Author: Nancy, PANews
Founded in 2011, Bitstamp is considered one of the exchanges with high compliance, with business in Luxembourg, the United Kingdom, Slovenia, Singapore and the United States. It is not only one of the four crypto companies approved by the UK FCA in the past year, but also the first European crypto exchange to obtain in-principle approval in Singapore. It has also been the "royal" exchange of Ethereum founder Vitalik Buterin many times. Now, Bitstamp is about to become the crypto section of the traditional stock trading software Robinhood.
Recently, perhaps in the face of slowing crypto trading activities and regulatory pressure, Robinhood announced that it is acquiring the global crypto exchange Bitstamp for $200 million to expand its international presence. At the same time, the crypto business has become an important driving force for Robinhood's performance growth, and its stock price has also jumped sharply this year.
Spending $200 million to acquire Bitstamp, business expansion and regulatory pressure are important reasons
On June 6, Robinhood announced that it would acquire Bitstamp. The transaction will be completed in the form of US$200 million in cash and is expected to be completed in the first half of 2025, subject to conventional closing conditions and regulatory approvals. In this acquisition, Barclays Capital will serve as Robinhood's exclusive financial advisor, and Galaxy Digital Partners will serve as Bitstamp's exclusive financial advisor.
The announcement stated that the strategic partnership will enable Robinhood to better expand outside the United States and will bring trusted and reputable institutional business to Robinhood.
As for the reason for the acquisition, Robinhood Crypto General Manager Johann Kerbrat recently said in an interview with Unchained that Robinhood hopes to expand its potential market by acquiring Bitstamp. The exchange has valid licenses and is registered in more than 50 countries and regions around the world, which can bring Robinhood customers from the European Union, the United Kingdom, the United States and even parts of Asia.
In this regard, Fortune magazine predicts that this deal will not only add 4 million to 5 million new crypto customers to Robinhood. At the same time, Bernstein also pointed out in a research report that Robinhood's acquisition of Bitstamp will enable Robinhood to provide a wider range of cryptocurrency products to more institutional clients. From the current 15 tokens in the United States and more than 30 in Europe, expanding to more than 85 on Bitstamp, it will also enable Robinhood to obtain global liquidity, thereby improving the economic benefits of its own platform. Bitstamp's diversified services (such as staking, stablecoins, trading, custody and prime brokerage) will help Robinhood attract more institutional clients and may accelerate its expansion in the European market.
In addition, the US regulatory environment is also an important reason for this acquisition. In May this year, Robinhood also received a Wells Notice from the US SEC. "The lack of regulatory clarity in the United States is one of the main reasons why we chose to expand into the EU market. After the SEC chairman publicly stated that crypto companies need to register, Robinhood has been trying to register and met with him 16 times. At the same time, for safety reasons, Robinhood only lists 15 assets on the platform and never provides pledge services, but still received a Wells Notice from the SEC. We are extremely disappointed with the SEC's response." Johann Kerbrat admitted in an interview.
Investment bank Architect Partners believes that the SEC's Wells Notice informed Robinhood that regulators have enough information to take enforcement action against it, and that the platform's acquisition of Bitstamp will expand Robinhood's global influence, thereby weakening the SEC's strong regulatory influence and ensuring Robinhood's participation in any action taken by the United States.
According to CoinGecko data, as of June 11, Bitstamp's daily trading volume was nearly $200 million, with 1.21 million monthly visits, ranking 41st among many exchanges. Although Bitstamp's trading volume once ranked among the top three in the world, the exchange's market competitive advantage is no longer obvious. It is worth mentioning that Ripple also participated in the acquisition of some Bitstamp shares in 2023 to help the company expand its global influence and go beyond the payment field. However, Bitstamp is also facing regulatory pressure from many countries, such as previously stopping providing token trading and ETH staking services to US customers, terminating services in Canada, and being blocked by the Indian Financial Intelligence Agency.
The company has stepped up its crypto business expansion, and its stock price has risen by nearly 90% since the beginning of the year.
Since the beginning of this year, Robinhood has been accelerating its business expansion, including cooperating with crypto projects, enriching crypto trading services and asset types, etc.
For example, in January this year, Robinhood launched trading services for 11 spot Bitcoin ETFs, which are open to all U.S. customers in retirement accounts and brokerage accounts; in February, Robinhood's wallet service Robinhood Connect integrated MetaMask, allowing its users to use the latter's aggregation service to purchase cryptocurrencies; in March, Robinhood officially launched a crypto wallet to Android users, supporting the sending, receiving and storage of cryptocurrencies on Ethereum, Bitcoin, Dogecoin, Arbitrum and Polygon; in early May, Uniswap Labs announced a partnership with Robinhood, allowing users to purchase cryptocurrencies using debit cards, bank transfers or directly from Robinhood balances. In the same month, Robinhood Crypto launched a staking function to European customers and launched a localized application. In addition, Robinhood also attracts investors by launching popular assets such as TON, WIF, and BONK.
These measures also led to a surge in Robinhood's revenue in the first quarter of this year. According to Robinhood's previously released financial results for the first quarter of fiscal year 2024, its transaction-based revenue increased by 59% year-on-year to US$329 million, mainly driven by US$126 million in cryptocurrency revenue (up 232%) and US$154 million in options revenue (up 16%). Robinhood's Q1 cryptocurrency nominal trading volume increased 224% year-on-year to US$36 billion, a much higher growth rate than the growth in stock nominal trading volume (40%), even though the latter had a larger trading volume of US$225 billion.
However, as retail investors' interest in digital assets has cooled, Robinhood's cryptocurrency trading volume has also fallen sharply. According to its published operating data for April, Robinhood's crypto trading has fallen 57% from March to $10.1 billion, exceeding the decline of its competitor exchanges, but still up 173% from the same period last year, and the average daily revenue trading volume of the stock trading platform has also fallen 43% to about 400,000 transactions.
Benefiting from asset growth and increased trading volume, Robinhood's stock price has also soared this year. Wall Street investment bank JMP even raised Robinhood's target price to $30 and reiterated its "market outperform" rating. However, the agency also believes that due to the minimal profitability of the acquisition target Bitstamp, the transaction is not expected to bring substantial value-added. As of the time of writing, Robinhood's stock price was $23.43, up only nearly 2.1% from the closing price of the acquisition announcement, but up more than 89.3% from the beginning of the year. Not long ago, Robinhood also announced that its board of directors approved a $1 billion stock repurchase plan, which is expected to be implemented within two to three years starting in the third quarter of this year.
Overall, Robinhood is increasing its influence in the crypto space through multiple business layouts, but it remains to be seen whether it can use Bitstamp to bring more users and funds to the platform.