Robinhood, one of the most popular US brokers, has recently taken a significant step in the crypto market by expanding its services in the European Union.
Adam Nasli, Head Analyst at international broker comparison site BrokerChooser, shared his thoughts on this development:
“The recent weeks have seen a notable surge in the crypto market, with the impending launch of the Spot Bitcoin ETF in the US. Robinhood, known for its strong emphasis on crypto services, is now making a substantial advance by extending its offerings to the EU.”
Factors behind Robinhood’s EU expansion
Comprehensive EU crypto regulation
The EU’s crypto regulation, known as MiCA, places it ahead of the curve compared to the US. While the US grapples with regulatory uncertainty and SEC enforcement actions, the EU has introduced comprehensive regulations. Since June 2023, numerous companies have applied for EU crypto licenses.
Johann Kerbrat, GM of Robinhood Crypto, emphasized the EU’s robust regulatory framework as a pivotal factor in their decision: “The EU has developed one of the world’s most comprehensive policies for crypto asset regulation, which is why we chose the region to anchor Robinhood Crypto’s international expansion plans.”
Robinhood needs to diversify revenue
Post-Robinhood’s IPO, Q2 2023 marked the only quarter the company achieved profitability, with a net profit of $25 million. The major reason behind is the significant improvement of net interest revenue:
- net interest revenue grew by 170%
- while transaction-based revenue dropped by 7%
in 2023 YTD compared to the same period.
Although crypto contributes less than 7% to Robinhood’s total revenue in 2023 YTD, the positive sentiment in the crypto market can drive revenue. For example, crypto revenue made up 38% of total revenue in 2021 when there was a crypto hype.
While crypto currently constitutes less than 7% of Robinhood’s total revenue in 2023 YTD, the optimistic sentiment in the crypto market has the potential to significantly boost revenue. For instance, in 2021, during the peak of the crypto hype, crypto revenue accounted for an impressive 38% of the total revenue.
Meeting younger customers’ demand
With the average age of Robinhood customers being 32, the younger generation shows a strong interest in crypto investments. According to a Charles Schwab 401k research, 47% of millennials and 43% of Gen Z users surveyed invest in crypto, compared to only 4% of boomers.
Recognizing this trend, Robinhood aims to cater to its younger audience by prioritizing crypto as a key product development direction.
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