Robinhood Expands Its Commission-Free Crypto Trading to the European UnionDecember 7, 2023
Robinhood Markets, Inc. is officially launching its commission-free crypto trading platform in the European Union, just one week after its international debut with stock-broking services in the UK. Starting today, European investors can buy and sell over 25 cryptocurrencies directly through the Robinhood app, including Bitcoin, Ether (ETH), and Solana (SOL), according to Johann Kerbrat, Robinhood Crypto’s general manager.
According to a report by Emily Nicole for Bloomberg, to incentivize European users, Robinhood is introducing a unique loyalty program. A percentage of each user’s monthly trading volume will be credited back in the form of Bitcoin, essentially a cashback program for crypto enthusiasts.
This launch coincides with a nascent recovery in cryptocurrency prices, fueled by optimism around a potential decline in US interest rates and the anticipation of the first spot Bitcoin exchange-traded fund (ETF) launching in the U.S. in the next few months. In November alone, Robinhood saw a 75% increase in its crypto trading volume compared to the previous month, highlighting the renewed interest among retail investors.
However, Robinhood’s crypto services are currently limited to European investors, with no immediate plans for UK users due to uncertainties in the local regulatory landscape surrounding digital assets.
Robinhood generates revenue through rebates from market makers and trading venues that facilitate trades on its behalf. In the European market, these rebates will be significantly higher, reaching “about 65 basis points” per trade, nearly double the 35 basis points earned in the US.
Despite the recent price surge, overall crypto trading volume remains subdued compared to the peak of the pandemic. This decline has impacted Robinhood’s performance, with its third-quarter revenue dropping significantly due to a 55% decrease in crypto trading volume year-over-year.
Currently, European Robinhood Crypto users cannot transfer their holdings outside the app. However, Kerbrat confirmed Robinhood Crypto’s plans to introduce this feature and additional tokens and staking services in the coming year.
Robinhood has already secured its virtual currency exchange operator license in Lithuania and is actively pursuing approvals in other EU countries. As the bloc’s new Markets in Cryptoassets (MiCA) regulations come into effect in early 2025, Robinhood will need to obtain full authorization as a crypto service provider in at least one EU member state.
Robinhood CEO Vlad Tenev recently appeared on CNBC’s “Squawk Box” to discuss the significant rise in cryptocurrency trading volume on the platform and its impact on the broader market and the company itself.
The interview revealed several key points:
Crypto Trading Volume Spikes 75%
Tenev highlighted an impressive 75% increase in crypto trading volume on Robinhood from October to November. This surge was attributed to a combination of factors, including:
- Robinhood’s Growing Presence: The company has made significant investments in its crypto offerings, focusing on providing customers with a seamless and affordable trading experience. This has led to an increased market share for Robinhood, particularly as the overall crypto market continues to grow.
- Optimism Around Bitcoin ETF: The potential launch of a spot Bitcoin ETF in the United States has sparked excitement among crypto investors, contributing to the recent rally.
- Changes in Rate Environment: The Federal Reserve’s potential move to slow down aggressive interest rate hikes is seen as positive news for risk assets like cryptocurrencies.
- Inflation Hedge: Bitcoin’s perceived ability to hedge against inflation has also attracted investors seeking to protect their purchasing power.
Impact on Robinhood’s Value and Earnings
While the recent surge in crypto activity has benefited Robinhood, Tenev emphasized the company’s diversified business model. Unlike pure-play crypto companies, Robinhood offers a broader range of services, including:
- 24-Hour Market for Equities: This unique feature allows users to trade stocks even after traditional market hours.
- Over 200 Stock Symbols: Robinhood’s expanded selection provides investors with more options to personalize their portfolios.
- Fractional Shares: This innovative feature allows users to invest in any stock, regardless of its price, making portfolio diversification more accessible.
Investment Trends Among Robinhood Users
Tenev shared interesting insights into the investment trends among Robinhood users:
- Bitcoin Dominates: Bitcoin remains the most popular recurring investment on the platform, indicating a strong preference for including it in diversified portfolios.
- Fractional Shares Impact: The introduction of fractional shares has empowered investors to build more diversified portfolios without relying solely on ETFs.
Market Cycles and Meme Stocks
Tenev acknowledged the cyclical nature of the market and the possibility of future meme stock-like phenomena. He reiterated Robinhood’s commitment to providing an impartial platform and supporting customers through periods of high market activity.
Improvements Post-Meme Stock Phenomenon
Learning from the challenges faced during the meme stock frenzy, Robinhood has taken steps to prevent similar situations in the future. These include:
- Infrastructure Enhancement: The company has invested in upgrading its systems to handle increased trading volumes.
- Balance Sheet Expansion: Robinhood has strengthened its financial position to navigate market volatility.
- Customer Education: Increased emphasis has been placed on educating customers about responsible investing practices.
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