Robinhood CEO: “Crypto is more than just an asset class”

During service negotiation Robinhood Markets (HOOD -2.83%) released first quarter results on Thursday evening, management made an important statement about the cryptocurrency market. In the eyes of CEO Vlad Tenev, crypto is not a fad and is more than just an abstract idea you can invest in.

“We believe crypto is more than just an asset class,” Tenev said on the earnings call. “By enabling anyone with a smartphone and an internet connection to create and use powerful financial tools, the technology behind crypto has the potential to become the operating system that powers the future of services. financial.”

It’s a grand statement with game-changing implications. I think Tenev is right too. Let’s learn about his vision for a crypto-powered global economy and see how Robinhood is making it a reality.

Isn’t that a self-serving argument?

First, this statement was not made in a vacuum. Cryptocurrencies are big business for Robinhood today, and only growing in importance over time.

Crypto trading accounted for 25% of the company’s revenue in the first quarter, up from 21% a year ago. Digital assets now represent a large and stable portion of investment assets in Robinhood’s custody:

Image source: Robinhood.

Given the scale of Robinhood’s cryptocurrency business, a cynic might jump to the conclusion that Mr. Tenev has an agenda to push here, undermining the importance and validity of the whole idea.

Maybe, but he’s always right

Just because Robinhood has skin in the cryptocurrency game doesn’t mean the CEO’s bullish announcement is fake. In fact, the company’s unique position in the market at the crossroads of traditional investing, the digital currency phenomenon, and a relatively inexperienced user base should give Tenev a clear view of how the market will evolve. .

At the same time, the executive is clearly on the right track. If crypto-based apps and services can deliver high-quality financial services to “anyone with a smartphone and an internet connection,” investors everywhere should rejoice in the economic value the revolution will unlock. in markets such as Latin America, India and Africa.

Billions of consumers can break free from underdeveloped financial systems. This is good news for individuals getting better financial tools, and for institutions and businesses developing and operating decentralized financial services in the developing world. It’s also a big development for retailers and service providers who are currently held back by unreliable payment and finance systems.

A youth gazing at the distant horizon.

Image source: Getty Images.

Here’s Robinhood’s long-term crypto plan

Additionally, the CEO was quick to elaborate on the challenges ahead and what Robinhood is doing to overcome them.

In order to become useful to your average consumer who has little experience with online trading systems, apps providing blockchain-based financial tools globally must be easy to use with heavily discounted trading fees. The company is not content to work on these problems, but is preparing to deploy concrete solutions.

“Cryptography is complicated and the fees on other platforms are so high that many products are primarily aimed at wealthy early adopters,” Tenev said. “In the coming months, you will hear more about our plans to contribute to this ecosystem.”

Robinhood recently provided cryptocurrency wallets to millions of customers and introduced trading in several new crypto names. Next, the company integrates its trading platform with the Bitcoin (BTC -0.51%) Lightning Network, which will allow instant Bitcoin transfers at near-zero transaction fees.

This is just the start of a larger ambition. Robinhood is keeping its long-term crypto strategies under wraps for now, but we should see the company make several announcements of crypto-based decentralized financial services in 2022.

In turn, these improvements should be good news for Robinhood shareholders. This stock is starting to look like a smart way to invest in the cryptocurrency market without buying digital coins or tokens.

Michael J. Birnbaum