The stock-trading app Robinhood provided tech-savvy individuals easy access to trading stocks in 2014 and is trying to do the same for cryptocurrency trading.
With more than 13 million users, Coinbase is still the largest mainstream brokerage for bitcoin trading. However, the brokerage received occasional criticism for its fees that can be excessive at times and fluctuate depending on the time of day and usage volume. Here is where the app from Robinhood comes to the rescue.
The app plans to offer the no-fee trading service starting in February 2018 on a limited basis. According to Robinhood’s CEO Baiju Bhatt, only users “in good standing that have had accounts for a relatively long period of time” will initially have access to the service and only in five states. Robinhood continues to work on acquiring necessary licenses in all states. However, the company received their licenses only for California, New Hampshire Massachusetts, Missouri and Montana so far. According to Robinhood’s own survey of its users, 95% of users are either “very likely” or “extremely likely” to invest in cryptocurrencies. That level of interest and the limited initial access should create a long waiting list for the new service.
Initially, the Robinhood Crypto app will offer trading in only two cryptocurrencies – ether (Ethereum network’s blockchain token) and bitcoin. However, users can track price movements 14 additional cryptocurrencies – bitcoin cash, bitcoin gold, dash, ethereum classic, lisk, litecoin, monero, NEO, ogecoin, OmiseGo, Qtum, ripple, stellar and Zcash. Interested users do not have to wait until trading commences next month, but can set up monitoring and tracking for any of the 16 cryptocurrencies right now.
It is important to note that while the new app might provide easy access to cryptocurrencies, the risk of loss is at least as high as trading stocks or exchange-traded funds (ETFs), if not higher. Additionally, unlike its parent company – Robinhood Financial – Robinhood Crypto is not registered with the U.S. Securities and Exchange Commission (SEC) and is not a member of the Financial Industry Regulatory Authority (FINRA).
However, Robinhood Crypto is registered with the Financial Crimes Enforcement Network (FinCEN) as a money services business. That means that “Robinhood Crypto is subject to the requirements of the Bank Secrecy Act as well as the money transmitter laws of most U.S. states, Bhatt said.
Since bitcoin rose more than 1,000% and ether rose almost 10,000% in the past 12 months, demand for cryptocurrencies appears to be strong and Robinhood plans to capture first mover advantage.
Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.