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Robinhood Buys Cryptocurrency Exchange BitStamp for $200 Million Despite Possible SEC Lawsuit
Robin Hood plans to buy Cryptocurrency exchange BitStamp plans to expand its cryptocurrency business internationally even as it faces increasing scrutiny from national regulators.
The financial services company he said Thursday would purchase BitStamp for $200 million in cash to help it expand its cryptocurrency business around the world. Founded in Slovenia in 2011, BitStamp has a significant international presence with more than 50 active licenses to operate globally. The majority of the company’s revenue comes from Europe.
“The acquisition of Bitstamp is an important step in the growth of our cryptocurrency business. Bitstamp’s long-standing and highly trusted global exchange has demonstrated resilience through market cycles,” said Johann Kerbrat, managing director of Robinhood Crypto, in a statement.
While Robinhood targets overseas, trouble with regulators is brewing at home. Last month, the Securities and Exchange Commission sent the company a Wells Notice, informing it that the regulator could sue after a “preliminary determination” that Robinhood had violated securities laws. The Wells Notice does not necessarily mean that the SEC will proceed with a lawsuit, but it is a step that regulators take before determining whether or not to proceed with formal enforcement proceedings. The company has the opportunity to explain to regulators why it should not take enforcement action within 30 days. The SEC evaluates the response in making its final decision. Robinhood’s impending acquisition of BitStamp likely won’t be relevant to the SEC since BitStamp’s operations are primarily overseas.
“We firmly believe that the assets listed on our platform are not securities and look forward to working with the SEC to clarify how weak any case against Robinhood Crypto would be on both the facts and the law,” Official Robinhood Compliance and Corporate Affairs, Dan Gallagher said in May declaration.
In that statement, the company said it has been conservative about the types of tokens listed on its platform. It said it has also avoided offering products targeted by the SEC, such as lending and “staking,” in which cryptocurrency owners can earn rewards by placing part of their cryptocurrencies to help verify transactions on certain blockchains that use the “proof of stake”. .” The SEC has sued the largest US-based cryptocurrency exchange, Coinbasebecause it claims that the exchange offered non-nominal titles through its staking rewards program.
With the acquisition of BitStamp, Robinhood will introduce its first institutional business. It will also move into staking and lending abroad, although it is limited to the United States
The SEC, chaired by Gary Gensler, has taken this path a years-long campaign against cryptocurrencies, with mixed results. Even though Gensler collected some legal victories against cryptocurrency players, faced a setback when a judge ruled in August that the SEC had unreasonably denied crypto asset manager Grayscale’s request to create a spot Bitcoin ETF. The SEC approved several spot Bitcoin ETFs in January, and within months, the financial vehicles have piled up billions of dollars in inflows.
Despite the SEC’s warning, Robinhood has moved forward with cryptocurrencies for good reason. According to quarterly earnings, crypto transactions generated $126 million in revenue in the first quarter, compared to $38 million in the same period last year. Cryptocurrencies were the second-largest revenue driver for the company behind options trading in the first quarter.
Robinhood shares were trading 1.45% higher at $23 as of midday Thursday following the acquisition announcement.