Ripple has expanded into stablecoins, custody, and leveraged exchange-traded fund swap financing, becoming a notable participant in a business long dominated by major banks. According to ChainCatcher, the company entered the market after acquiring crypto prime broker Hidden Road last year, and the business is now called Ripple Prime.

The Wall Street Journal reported that leveraged ETF managers use total return swaps and other derivatives to amplify the daily moves of a stock or index, while banks or brokers sell the contracts, collect fees, and hedge their exposure by buying stocks or derivatives. Morningstar Direct said there are 593 leveraged ETFs in the U.S. with more than $256 billion in assets, including 426 single-stock leveraged funds, a category approved by regulators in 2022.

Ripple Prime is working with multiple ETF providers and wants to expand to other asset managers, including hedge funds. On Tuesday, Ripple Prime said it will provide prime brokerage, clearing, and financing services to hedge fund Brevan Howard. Ripple Prime President Noel Kimmel said the business is a growing and meaningful part of the company.

The report said one fund pays Ripple the overnight bank funding rate plus 4 percentage points, which was roughly equivalent to 8% annualized as of Tuesday. That cost is included in the leveraged fund's net asset value and is separate from an approximately 1% management fee.