Robinhood’s app launched about three years ago as a way for customers, mostly younger investors, to trade stocks through their smartphones for free. Robinhood also has a premium paid service, and in December launched options trading. The company now has more than 3 million users, with 78 percent falling into the so-called millennial age category of 18 to 35 years old.
For cryptocurrency trading, Robinhood will have no investment minimums or maximums, and no withdrawal limits. The start-up will hold most of the digital coins offline in what is called cold storage. The practice prevents hackers from stealing the coins.
“We will connect to many exchanges, up to a dozen or more, over the next several months,” Tenev said. “We want to break even on this business, not to profit from it. We view this as an opportunity to expand our customer base and give our customers more access to functionality.”
List of digital coins Robinhood users can view
Source: Robinhood
But with just five states at launch Robinhood will not likely pose a significant threat to Coinbase, the leading U.S. cryptocurrency exchange. Coinbase has more than 13 million customers around the world and has money transmitter licenses in 36 states, including New York. The February rollout of cryptotrading to five states will be in phases, and Robinhood said it hopes to offer cryptocurrency trading to New York residents in the future, but noted that the state and others may require specific licensing and approvals.
Both fintech start-ups and more traditional players have been far more cautious about cryptocurrency trading. Some online brokerages such as E-Trade and TD Ameritrade offer access to bitcoin futures, but not the digital currency itself.
Online financial advisor Betterment said in a Jan. 16 blog post that cryptocurrency investing is like high-risk early stage investing in companies. The post also said that speculation is driving most of the price action in digital currencies today. Competing advisor WealthFront also said in December that it does not intend to incorporate bitcoin into its investment management service.
— CNBC’s Eugene Kim contributed to this report.
Clarification: This story has been updated to reflect that Robinhood’s stock trading app was launched about three years ago.
