Following the SEC’s measures against Binance and Coinbase, Robinhood is reconsidering its cryptocurrency service amidst discussions of a potential Robinhood delist.
Some coins that Robinhood may delist include Solana, Cardano, and Polygon. The SEC’s measures may cause the entire cryptocurrency market to crash.
Since the most recent regulatory crackdown is already forcing big exchanges to reconsider their offerings, crypto assets face an existential threat in the US. Robinhood, a trading app, is considering removing some crypto assets from its marketplace.
The legal director of Robinhood, Dan Gallagher, told the US Congress about the platform’s position on cryptocurrency offerings on Tuesday, June 6, 2023. The comments followed a lawsuit the Securities and Exchange Commission (SEC) filed against significant cryptocurrency exchanges.
Robinhood is considering delisting 18 different tokens it currently provides that the SEC has designated as unregistered securities. These include Cardano (ADA), Solana (SOL), and Polygon (MATIC).
What Pressure Led To Robinhood’s Delisting?
The U.S. Securities and Exchange Commission (SEC) announced an investigation into Binance and Coinbase, two of the biggest cryptocurrency exchanges, on Monday, June 5. In the lawsuit brought against the exchange, specific tokens on Binance’s platform were referred to as securities.
BNB, BUSD, Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Cosmos (ATOM), Sandbox (SAND), Decentraland (MANA), Algorand (ALGO), Axie Infinity (AXS), and COTI are the coins listed in the SEC case against Binance.
Having a broker-dealer license allows Robinhood to trade securities. However, Gallagher, a former SEC commissioner, does not think that the license allows it to trade the cryptocurrencies mentioned in the SEC filings in a secure manner.
There has not been a delisting of any cryptocurrency yet. However, if Robinhood thinks it might be charged on these tokens, they are likely to be taken down.
The Impact Of Crypto Delisting On Robinhood
A small but considerable amount of Robinhood’s earnings comes from cryptocurrency. For the first quarter of 2023, Robinhood reported total net revenues of $441 million. Less than 10% of that total, or $38 million, came from the company’s cryptocurrency sales.
It is important to remember that not all of the cryptocurrency tokens that Robinhood lists have been included in the SEC lawsuit. However, because Robinhood only caters to US customers, it has few opportunities for geographic diversification.
Payments for order flow account for the majority of Robinhood’s earnings. In other words, when users place transactions, Robinhood grants market makers the authority to carry them out. Market makers pay a small fee to Robinhood for this, about a cent per share.
On the other hand
The SEC did not mention the largest cryptocurrencies, such as Bitcoin and Ethereum. The agency also failed to highlight important Proof-of-Work tokens like Litecoin or Dogecoin.
The lawsuit did not include major stablecoins like Tether (USDT) and USD Coin (USDC). It solely cites the BUSD stablecoin from Binance, whose issuer is Paxos.
Why This Is Important
Robinhood is a popular stock and cryptocurrency trading app that ranks among the most popular of its kind worldwide. Delisting large cryptocurrencies could have a detrimental effect on their prices.
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