Robinhood Markets Inc. plans to purchase the European cryptocurrency exchange Bitstamp Ltd. for $200 million. This acquisition is a strategic move for Robinhood, a company primarily known for its stock trading platform, to expand its reach beyond the US and delve into the institutional side of the crypto market.
The deal is anticipated to be finalized in the first half of next year, subject to regulatory approval. This will be Robinhood’s first major venture into the institutional business sector, indicating a significant shift in its business strategy.
However, this acquisition comes at a time when Robinhood is under scrutiny by the US Securities and Exchange Commission (SEC). About a month ago, the SEC warned Robinhood that it might face enforcement action related to its crypto operations.
In May, Robinhood revealed that it had received a Wells notice from the SEC. This notice indicates that the SEC’s enforcement staff has made a preliminary decision to recommend enforcement action against the company, signaling potential legal and regulatory challenges ahead for Robinhood.
Boosting Crypto Portfolio: Robinhood’s Latest Move with Bitstamp :
Bitstamp has built a strong reputation among institutional clients for its reliable trade execution, extensive order books, and high-quality API connectivity. These features make Bitstamp a trusted platform for large-scale and professional trading.
The acquisition by Robinhood means that Robinhood will now have access to Bitstamp’s advanced institutional services. These services include:
1)Bitstamp-as-a-Service: A white-label solution that allows other businesses to use Bitstamp’s trading infrastructure under their own brand.
2)Institutional Lending: Providing loans to institutional clients, a service often used for trading and liquidity purposes.
3)Staking: A service that allows clients to earn rewards by participating in the blockchain process of validating transactions.
By acquiring Bitstamp, Robinhood will immediately benefit from Bitstamp’s established relationships with institutional clients, its proven infrastructure, and its industry-leading products. This move enables Robinhood to enter the institutional crypto market with a solid foundation and a range of advanced offerings.
Robinhood is broadening its product offerings and geographical reach to grow beyond its core business of serving retail traders in the US. Recently, it has added a credit card and retirement products to its portfolio. Furthermore, it has expanded internationally by launching its commission-free trading app in the United Kingdom this year.
The acquisition of Bitstamp will give Robinhood a stronger presence outside the US and significantly enhance its capabilities in the cryptocurrency market. Bitstamp’s robust and trusted platform, known for its resilience during market fluctuations, will provide Robinhood with advanced crypto services and infrastructure.
Following the announcement of this acquisition, Robinhood’s shares rose by 2.6% in premarket trading, indicating positive investor sentiment. Johann Kerbrat, Robinhood’s general manager of crypto, highlighted Bitstamp’s strong reputation for integrating customer experience with safety across different regions, appealing to both retail and institutional crypto investors.
For this acquisition, Robinhood received advice from Barclays Capital Inc., while Bitstamp was advised by Galaxy Digital Holdings Ltd.
Robinhood has been expanding its offerings beyond its original function as a trading app for novice stock and options investors. Over the past year, the brokerage has introduced retirement accounts and a credit card, and plans to launch futures trading later this year. The acquisition of Bitstamp supports this broader strategy by enhancing Robinhood’s crypto trading capabilities.
Following the acquisition, Robinhood’s stock (HOOD) rose to $21.57, reflecting a 3.8% increase. Although Bitstamp is smaller than competitors like Binance, Coinbase, and Kraken in terms of monthly trading volume, it offers significant regulatory credentials and international reach.
Robinhood’s crypto trading revenue has seen a substantial rise, increasing to $126 million in the first quarter from $38 million the previous year. Additionally, cryptocurrency assets under custody more than doubled to $26 billion, and the monthly notional crypto trading volume nearly tripled year-over-year in April.
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