Big changes may be coming to Robinhood’s crypto platform, and market experts say Coinbase should be worried

Robinhood

• Robinhood, the California brokerage known for its free stock trading application, is expanding its foothold in the crypto world.
• Certain Robinhood users have been able to buy crypto since the beginning of 2018.
• Now, it is hiring developers to build a crypto wallet, according to a job advertisement. It is also looking to support trading in new coins.
• A wallet would make it a stronger rival to Coinbase, the cryptocurrency exchange and broker, experts say.

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Robinhood, the California broker known for pioneering free stock-trading, is looking to dive deeper into the market for digital currencies. And Coinbase, one of the largest platforms for crypto trading, should be worried, market observers tell Business Insider.

Robinhood, which rolled out a cryptocurrency trading offering earlier this year in some US states, is looking to hire developers to build-out a cryptocurrency wallet, according to a job advertisement.

Such an offering would allow investors to transfer their crypto holdings from outside brokerages and wallets into Robinhood. Currently, if a Robinhood crypto customer wants to transfer coins in and out of the platform they would have to first sell them, transfer the money to another platform, and then buy.

A spokesman for Robinhood declined to provide a timeline on a wallet offering, but said “people are constantly asking for the ability to transfer their coins into Robinhood.”

In addition to providing an on-ramp for Robinhood users to send coins from elsewhere, the wallet could also provide a more secure way for Robinhood customers to store their crypto under the same company umbrella.

Robinhood doesn’t charge customers to trade bitcoin or ether on its platform, versus Coinbase which charges customers a 2% transaction fee or more for buying and selling cryptocurrency. Robinhood isn’t the only firm undercutting Coinbase. Circle, the Boston-based fintech firm, rolled-out Circle Invest which also doesn’t charge a fee. To be sure, Coinbase operates a much larger business outside its retail brokerage. It operates an institutional-grade exchange and has been developing more and more products aimed at Wall Street.

“If you are trying to attract large holder folks onto the platform, then [lack of fees] is one way to do it,” said Warren Hogarth, the founder of fintech firm Empower, said in an interview with Business Insider.

Coinbase declined to comment for this story. The firm has previously defended its fees by pointing out customers can move physical bitcoin in and out of its platform. Robinhood doesn’t currently offer that functionality but soon could if they successfully roll out a wallet.

“For any customers who’s buying or selling bitcoin or any cryptocurrency on Coinbase, they will have access to send and receive their coin, which we believe is a core piece of functionality. As a result of that we do charge fees,” Dan Romero, the general manager of Coinbase, told the Wall Street Journal.

New challenges for Coinbase

Robinhood is also interested in supporting the trading of new coins onto the platform, the job ad suggests. The addition of news coins and a wallet could better position them against Coinbase, which is reported to have made $1 billion in crypto revenues last year.

The bull-run of 2017 helped Coinbase build a massive business around their brokerage unit. But increased competition presents “a pretty significant threat for their core bread and butter,” said Michael Dunworth, the founder of crypto firm Wyre.

“Not only is it hyper-competitive from traditional fintech,” he said, “add the [international exchanges] to that and it starts looking like a tough market for Coinbase.”

In November, Japan-based Bitflyer announced it was opening shop in the US. Dunworth expects other foreign crypto exchanges to expand into the US.

As for Robinhood’s crypto future, the job ad makes it clear that the firm’s ambitions lay beyond their current product offering.

“What has been created so far only scratches the surface of how Robinhood envisions cryptocurrencies to play a role in our user’s lives,” the ad said.

Still, Robinhood has made it clear that it views crypto as a gateway to its equities and options businesses, rather than a money-maker in itself.

“We are going to break-even on this,” Robinhood cofounder Baiju Bhatt said in an interview with Business Insider in January. “But it could dramatically increase user growth.”

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