In the face of a possible regulatory challenge to its primary revenue stream, Robinhood is doubling down and seemingly going all in on crypto.
As reported earlier this month, the online investment and trading platform has been testing a new cryptocurrency wallet.
In terms of the mechanics of the wallet itself, consumers would be able to send and receive digital currencies, including bitcoin, without having to convert the holdings to fiat currency (e.g. dollars) along the way.
Read also: Robinhood Tries Out Crypto Wallet, Transfer Features
As reported, the features themselves have been tied to a beta version of the company’s iPhone app. There’s also a waitlist.
Now, there’s a long road between beta test and official deployment, and anything could change in the meantime.
But speed seems to be on the company’s mind. Just after the initial reports surfaced about the crypto wallet, the company said in a statement that the wallets will begin rolling out next month. The company said in a blog post that it will “receive supported cryptocurrencies into your Robinhood account. This means you can consolidate your coins into one account so it’s easier to track your portfolio, move supported coins into your Robinhood account so you can trade those coins commission-free, and more.”
At this point, it would be hard to overstate the importance of crypto to the company — which shows up in the latest data from its first earnings report as a publicly-traded entity.
Read more: Robinhood: More Than 60 Pct Of Funded Accounts Traded Crypto
As revenues in the latest period more than doubled, year over year, the crypto revenues $233 million of the $451 million in transaction related top line. A year ago, crypto-related sales were a relatively meager $5 million. Over 60% of the company’s funded accounts — where the cumulatively tally was 22.5 million — traded cryptocurrencies in the period. Dig a bit deeper, and it turns out that 62% of the crypto trading in the period centered around Dogecoin.
It’s conceivable that the wallets would let users (eventually) spend cryptos, or at least use them directly in investments and trades, avoiding what has commonly been referred to as a stutter step, where dollars are converted into crypto on one side of the transaction, and the crypto is converted into dollars on the other end.
By bringing the wallets on board, so to speak, Robinhood may in effect be leaping from the regulatory pan into the regulatory fire. The Securities and Exchange Commission (SEC) is already looking into the controversial practice known as payment for order flow, wherein brokers receive compensation for routing trades to a particular market maker. The SEC has said it is mulling banning the practice here in the states; Robinhood has said that’s not likely to happen.
Roughly 80% of the company’s latest consolidated top line came from transaction based revenues, which includes routing. It makes sense, then, that Robinhood would want to diversify — but then again cryptos, and exchanges, are also under a significant amount of scrutiny, too, by regulators and lawmakers. SEC chair Gary Gensler has said cryptos have gotten too big to survive without regulatory oversight.
It may be hard to find a safe haven from volatility. Given the fact that Robinhood is now publicly traded, sentiment plays out on the stock exchanges for Robinhood, just as it does for the holdings investors bid up or ratchet down on its platform every trading day.
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