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Robinhood’s crypto trading surges, as overall growth slows

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Robinhood's crypto trading surges, as overall growth slows

After helping a new generation of investors get into stocks, Robinhood is increasingly doing the same for cryptocurrencies.

More than $4 of every $10 that Robinhood Markets Inc. made in revenue during the spring came just from customers trading dogecoin, bitcoin and other cryptocurrencies.

Robinhood also said Wednesday that it lost $501.7 million, or $2.16 per share, compared with a profit of $57.6 million, or 9 cents per share, in last year’s second quarter. Most of the loss was due to accounting changes related to a fundraising round it undertook early this year.

The loss was no surprise after the company had earlier given preliminary estimated results for the quarter. The company’s slowdown in revenue growth was also expected — it more than halved to 131% from 309% in the first three months of the year — and the company again said revenue will likely drop in the summer from the spring.

But the degree of the sharp rise in crypto’s importance to Robinhood’s business was striking. Cryptocurrencies made up 41% of all of Robinhood’s $565.3 million in revenue in the quarter that ended June 30. That’s up from 17% in the first three months of the year and from just 3% at the start of last year. The spring marked the first quarter for Robinhood where new customers were more likely to make their first trade in cryptocurrencies rather than in stocks.

Robinhood CEO Vlad Tenev said in a recent interview with The Associated Press that he wants the company to make it easy to trade any asset its customers are interested in, and that increasingly means crypto.

“They’re interested in exploring this new asset class,” he said. “So, no doubt, crypto has been very culturally relevant through the first six months of the year.”

Tenev also said he sees cryptocurrency companies as Robinhood’s competitors, just like other stock-trading brokerages. Coinbase, a publicly traded crypto exchange, said it had $1.9 billion in transaction revenue during the second quarter, versus Robinhood’s $233 million in crypto-related trading revenue.

With cryptocurrencies, Robinhood makes money by routing its customers’ trade orders to market makers. It’s similar to how Robinhood makes money from its customers trading stocks: It gets payments from Citadel Securities and other big trading firms after sending them the stock orders made by its customers.

Interest in cryptocurrencies surged in the early part of last quarter, leading to a frenzy of trading activity. Bitcoin hit $64,829 in April after starting the year at less than $30,000.

Even dogecoin, whose fans have been trying to help it shed its image as a joke cryptocurrency, soared. It got to 74 cents in May after starting the year at roughly half a penny. The majority of Robinhood’s crypto-related revenue last quarter came from dogecoin, at 62%.

But cryptocurrencies are notoriously volatile, and their prices have continued to swing sharply since hitting those peaks. Bitcoin has since fallen back toward $45,000, and dogecoin has more than halved to roughly 30 cents.

That could hinder Robinhood’s revenue growth going forward. The company said Wednesday that its revenue will likely drop from the second quarter to the third.

“We expect seasonal headwinds and lower trading activity across the industry,” Chief Financial Officer Jason Warnick said in a conference call following the release of the quarter’s results.

Trading for brokerages is typically busiest in the first half of the year, before fading in the second half, he said. Robinhood’s revenue also does best when markets are volatile and customers are trading a lot, and the first two quarters of the year were punctuated by extreme volatility. In the first quarter, GameStop and other “meme stocks” soared to heights that professional investors called irrational, and cryptocurrencies had their own pop in the second quarter.

Worries about potentially slower growth helped send Robinhood shares down 8% in afterhours trading on Wednesday, after they rose 6.7% in the regular session to close at $49.80. Such swings are nothing new in the stock’s young life.

Shares of Robinhood, which is based in Menlo Park, California, have veered between $33.25 and $85 since they began trading at $38 on July 29.


NEW YORK (AP)

Cryptocurrency

Coinbase adds tax center to platforms to report crypto taxes

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Famous cryptocurrency exchange, Coinbase, uncovered plans to add its latest tax center on its platforms to assist U.S.-based customers in figuring out how much taxes they owe the IRS from their cryptocurrency transactions.

When tax day comes, the section will assemble every transaction made and put them all together into one space to facilitate their taxes.

While we might consider some of the leading cryptocurrencies on the market, such as Bitcoin and Ethereum, with the same monetary value as fiat money, the Internal Revenue Service (IRS) considers these decentralized assets as property with monetary value according to the federal agency’s FAQ.

Meaning, to the IRS, any type of cryptocurrency transaction will be considered as capital gains and losses and will be reported as such. In parallel, this also means keeping a record of the asset’s value when bought and sold throughout time.

Coinbase perceives that its new section will reveal “a personalized summary of [a customer’s] taxable activity on Coinbase, broken out over time by realized gains/losses and miscellaneous income.”

Then, this data can be shared with an accountant specializing in cryptocurrency and taxes or can even be implemented into tax software, such as TurboTax. Coinbase also accentuated that in case users were transferring crypto to external exchanges, wallets, or other decentralized finance (DeFi) services, users will also be able to receive tax reports covering an estimate of 3,000 transactions with CoinTracker, for free.

Customers can access the cryptocurrency exchange’s tax section from their account’s profile icon at the top right-hand corner of the interface. Once the “Taxes” shows on the menu item, users can access it and receive reports.

As for the application, users can access the Taxes section from the “Profile & Settings” menu – accessed from the top left of the application’s interface. Moreover, Coinbase is in the works to deliver written guidelines and assistance videos in the upcoming weeks to elaborate on how cryptocurrency and digital assets taxes works.

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Cryptocurrency

Swiss National Bank against issuing retail central bank digital currency

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The Swiss National Bank does not see any overall benefit from issuing a central bank digital currency (CBDC) to be used by the general public and used in day to day transactions, governing board member Andrea Maechler said on Tuesday.

“We believe the risks outweigh the benefits,” Maechler told a financial conference held in Frankfurt, saying a retail CBDC meant central banks taking on the risks carried by the private sector and increased the risk of bank runs.

There also needed to be a balance struck between safeguarding privacy and the potential misuse of retail CBDCs in criminal activity, Maechler said.

Financial inclusion was also not a sufficient argument for CBDCs in Switzerland, Maechler said, with almost 100% of the country’s working population having access to bank accounts, while cash was still widely used.

“This does not mean the SNB is not interested in CBDC, but our focus is to look at the role that wholesale CBDCs could play,” Maechler said, referring to their use in transactions between financial institutions like banks.

The SNB last week said it has successfully used digital currency to settle transactions involving five commercial banks, and has also looked into how the technology can be used to improve cross-border payments..

Still, Maechler remained cautious.

“None of these projects are an indication that the SNB is ready to issue a wholesale CBDC,” she said.


ZURICH (Reuters)

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Cryptocurrency

Singapore bank issues guidelines to discourage crypto trading by public

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The Monetary Authority of Singapore (MAS) on Monday issued guidelines that limit cryptocurrency trading service providers from promoting their services to the general public, as part of a bid to shield retail investors from potential risks.

Singapore is a popular location for cryptocurrency companies due to a comparatively clear regulatory and operating environment and is among the forerunners globally in developing a formal licensing framework.

But the city-state’s authorities have repeatedly warned that trading in digital payment tokens (DPT), or cryptocurrency, is highly risky and not suitable for the general public, as they are subject to sharp speculative swings.

The new guidelines clarify the expectations of MAS that companies should not engage in marketing or advertising of DPT services in public areas in Singapore or through the engagement of third parties, such as social media influencers, to promote DPT services to the general public.

They can only market or advertise on their own corporate websites, mobile applications or official social media accounts.

“MAS strongly encourages the development of blockchain technology and innovative application of crypto tokens in value-adding use cases,” Loo Siew Yee, MAS Assistant Managing Director (Policy, Payments and Financial Crime), said in a statement.

“But the trading of cryptocurrencies is highly risky and not suitable for the general public. DPT service providers should therefore not portray the trading of DPTs in a manner that trivialises the high risks of trading in DPTs, nor engage in marketing activities that target the general public.”


SINGAPORE (Reuters)

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