Robinhood is making a significant leap into the cryptocurrency market by acquiring Bitstamp for $200 million. This bold move comes even as Robinhood faces potential legal challenges from the Securities and Exchange Commission (SEC).
Last month, Robinhood revealed it had received a Wells notice from the SEC, suggesting the regulator is considering a lawsuit against the company for alleged securities law violations related to its digital-assets business.
Strategic Expansion into Crypto
The acquisition of Bitstamp is a strategic effort to strengthen Robinhood’s foothold in the crypto sector. This move will enable Robinhood to serve institutional crypto clients and expand its international presence. Bitstamp, founded in 2011, brings with it over 50 global licenses and registrations, making it a valuable addition to Robinhood’s portfolio.
Enhancing Crypto Capabilities
Robinhood has been evolving beyond its roots as a trading app for novice stock and options investors. Over the past year, the brokerage has introduced retirement accounts, launched a credit card, and plans to add futures trading later this year. The acquisition of Bitstamp aligns with this broader strategy, enhancing Robinhood’s crypto trading capabilities. Following the acquisition announcement, Robinhood’s stock (HOOD) saw a 3.8% surge, trading at $21.57.
Bitstamp, although smaller than giants like Binance, Coinbase, and Kraken in terms of monthly trading volume, offers significant regulatory credentials and international reach. Robinhood’s revenue from crypto trading increased to $126 million in the first quarter, up from $38 million the previous year. Cryptocurrency assets under custody more than doubled to $26 billion, and monthly notional crypto trading volume nearly tripled year over year in April.
Future Plans Amid Regulatory Challenges
Despite the looming SEC lawsuit, Robinhood is determined to expand its crypto offerings. Johann Kerbrat, general manager of Robinhood Crypto, emphasized that customer demand is driving the company’s focus on enhancing its crypto products. The Bitstamp acquisition, expected to close in the first half of next year pending regulatory approval, will allow Robinhood to offer more advanced crypto services internationally.
In the U.S., Robinhood plans to focus on crypto-for-crypto trading for institutional clients. While the Wells notice is not a definitive indication of an SEC lawsuit, it provides Robinhood the opportunity to respond and argue against the potential civil lawsuit. Kerbrat expressed optimism about Robinhood’s position in the U.S. market and its ongoing engagement with regulators, underscoring the firm’s commitment to its crypto business.
