Robinhood Acquires Bitstamp: A Push for US Institutional Crypto

Robinhood, a popular stock trading app, is poised to significantly enhance its cryptocurrency services by acquiring Bitstamp, a well-established cryptocurrency exchange. 

The deal, valued at $200 million, is part of Robinhood’s strategic initiative to cater to institutional clients within the United States. Pending regulatory approvals, this acquisition is anticipated to be completed in the first half of 2025.

Responding to Customer Demand for Crypto Diversification

This strategic move by Robinhood is largely in response to its customers’ growing demand for diversified cryptocurrency products. Johann Kerbrat, the general manager of Robinhood Crypto, conveyed to The Wall Street Journal that this expansion comes after years of increasing engagement from customers expressing their desire for a broader range of crypto offerings.

Vlad Tenev, the co-founder and CEO of Robinhood, further underlined the transformative potential of cryptocurrencies in reshaping the financial landscape. 

In a statement on the social media platform X on June 6, Tenev discussed the upcoming integration with Bitstamp, highlighting its global reach, core spot exchange capabilities, and industry-leading products such as crypto-as-a-service, institutional lending, and staking. He emphasized that these elements are fundamental to Robinhood’s strategy to fundamentally reorganize the financial system.

Robinhood Expands Crypto Offerings with Institutional-Grade Services

Since introducing Bitcoin and Ether trading in 2018, Robinhood has been actively expanding its cryptocurrency offerings. The incorporation of Bitstamp is set to elevate Robinhood’s capabilities by adding institutional-grade services, including institutional lending, staking, and Bitstamp’s white-label solution known as Bitstamp-as-a-service.

Kerbrat emphasized the significance of Bitstamp’s acquisition, noting its reputation for reliability and its proven resilience through various market cycles. 

He lauded the Bitstamp team for establishing a strong reputation among both retail and institutional crypto investors by seamlessly coupling customer experience with safety across various geographies.

Established in 2011, Bitstamp boasts over 50 active regulatory licenses and registrations worldwide, positioning it as a globally recognized and trusted platform. 

Despite the acquisition, Bitstamp will retain its branding and continue its operations under its established name, maintaining its unique identity within the industry. 

Robinhood Faces Legal Hurdles in US Crypto Business 

However, the expansion comes amidst looming legal challenges for Robinhood in the United States. In early May, Robinhood received a Wells notice from the U.S. Securities and Exchange Commission (SEC), signaling the culmination of an investigation into Robinhood’s U.S.-based crypto business. 

This notice hinted at a preliminary decision to recommend enforcement action due to alleged violations of securities regulations. The SEC’s investigation into Robinhood has focused on aspects such as cryptocurrency listings and crypto custodian operations. 

Despite Robinhood’s proactive attempts to collaborate with the SEC for regulatory clarity, including an initiative to register its operations formally, the issuance of the Wells notice has set a complex backdrop for the acquisition.

Dan Gallagher, the chief legal, compliance, and corporate affairs officer at Robinhood Markets, expressed disappointment over the SEC’s decision. In a blog post dated May 6, Gallagher detailed Robinhood’s continuous efforts to engage with the SEC, aiming to clear regulatory hurdles and foster transparency. 

He underscored the company’s commitment to working with the regulator to address and resolve any potential violations. The receipt of the Wells notice does not conclusively indicate that the SEC will pursue litigation against Robinhood.

 However, it does highlight the regulatory complexities involved in expanding into the cryptocurrency space. Robinhood has indicated its intention to continue its cooperation with the SEC to ensure compliance and mitigate any legal risks associated with its operations.

 As the situation unfolds, Robinhood remains focused on its mission to democratize finance for all, navigating through regulatory challenges while expanding its cryptocurrency offerings.