Robinhood doubles down on crypto: $200 million acquisition of the established compliant exchange Bitstamp, stock price surges 90% this year

Author: Nancy, PANews

Founded in 2011, Bitstamp is considered one of the most compliant exchanges, with operations in Luxembourg, the UK, Slovenia, Singapore, and the United States. It is not only one of the four crypto companies approved by the UK's FCA in the past year but also the first European crypto exchange to receive in-principle approval in Singapore. Bitstamp has frequently served as the "preferred" exchange for Ethereum founder Vitalik Buterin. Now, Bitstamp is set to become the crypto segment of the traditional securities trading software Robinhood.

Recently, possibly due to a slowdown in crypto trading activities and regulatory pressures, Robinhood announced it is acquiring the global crypto exchange Bitstamp for $200 million to expand its international footprint. Meanwhile, the crypto business has become a significant driver of Robinhood's growth, with its stock price experiencing a substantial surge this year.

$200 Million Acquisition of Bitstamp: Business Expansion and Regulatory Pressure as Key Reasons

On June 6, Robinhood announced it would acquire Bitstamp, with the transaction to be completed in cash for $200 million, expected to close in the first half of 2025, subject to customary closing conditions and regulatory approvals. In this acquisition, Barclays Capital will serve as Robinhood's exclusive financial advisor, while Galaxy Digital Partners will act as Bitstamp's exclusive financial advisor.

The announcement stated that this strategic partnership would enable Robinhood to better expand beyond the U.S. and would bring Robinhood a trusted and reputable institutional business.

Regarding the reasons for the acquisition, Robinhood Crypto General Manager Johann Kerbrat recently stated in an interview with Unchained that Robinhood aims to leverage the acquisition of Bitstamp to expand its potential market. The exchange holds valid licenses and registrations in over 50 countries or regions, which can bring Robinhood customers from the EU, the UK, the U.S., and even parts of Asia.

In this regard, Fortune magazine predicts that this transaction could add 4 to 5 million new crypto customers to Robinhood. Additionally, Bernstein's research report indicated that Robinhood's acquisition of Bitstamp would enable it to offer a broader range of cryptocurrency products to more institutional clients. This would expand from the current 15 tokens in the U.S. and over 30 in Europe to more than 85 available on Bitstamp, while also providing Robinhood with global liquidity to improve the economic efficiency of its platform. Bitstamp's diversified services (such as staking, stablecoins, trading, custody, and prime brokerage) will help Robinhood attract more institutional clients and potentially accelerate its expansion in the European market.

Moreover, the regulatory environment in the U.S. is also a significant reason for this acquisition. In May, Robinhood received a Wells Notice from the SEC. "The lack of regulatory clarity in the U.S. is one of the main reasons we chose to expand into the EU market. Since the SEC chair publicly stated that crypto companies need to register, Robinhood has been trying to register and has met with them 16 times. For safety, Robinhood only lists 15 assets on its platform and never offers staking services, yet still received a Wells Notice from the SEC, which we are extremely disappointed about," Johann Kerbrat admitted in the interview.

Investment bank Architect Partners believes that the SEC's Wells Notice indicates that regulators have sufficient information to potentially take enforcement action against Robinhood, and the acquisition of Bitstamp will expand Robinhood's global influence, thereby mitigating the SEC's stringent regulatory impact, ensuring Robinhood's participation regardless of any actions taken by the U.S.

According to CoinGecko data, as of June 11, Bitstamp's daily trading volume was nearly $200 million, with monthly visits reaching 1.21 million, ranking 41st among various exchanges. Although Bitstamp's trading volume once ranked among the top three globally, its competitive advantage in the market is no longer as pronounced. Notably, Ripple also participated in acquiring a stake in Bitstamp in 2023 to help the company expand its global influence beyond the payments sector. However, Bitstamp is also facing regulatory pressures from multiple countries, such as previously halting token trading and ETH staking services for U.S. customers, terminating services in Canada, and being blocked by India's financial intelligence agency.

Increasing Expansion of Crypto Business: Stock Price Up Nearly 90% Since the Beginning of the Year

Since the beginning of this year, Robinhood has been accelerating its business expansion, including partnerships with crypto projects and enriching its crypto trading services and asset types.

For instance, in January, Robinhood launched trading services for 11 spot Bitcoin ETFs, available to all U.S. customers in retirement and brokerage accounts; in February, Robinhood's wallet service, Robinhood Connect, integrated with MetaMask, allowing its users to use the latter's aggregation services to purchase cryptocurrencies; in March, Robinhood officially launched a crypto wallet for Android users, supporting sending, receiving, and storing cryptocurrencies such as 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 their Robinhood balance. In the same month, Robinhood Crypto launched staking features for European customers and introduced localized applications. Additionally, Robinhood has attracted investors by listing popular assets like TON, WIF, and BONK.

These initiatives have also driven Robinhood to achieve a surge in 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 grew by 59% year-on-year to $329 million, primarily driven by cryptocurrency revenue of $126 million (up 232%) and options revenue of $154 million (up 16%). Robinhood's nominal cryptocurrency trading volume in Q1 increased by 224% year-on-year to $36 billion, a growth rate far exceeding that of nominal stock trading volume (40%), despite the latter's trading volume being larger at $225 billion.

However, as retail investors' interest in digital assets has cooled, Robinhood's cryptocurrency trading volume has also seen a significant decline. According to its operational data released for April, Robinhood's crypto trading fell by 57% from March to $10.1 billion, exceeding the decline of competing exchanges, but still up 173% compared to the same period last year. Additionally, the daily trading volume on the stock trading platform also dropped by 43% to about 400,000 trades.

Benefiting from asset growth and increased trading volume, Robinhood's stock price has surged this year, with Wall Street investment bank JMP even raising Robinhood's target price to $30 and reaffirming its "market outperform" rating. However, the institution also believes that due to Bitstamp's minimal profitability, the acquisition is not expected to bring substantial value. As of the time of writing, Robinhood's stock price is $23.43, up only about 2.1% from the closing price at the time of the acquisition announcement, but up over 89.3% since the beginning of the year. Recently, Robinhood also announced that its board approved a $1 billion stock repurchase plan, expected to be executed over the next 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 initiatives, but whether it can leverage Bitstamp to bring more users and capital to the platform remains uncertain.