Robinhood (HOOD) Plans to Begin EU Crypto Trading in Near Term
As part of its efforts to expand globally, Robinhood Markets, Inc. HOOD plans to start cryptocurrency trading in the European Union (“EU”) and brokerage operations in the U.K. in the coming weeks.
In its third-quarter earnings release, the company stated, “With an experienced team in place, we will soon launch brokerage operations in the U.K. As another step in global expansion, we are also planning to launch crypto trading in the EU following our U.K. launch.”
Notably, HOOD’s third-quarter crypto-related revenues fell almost 55% from the prior-year quarter to $23 million. Shares of the company lost 14.3% following the release of its results primarily because of a slowdown in trading activity. HOOD’s third-quarter transaction-based revenues declined 11% from a year ago.
The EU expansion move by HOOD comes at a time when various other crypto firms are suspending serving U.K. customers because of the implementation of the new promotions rules effective Oct 8, 2023.
The Financial Conduct Authority (“FCA”) has established new guidelines for marketing crypto assets to consumers, which is a significant step toward establishing a regulatory framework in the U.K.
Starting Oct 8, consumers in the U.K. have greater protection as crypto asset firms’ marketing is now required to be clear, fair and not misleading, and labeled with prominent risk warnings.
The new rules, which strengthen consumer protection in a high-risk area, also coincide with a greater interconnectedness between the worlds of crypto and traditional finance.
Notably, until July 2020, the Office of the Comptroller of the Currency did not grant permission to banks in the United States to hold cryptocurrencies. The amendment post-July gave banks the go-ahead to begin exploring cryptocurrency operations.
While more banks and financial institutions started embracing cryptocurrencies after witnessing increased demand for the emerging market, crypto assets like Bitcoin and Ethereum remained largely unregulated in the U.K., which was worrisome.
Because of increased scams and fraud cases, JPMorgan’s JPM retail bank, Chase, in the U.K., decided to restrict customers’ access to cryptocurrency-related transactions. The bank said that from Oct 16, there would be a limit on the ability of its customers to engage in crypto transactions in the U.K.
A JPMorgan spokesperson stated, “We've seen an increase in the number of crypto scams targeting UK consumers, so we have taken the decision to prevent the purchase of crypto assets on a Chase debit card or by transferring money to a crypto site from a Chase account.”
JPM entered the U.K. market with the launch of its digital-only consumer bank under the Chase brand in September 2021. Since then, it has attracted more than 1.6 million customers.
Chase was not the first bank to block or restrict crypto transactions. Earlier this year, banks like NatWest Group plc NWG and Banco Santander SAN imposed tighter restrictions on U.K. customers looking to use crypto.
In order to protect its customers from crypto-related scams, NatWest imposed new limits on the daily and monthly amount consumers can send to crypto exchanges. NWG customers can only send a maximum of £1,000 per day and £5,000 over a 30-day period to crypto exchanges.
Similarly, Spain’s Santander said that it would block U.K. customers from sending real-time payments to crypto exchanges. While SAN prohibits payments from a customer’s account to Binance, customers can transfer funds to their accounts from Binance.
Over the past six months, shares of Robinhood have lost 7.8% (with the stock losing more than 14% in a day’s trading because of weaker-than-expected third-quarter 2023 results) against 2.4% growth of the industry.
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Currently, HOOD carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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