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Robinhood’s Bold Crypto Futures Plan: Expansion Amid Regulatory Scrutiny

Robinhood  Markets Inc. is going to acquire Bitstamp next year for approximately $200 Million. Before this deal is closed they are considering entering the cryptocurrency futures market. This could expand its offering in the US as well as in Europe. 

Expansion into Europe and the US

Robinhood plans to use Bitstamp’s licenses to offer perpetual futures in Europe. According to anonymous sources, the commission-free trading app also intends to launch CME-based futures in the U.S. for Bitcoin and Ether. Despite their significance, Robinhood is not in a rush to immediately launch these plans, as stated by one of their spokespersons.

Earlier this year, the company acquired a futures broker license from Marex and despite receiving a Wells notice from the SEC they have been broadening their crypto strategy and offerings. The notice is issued when the regulator plans to bring enforcement action against a company.

Regulatory Hurdles and Competitive Landscape

Robinhood has seen rapid growth and a significant earnings boost in the first quarter but faces regulatory inspection. The Wells notice came shortly after the company’s strong earnings report. Competitors like Coinbase Global Inc already offer derivative services and Robinhood’s entry to this space could increase the competition.

Market Dynamics and Demand

The crypto derivative market is much bigger than that of the spot market globally. According to reports, spot market trading volume on centralized exchanges was $1.58T while the monthly derivative volume reached $3.69T. Since the approval of the US Bitcoin ETF, the demand for futures has increased significantly. The potential offerings by Robinhood could attract a new segment of crypto traders. 

What to expect?

Despite SEC sending a Wells notice to Robinhood, it plans to close the $200M deal to acquire Bitstamp early next year. This shows its plan to enhance its market presence in both the US and Europe by offering derivatives. The outcome of the regulatory hurdles and competition will shape Robinhood’s future in the crypto market.

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