Following the SEC’s measures against Binance and Coinbase, Robinhood is reconsidering its cryptocurrency service.
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 are facing 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, stated the US Congress with information on the platform’s position on cryptocurrency offerings on Tuesday, June 6, 2023. The comments followed a lawsuit filed by the Securities and Exchange Commission (SEC) 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. Specific tokens on Binance’s platform were referred to as securities in the lawsuit brought against the exchange.
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 that have been listed in the SEC case against Binance.
Having a broker-dealer license allows Robinhood to trade securities. Gallagher, a former SEC commissioner, does not, however, 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 as of yet. However, they are likely to be taken down if Robinhood thinks it might be charged on these tokens.
The Impact Of Crypto Delisting On Robinhood
A small but considerable amount of Robinhood’s earnings comes from cryptocurrency. Robinhood reported total net revenues of $441 million for the first quarter of 2023. Less than 10% of that total, or $38 million, came from the company’s cryptocurrency sales.
Not all of the cryptocurrency tokens that Robinhood lists have been included in the SEC lawsuit, it is important to remember. 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 largest cryptocurrencies, such as Bitcoin and Ethereum, were not mentioned by the SEC. The agency also failed to highlight important Proof-of-Work tokens like Litecoin or Dogecoin.
Major stablecoins like Tether (USDT) and USD Coin (USDC) were not included in the lawsuit. 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 of large cryptocurrencies could have a detrimental effect on the price of those cryptocurrencies.