Trading app giant Robinhood is issuing a warning about the potential damage future crypto regulations could do to its business.
In an amendment to an S-1 Form filed with the U.S. Securities and Exchange Commission (SEC), the financial services company lays out the numerous risks related to its cryptocurrency products and services.ADVERTISEMENT
Some of those risks involve the haziness surrounding what future industry regulations might look like, according to Robinhood.
“The regulatory landscape involving cryptocurrencies is constantly evolving and [Robinhood Crypto] may be subject to fines, penalties, or loss of regulatory licenses if the SEC or any other regulators issue new regulations or interpretive guidance related to cryptocurrencies that prohibit any of our current business practices.”
Customers began testing cryptocurrency wallets on Robinhood this month. In September, the trading platform rolled out a new feature that allows crypto investors to buy digital assets commission-free on a recurring basis.
In the SEC filing, Robinhood notes that it can’t guarantee that the company’s wallets will be protected. The trading platform says it holds the “overwhelming majority” of its crypto in storage, but also uses wallets to support day-to-day operations.
“We cannot provide assurance that any or all of our wallets will not be hacked or compromised such that cryptocurrencies are sent to one or more private addresses that we do not control, which could result in the loss of some or all of the cryptocurrencies that RHC holds in custody on behalf of customers. Any such losses may be significant, and we may not be able to obtain insurance coverage for some or all of those losses.”
In January, Robinhood restricted its customers from buying crypto altogether, citing “extraordinary market conditions.” The firm also halted users from buying shares in Gamestop (GME), which rapidly rose in price after a flurry of retail trading buzz on Reddit.
Grayscale’s Top Executive Joins Robinhood as New Chief Compliance Officer
Robinhood hires a new CCO, the chief compliance officer of Grayscale
Robinhood brokerage app has welcomed Benjamin Melnicki as a new Chief Compliance Officer, who is also the holder of the same position at Grayscale Investments. He joined Grayscale in early January this year.
At the moment, Robinhood’s cryptocurrency arm is facing scrutiny from financial regulators. Last year, Robinhood was a target of an investigation connected to anti money laundering and certain cybersecurity problems experiences by its crypto division.
*Robinhood's Crypto Unit Hires New Chief Compliance Officer From Grayscale
*Benjamin Melnicki's Appointment Follows Scott Hershorin's Departure in June
*Appointment Comes as Robinhood's Crypto Unit Faces Regulatory Scrutiny$HOOD— *Walter Bloomberg (@DeItaone) September 24, 2021
As reported by U.Today previously, later this year, the brokerage firm plans to roll out cryptocurrency wallets for its users. The trials of wallets will kick off in October and will allow customers to deposit and withdraw cryptocurrencies to addresses beyond Robinhood seamlessly.
Robinhood confirms crypto wallet feature on app starting in October
Trading app Robinhood has opened up a waitlist to test a crypto wallet for users to hold their tokens.
According to a Wednesday blog post, in October Robinhood plans to start testing a digital wallet feature on its app that enables users to send and receive cryptocurrencies. The move may encourage more Robinhood users to use the app for crypto trading, as it currently only allows them to buy crypto with U.S. dollars and trade on the platform — users can’t deposit or withdraw in crypto.
Robinhood did not specify which tokens the digital wallet would support, but the app currently provides commission-free trading for Bitcoin (BTC), Ether (ETH), Bitcoin Cash (BCH), Litecoin (LTC), Bitcoin SV (BSV), Dogecoin (DOGE), and Ethereum Classic (ETC). The company said it planned for the wallets to have security features including identity verification, multi-factor authentication, and email and phone verification “to keep coins safe from hacks and other threats.”
The trading app experienced a surge in popularity earlier this year, likely due to retail investors from Reddit purchasing DOGE in an attempt to pump up the price. Since that time, Robinhood has made more options available to crypto traders, including a recurring investment feature allowing users to purchase multiple crypto assets on a daily, weekly, bi-weekly or monthly basis.
Robinhood debuted crypto trading three years ago, with trading volume growing significantly in the last year. The company generated $5 million in crypto trading services for all of 2020, but $233 million in the second quarter of 2021 — this represented 41% of its $565 million quarterly revenue.
Users to Begin Testing Robinhood Crypto Wallets Next Month
US-based major financial services company Robinhood confirmed that crypto wallets are coming to the platform, allowing their users to move crypto in and out of the app.
They shared in today’s announcement that “starting next month, the first customers will begin testing crypto wallets on Robinhood.”
The next step is to observe the experience and feedback of those testing the new service, and share it with the rest of the community, after which they “will continue to roll out access to more and more customers through our waitlist.”
“We’re not first to the market — we’ve been taking our time to make sure that we build this in a phased approach,” Robinhood’s Chief Product Officer Aparna Chennapragada told CNBC. “We’ll have a few customers come in, iterate on the product, get the customer feedback and then expand from there.”
Interested users can already join the waitlist.
This wallet will allow users to move their crypto in and out of the app, send crypto to other wallet addresses, as well as receive supported cryptocurrencies. “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,” said the post.
The wallets are coming with security features such as identity verification, multi-factor authentication, as well as email and phone verification.
And while the company recently announced the launch of crypto recurring investments, they’ve made it available to all users starting today. This allows users to buy chosen coins automatically, commission-free, “and with as little as [USD] 1 on a schedule of your choice,” said the announcement.