Robinhood is quietly expanding its foothold in cryptocurrency, and it could present a big challenge to Coinbase’s flagship business


Robinhood

  • Robinhood, the California brokerage known for its free
    stock trading application, is expanding its foothold in the
    crypto world. 
  • Certain Robinhood users have been able to buy crypto
    since the beginning of 2018. 
  • Now, it is hiring developers to build a crypto wallet,
    according to a job advertisement. It is also looking to support
    trading in new coins.
  • Such a product would make it a stronger rival to
    Coinbase, the cryptocurrency exchange and broker, experts
    say. 

Robinhood, the California broker known for pioneering free
stock-trading, is looking to dive deeper into the market for
digital currencies. And Coinbase, one of the largest platforms
for crypto trading, should be worried, market observers tell
Business Insider. 

Robinhood, which
rolled out a cryptocurrency trading offering earlier this year in
some US states
, is looking to hire developers to build-out a
cryptocurrency wallet,
according to a job advertisement
.

Such an offering would allow investors to transfer their crypto
holdings from outside brokerages and wallets into Robinhood.
Currently, if a Robinhood crypto customer wants to transfer coins
in and out of the platform they would have to first sell them,
transfer the money to another platform, and then buy. 

A spokesman for Robinhood declined to provide a timeline on a
wallet offering, but said “people are constantly asking for the
ability to transfer their coins into Robinhood.” 

In addition to providing an on-ramp for Robinhood users to send
coins from elsewhere, the wallet could also provide a more secure
way for Robinhood customers to store their crypto under the same
company umbrella. 

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Robinhood doesn’t charge customers to trade bitcoin or ether on
its platform, versus Coinbase which charges customers a 2%
transaction fee or more for buying and selling cryptocurrency.
Robinhood isn’t the only firm undercutting Coinbase. Circle, the
Boston-based fintech firm, rolled-out
Circle Invest which also doesn’t charge a fee
. To be sure,
Coinbase operates a much larger business outside its retail
brokerage. It operates an institutional-grade exchange and has
been developing more and more products aimed at Wall
Street. 

“If you are trying to attract large holder folks onto the
platform, then [lack of fees] is one way to do it,” said Warren
Hogarth, the founder of fintech firm Empower, said in an
interview with Business Insider. 

Coinbase declined to comment for this story. The firm has
previously defended its fees by pointing out customers can move
physical bitcoin in and out of its platform. Robinhood doesn’t
currently offer that functionality but soon could if they
successfully roll out a wallet. 

“For any customers who’s buying or selling bitcoin or any
cryptocurrency on Coinbase, they will have access to send and
receive their coin, which we believe is a core piece of
functionality. As a result of that we do charge fees,” Dan
Romero, the general manager of Coinbase,
told the Wall Street Journal

New challenges for Coinbase

Robinhood is also interested in supporting the trading of new
coins onto the platform, the job ad suggests. The addition of
news coins and a wallet could better position them against
Coinbase,
which is reported to have made $1 billion in crypto revenues last
year

The bull-run of 2017 helped Coinbase build a massive business
around their brokerage unit. But increased competition presents
“a pretty significant threat for their core bread and butter,”
said Michael Dunworth, the founder of crypto firm Wyre.

“Not only is it hyper-competitive from traditional fintech,” he
said, “add the [international exchanges] to that and it
starts looking like a tough market for Coinbase.”

In November, Japan-based Bitflyer announced it was opening shop
in the US. Dunworth expects other foreign crypto exchanges to
expand into the US. 

As for Robinhood’s crypto future, the job ad makes it clear that
the firm’s ambitions lay beyond their current product
offering. 

“What has been created so far only scratches the surface of how
Robinhood envisions cryptocurrencies to play a role in our user’s
lives,” the ad said.

Still, Robinhood has made it clear that it views crypto as a
gateway to its equities and options businesses, rather than a
money-maker in itself. 

“We are going to break-even on this,” Robinhood cofounder
Baiju Bhatt said
in an interview with Business Insider in January
. “But it
could dramatically increase user growth.”

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