In what could be one of the first investments by a crypto-based firm in a major U.S. firm that is publicly traded, Ripple Inc. has arranged to invest up to $50 million in MoneyGram International Inc. Ripple is the company behind the XRP digital currency, The Wall Street Journal reported.
Ripple’s Chief Executive Brad Garlinghouse said, according to the newspaper, “This deal is a major milestone for the entire industry.” The crypto company agreed to purchase $30 million worth of shares in MoneyGram along with warrants to purchase its stock at $4.10 per share. In addition, the deal encompasses warrants for up to $20 million in additional stock that is newly issued at $4.10 a share as well at the discretion of MoneyGram.
MoneyGram has tapped into foreign exchange markets for settlements in the past. As a result, the company had to purchase currencies ahead of time regularly. By changing to the XRP digital currency, however, it forecasts lower operating costs along with the value of working capital it needs. It also reportedly believes that the move will bring in improved earnings as well as free cash flow.
News of the investment comes after it was reported last January that Ripple was connecting with MoneyGram to pilot the XRP digital currency for use in the latter’s payment flows. In an announcement at the time, the two companies said that MoneyGram would pilot the use of XRP though xRapid.
Through the terms of the pact at the time, MoneyGram would let people “safely and efficiently send cross-border payments to friends, families and business partners,” noting that the “current model for these payments requires money transfer companies to use pre-funded accounts across the globe to source liquidity. Newer blockchain technologies have the potential to revolutionize this process and optimize capital deployment.”
The linkup is strategic, the firms noted at the time, and will help MoneyGram delve into how blockchain can improve efficiency and bolster operations.