Robinhood bets on EU crypto trading to offset revenue dip

abdelaziz Fathi

Commission-free brokerage Robinhood Markets plans to expand its operations into the European Union and the United Kingdom, with intentions to launch crypto trading and a brokerage in these regions soon.

Despite these expansion plans, Robinhood’s third-quarter earnings report painted a mixed picture. The company’s shares dipped in after-hours trading due to reported revenues falling short of analyst expectations, as lower cryptocurrency volumes weighed heavily on transaction-based revenue. Net revenue was reported at $467 million, falling below the expected $478.9 million but still showing a 29% increase from the same quarter the previous year.

The Q3 earnings showed transaction-based revenues decreased by 11% to $185 million year over year, impacted by a 55% drop in crypto trading volumes. As a result, crypto-related revenue for the quarter stood at $23 million, a sharp decline from the previous year. This decline in crypto trading activity reflects broader market conditions, including regulatory changes in the UK affecting crypto promotions and the discontinuation of support for tokens involved in SEC lawsuits against crypto exchanges.

“With an experienced team in place, we will soon launch brokerage operations in the U.K.,” Robinhood said in its third-quarter earnings statement on Tuesday. “As another step in global expansion, we are also planning to launch crypto trading in the EU following our U.K. launch,” the firm added.

Despite the downturn in trading revenues, the no-fee app doubled its net interest revenue, which climbed to $251 million, benefiting from higher interest rates and growth in interest-earning assets. This includes revenue from margin loans and corporate cash.

However, equity trading revenue fell by 13% to $27 million, and the number of monthly active users dropped by 16% to 10.3 million. While options revenue remained stable at $124 million, the decreased user engagement reflects fading influences from the meme-stock frenzy and the drying up of pandemic stimulus funds.

Amid these challenges, the discount broker has pursued diversification and service expansion, offering new products such as IRAs, all-day trading, and Robinhood Gold. Furthermore, the platform’s strategic buyback of shares seized from Sam Bankman-Fried, associated with the now-defunct FTX helped mitigate the impact of the crypto empire collapse on its operations and customers.

Earlier in July, Robinhood appointed Jordan Sinclair, a former Freetrade executive, to run its yet-to-be-launched UK business as it prepares to renew its push to win over British investors.

The Silicon Valley-headquartered firm, whose mobile app lets users buy and sell public stocks without trading ‎fees, aims to introduce brokerage services for retail investors in the UK later this year. Robinhood’s offering is particularly popular among the “millennial” population, who appreciate the ease of using the app to trade several asset classes without fees.

The arrival of Robinhood in the UK market would introduce competition for domestic rivals such as Freetrade and Lightyear, as well as traditional retail stock broking firms like Vanguard, AJ Bell, and Hargreaves Lansdown.

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