Ripple Moves from Crypto into Wall Street Finance

Ripple is expanding into one of Wall Street’s less visible but highly profitable businesses: financing leveraged exchange traded funds. Through Ripple Prime, the former Hidden Road brokerage acquired for $1.25 billion, the company is providing swaps that allow funds to deliver two or three times the daily return of a stock or index.

The opportunity is sizable. The United States has 593 leveraged exchange traded funds managing more than $256 billion, including 426 funds tied to individual stocks. To create their promised returns, these funds enter into total return swaps with banks or brokers. The financing provider charges a fee and hedges its exposure by purchasing shares or derivatives.

Ripple’s crypto origins matter, although not because these swaps necessarily run on a blockchain. Hidden Road built relationships with crypto hedge funds that were often underserved by traditional prime brokers. Ripple can now offer those clients services across digital assets, conventional securities, derivatives, clearing and financing. It can also serve newer ETF issuers that may lack established relationships with major banks.

That position places Ripple between two financial systems. Hidden Road contributes the institutional machinery and risk expertise, while Ripple brings crypto native customers and a broader digital asset ecosystem. If stablecoins and tokenized collateral are eventually incorporated into the platform, that bridge could become an operational advantage as well as a distribution advantage.

The economics are attractive, but the risks are real. One fund cited by The Wall Street Journal pays Ripple the overnight funding rate plus four percentage points, equivalent to roughly 8 percent annually at current rates. Those costs ultimately reduce investor returns. Meanwhile, a sudden decline of more than 50 percent in an underlying stock could wipe out a leveraged fund and leave its swap provider exposed.

Ripple’s expansion shows how crypto firms are entering traditional finance not by replacing Wall Street, but by acquiring its infrastructure and serving customers that incumbent banks may overlook.










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