Ripple raises $1 billion to build XRP reserves! The world's largest digital asset vault is born.

According to a report by Bloomberg citing informed sources, Ripple Labs is leading a fundraising effort of at least $1 billion to establish a new digital asset vault for XRP. This financing will be conducted through a special purpose acquisition company (SPAC), and Ripple will contribute its holdings of XRP shares.

Ripple raises $1 billion: XRP reserve strategy intentions

(Source: Bloomberg Law)

According to Bloomberg citing sources [report] ( https://news.bloomberglaw.com/business-and-practice/ripple-labs-said-to-lead-1-billion-fundraise-for-xrp-hoard), Ripple Labs is leading a fundraising effort of at least $1 billion to establish a new digital asset vault for XRP. Reportedly, this financing will be conducted through a special purpose acquisition company (SPAC), and Ripple will contribute its holdings of XRP shares. The report states that the financing details and transaction structure are still under discussion and may change.

The use of SPAC structure in the financing of XRP reserves has strategic considerations. A SPAC is a shell company that raises funds through an IPO and then seeks a target company for a merger. Through the SPAC structure, Ripple can complete large-scale financing in a relatively short period of time, providing transparency and governance structure of a listed company for XRP reserves. This approach also offers institutional investors a compliant investment channel.

Ripple's contribution of its held XRP shares is key to this structure. Ripple holds a large amount of XRP, and the injection of these XRP will provide the new entity with an initial asset base. Investors purchasing SPAC shares are essentially buying shares of a digital asset pool backed by XRP. This design is similar to gold ETFs, allowing investors to gain exposure to the price appreciation of XRP without directly holding XRP.

The Block has reached out to Ripple Labs for comment, but has not received a response as of the time of publication. The fact that financing details and transaction structures are still under discussion means that this XRP reserve plan is still in its early stages, and the final structure may differ from current reports.

XRP Reserve Comparison with BTC and ETH: The Gap in Institutional Adoption

Although Bitcoin and Ethereum have dominated the cryptocurrency market this year, especially in terms of institutional adoption, the attention on XRP as the underlying asset of DAT (Digital Asset Trust) has been noticeably lower. This gap reflects that XRP's status in the eyes of institutional investors has not yet reached the level of BTC and ETH.

If successfully established, the new entity may become the largest XRP dedicated digital asset vault. In June this year, Singapore-based Trident Digital announced plans to raise $500 million to establish XRP reserves. Ripple's $1 billion project scale is twice that of Trident, demonstrating its determination and resource advantage in promoting XRP institutional adoption.

The success of the Bitcoin ETF this year has provided a template for other crypto assets. BlackRock's IBIT asset size is approaching $100 billion, proving that institutional investors have a huge demand for compliant crypto investment products. However, the approval process for the XRP ETF is far behind that of BTC and ETH. In this context, establishing an XRP reserve through a special purpose acquisition company (SPAC) may be an alternative solution for Ripple to bypass the ETF approval delays.

Market Challenges and Valuation Dilemmas of DAT Model

However, the DAT model is now under strict scrutiny, as the market performance of major companies including Strategy, Metaplanet, and BitMine has declined, with their enterprise value dropping below the value of their underlying cryptocurrency assets. This phenomenon is referred to as “net asset value discount” (NAV discount), which is a potential challenge faced by the XRP reserve program.

When the market value of a digital asset vault is lower than the value of the cryptocurrencies it holds, it indicates a lack of confidence from the market in the structure or management team. This discount may stem from various factors: management fees eroding value, insufficient liquidity causing the premium to disappear, doubts about the management team's capabilities, or investors preferring to hold cryptocurrencies directly rather than through an intermediary structure.

Strategy (formerly MicroStrategy) is the most famous Bitcoin treasury, whose market value has long been higher than the value of the Bitcoin held, enjoying a premium. However, as the Bitcoin ETF was launched, providing a more convenient investment channel, the premium of Strategy has gradually narrowed and even turned into a discount. This case serves as a warning for the XRP reserve plan: if the XRP ETF is approved in the future, the attractiveness of the SPAC structure may decline.

The performance decline of Metaplanet and BitMine further validates the challenges of the DAT model. The market capitalizations of these companies have fallen below their net asset values, indicating that investors prefer to hold cryptocurrencies directly. For Ripple's XRP reserve program, maintaining a premium or at least avoiding a significant discount will be key to success.

Synergies of GTreasury acquisition

At the same time, this report aligns with Ripple's announcement on Thursday that it is acquiring the fintech company GTreasury, headquartered in Chicago and specializing in financial management systems software and solutions, for $1 billion. Ripple stated in the announcement that its goal is to open up the multi-trillion dollar corporate finance market and gain many of the largest and most successful corporate clients.

The two companies stated that they would initially focus on helping clients enter the global repurchase market and achieve instant cross-border payments at competitive prices. This business expansion creates a perfect synergy with the XRP reserve program. GTreasury's corporate clients may become potential users of XRP, while the establishment of the XRP reserve provides liquidity assurance for these companies to use XRP.

Ripple's dual $1 billion investment (GTreasury acquisition and XRP reserves) demonstrates clear strategic logic: engaging with the corporate finance market through GTreasury and offering institutional-grade investment products via XRP reserves, ultimately driving the widespread adoption of XRP in the corporate finance sector. If successfully executed, this vertical integration strategy will significantly enhance the actual demand for XRP.

Against the backdrop of a sluggish overall market, the world's fifth largest cryptocurrency XRP has fallen by 3.33% in the past 24 hours, trading at a price of $2.35. Although short-term prices are under pressure, the long-term strategic value of the XRP reserve program and the acquisition by GTreasury may gradually be reflected in the price over the coming months.