager at Taurus, which claims more than 25 customers in the financial sector.

According to someone close to Taurus, solicitations from financial players "have increased since the Metaco takeover". However, this does not mean that there are any firm contracts in the pipeline, but "things are moving in the right direction".

Taurus, which recently set up offices in Paris and London, announced a partnership with Deutsche Bank in September. Other announcements of this style could follow. According to our information, Taurus is in talks with at least one major US bank and another French bank, which are hesitating with Metaco.

In the medium/long term:

So while the Metaco takeover may not have too much impact in the short term, in the medium/long term things could be very different.

"The question of renewing Metaco's contracts is going to come up," explains an industry expert. "Some companies will certainly want to work with a player that is not dependent on a group like Ripple," he adds.

Taurus could obviously benefit from this. But others such as Ledger, Fireblocks and even the sector's new kid on the block, France's DFNS, could also pull their weight 👀.

Fireblocks, which claims 1,800 customers, has made a name for itself on the market, but especially with crypto companies. "Our offering is fairly modular and the MPC (i.e. software, ed. note) gives more flexibility than the HSM (hardware, ed. note) approach", explains a Fireblocks spokesperson, who is already working with some major groups such as BNP Paribas, Unicredit and BNY Mellon.

The aim of Fireblocks, like Ledger, is to succeed in adapting its offering more for traditional companies. "That's clearly our goal," explains Fireblocks, which is valued at $9 billion. The question is whether they will succeed.