Robinhood warns crypto, payment for order flow regulation poses risk to business model
Robinhood has sounded the alarm to investors about the potential risks to its business model related to increased regulatory oversight of cryptocurrencies and payment for order flow (PFOF), a payment agreement with market makers that allows Trading platforms offer low commission or no commission trades. .
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According to Robinhood, order flow payment and transaction discounts from cryptocurrency trading accounted for 79% of the company’s total revenue in the second quarter, with PFOF accounting for 38% and cryptocurrencies. 41%.
“The regulation of the cryptocurrency industry continues to evolve and is subject to change. In addition, securities and commodities laws and regulations and other bodies of law may apply to certain cryptocurrency companies, ”the platform said in an S-1 amended filing Friday.
“These laws and regulations are complex and our interpretation of them may be subject to challenge by relevant regulators. Future regulatory developments are impossible to predict with certainty. ability to enable clients to buy, hold and sell cryptocurrencies with us in the future and may significantly and negatively affect our business. “
Additionally, the company cited a June agenda from the Securities and Exchange Commission, which noted that the agency would consider proposing rules next year to “modernize the structure of the stock market,” including d ‘possible new rules on order flow payment; and an August interview with SEC Chairman Gary Gensler in which he said a total ban on PFOF was “on the table.”
“Any new or strengthened PFOF regulations may result in increased compliance costs and may otherwise significantly decrease our transaction-based revenues, and may also make it more difficult for us to expand our platform in certain jurisdictions,” said the company.
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Robinhood’s warning comes as the company seeks approval for a previously announced share sale of up to 97.9 million shares. The SEC informed Robinhood in August that it was reviewing stock sales. No sale can be made until the agency has completed its review and declared it effective.
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Bitcoin, the world’s largest cryptocurrency, is trading at around $ 57,400 per coin at the time of publication, according to real-time price monitoring by CoinDesk, while rivals Ethereum and Dogecoin are trading at around 3, respectively. $ 500 and 23 cents per coin.