- According to Robinhood’s CEO, cryptocurrencies can give people economic power that they do not have today.
- The company invests heavily in decentralized financial tools.
- In this way, Robinhood drives change as it prepares to exploit its positive impact.
As a trade service Robinhood markets (NYSE: FTC -2.83%) As it reported its first quarter results last Thursday night, management issued an important statement on the cryptocurrency market. In the eyes of CEO Vlad Tenev, crypto is not a fashion phenomenon and more than just another abstract idea to invest in.
“We believe that cryptocurrencies are more than just an asset class,” Tenev said in the earnings call. “Because anyone with a smartphone and an Internet connection can create and use powerful financial tools, the technology behind crypto has the potential to become the operating system of the financial services of the future.”
It is a magnificent statement with groundbreaking implications. I also think Tenev is right. Let’s take a look at his vision of a crypto-based global economy and see how Robinhood makes it a reality.
Is not that a selfish argument?
First, that statement was not made in a vacuum. Cryptocurrencies are big business for Robinhood today and it will only grow in importance as time goes on.
Cryptocurrency trading contributed 25% of the company’s revenue in the first quarter, up from 21% in the same period last year. Digital assets now form a large and stable part of Robinhood’s assets under management:
PICTURE SOURCE: ROBINHOOD.
Given the scale of Robinhood’s cryptocurrency business, one cynic might conclude that Mr. Tenev pursues an agenda here that undermines the meaning and validity of the whole idea.
Maybe, but he’s still right
The mere fact that Robinhood plays in cryptocurrencies does not mean that the CEO’s optimistic announcement is wrong. The company’s unique market position at the crossroads between traditional investments, the digital currency phenomenon and a relatively inexperienced user base should give Tenev a clear overview of market developments.
At the same time, the CEO is clearly on the right track. If crypto-based apps and services can provide quality financial services to “anyone with a smartphone and an internet connection”, investors across the globe should be excited about the economic value the revolution will unleash in markets such as Latin America, India and Africa.
Billions of consumers can break free from poorly developed financial systems. This is good news for the people who receive better financial tools, and for the institutions and companies that develop and operate decentralized financial services in developing countries. It is also a fantastic development for retailers and service providers, which are currently hampered by unreliable payment and financing systems.
Here’s Robinhood’s long-term crypto plan
The CEO also addressed the challenges ahead and what Robinhood is doing to address them.
To be useful to the average consumer with little experience with online trading systems, apps that offer blockchain-based financial instruments globally need to be easy to use and significantly reduce trading fees. The company is not only working on these problems, but is also preparing to implement practical solutions.
“Cryptocurrencies are complicated, and the fees on other platforms are so high that many products are primarily aimed at wealthy early adopters,” Tenev says. “In the coming months, you will hear more from us about our plans to contribute to this ecosystem.”
Robinhood recently provided millions of customers with cryptocurrency wallets and introduced trading in several new cryptocurrencies. Next, the company will move its trading platform into Bitcoin (BTC -0.41%) Integrate Lightning Network, which enables instant bitcoin transfers for almost zero transaction fees.
This is just the beginning of a major project. Robinhood still keeps its long-term crypto strategies hidden so far, but by 2022, the company is likely to announce more crypto-based decentralized financial services.
In return, these improvements should be good news for Robinhood shareholders. This stock seems to be a viable way to invest in the cryptocurrency market without actually buying digital coins or tokens.
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This article is written by Anders Bylund and was published on Fool.com on 30/4/2022. It has been translated so that our German readers can participate in the discussion. The Motley Fool owns shares in and recommends Bitcoin.