Why Robinhood Just Bought Bitstamp For $200 Million

Exchange company Robinhood just doubled down on its crypto efforts by scooping up Bitstamp, one of the largest crypto players in Europe for just $200 million.

As Robinhood Crypto GM Johann Kerbrat explained in a new interview, this now puts Robinhood in a much stronger position to take on Coinbase by inheriting more than 50 global licenses and Bitstamp’s 4 million users.

“There's a lot of reasons why we were excited about this deal, but I think the three key reasons for us was that, one, it accelerates our crypto international expansion. Two, it brings a globally scaled exchange to Robinhood. And three, it really introduces the first institutional business to the company.”

Robinhood shares rose 7% on the news Thursday as investors celebrated Robinhood’s amplified bet on crypto.

The deal comes at an interesting time, given the fact that the Securities and Exchange Commission hit Robinhood with a Wells Notice for potentially offering unregistered securities last month. Kerbrat mentioned the company continues to work with the agency, but also intends to keep moving the business forward.

Bitstamp notably offers far more tokens available for trading than just the couple dozen on Robinhood. When asked how quickly Robinhood might change its strategy, Kerbrat was cautious, emphasizing that any additions would follow Robinhood's rigorous framework for listing assets. "We always ensure that new coins meet our standards for technical security and operation," he said.

Looking ahead, Robinhood does find itself in a unique position. It has already experimented in traditional markets with extended hours trading, and Kerbrat expressed enthusiasm about the potential for tokenizing real-world assets.

"Tokenization offers numerous benefits, including risk management, 24-hour trading, fractionalization, and real-time settlement," he said. At a House Financial Services hearing on the pros and cons of tokenizing assets Wednesday, the head of digital assets at the Depository Trust & Clearing Corporation noted the same when asked about Robinhood’s stumbles in 2021 when GameStop stock swings forced it to halt trading on the shares.

“One of the attributes we believe that tokenization along with smart contracts would allow [is] the automation and increase in efficiency of margin calculation and margin movement,” DTCC Digital Assets head Nadine Chakar said during her testimony. “We do believe that's one of the efficiencies to be able to deliver faster and more efficiently.”

Kerbrat also highlighted the strategic advantage of Robinhood's platform, which caters to both retail and institutional markets. He pointed out that institutions have shown interest in connecting with Robinhood's scalable and cost-effective platform. "This acquisition enables us to serve institutions more effectively and expand our business beyond retail," he explained.

Robinhood's acquisition of Bitstamp is not just a significant business move; it's a bold statement about the company's vision for the future of finance. As Kerbrat succinctly put it, "We want Robinhood to be at the forefront of financial innovation, and this acquisition is a major step towards achieving that goal."

At $200 million, Bitstamp got bought for just half of its reported valuation back in 2018. The deal is expected to close early next year.