Why Robinhood doesn’t allow users to withdraw cryptocurrencies

As the US online trading platform Robinhood is heading for an initial public offering (IPO) in the next few months, filing with the US Securities and Exchange Commission shows why Robinhood does not currently allow users to deposit and withdraw cryptocurrencies on its platform. Robinhood also reiterated that it could change this policy indefinitely.

Why Robinhood doesn’t allow users to withdraw cryptocurrencies

“If we allow customers to withdraw and withdraw cryptocurrencies on our platform in the future, such deposits and withdrawals could result in loss of client assets, disputes and other liabilities that could adversely affect our business, financial condition and results. said the company.

This statement follows a longer passage on the SEC’s stance on cryptocurrencies and the platform’s decisions about which platforms to approve, with regulatory concerns playing a role in the platform’s policy.

Robinhood currently offers a trading platform for a limited number of cryptocurrencies which it claims to be “analyzed in accordance with applicable internal policies and procedures and are not considered securities within the meaning of United States securities laws”.

However, this is not a legal decision and “regardless of our conclusion, we may be subject to legal or regulatory action if the SEC or a court determines that cryptocurrencies currently traded on our platform are” confidential “under US law,” she said.

When the SEC decides that a particular coin is in a security, Robinhood can exclude other coins that “have properties similar to a cryptocurrency identified as a security”.

Therefore, both listing and removing coins or not adding new coins will have a negative impact on the company.

Another problem is of a technical nature as the company states that users must use their private keys to deposit or withdraw cryptocurrencies and can provide additional information.

“When depositing or withdrawing cryptocurrency on or from our platform, some errors can occur, such as typographical errors, mistakes or failure to include information requested by the network,” said Robinhood.

For example, they say that a user could inadvertently deposit money into the public key of the platform or the recipient or into a completely fake wallet – and thus lose money permanently.

“Such incidents can lead to disputes with customers, damage to our brand and reputation, legal claims against us and financial liabilities,” the company explains.

In addition, allowing crypto deposits / withdrawals may expose the company to “high risk” in relation to the possibility of trade sanctions violations, anti-money laundering and terrorist financing violations, and “such fraudulent transactions may be difficult or impossible for us to detect and to devalue “. under certain circumstances. “

Ultimately, a temporary or permanent blockchain “fork” could affect Robinhood’s business as this could lead to new networks, relationships and relationships. Additional security concerns, disruption of the platform’s IT systems, loss of customer trust in the company if it decides not to support split cryptocurrencies, etc.

With all of that said, Robinhood Crypto (RHC) relies on affiliates, third party banks, and transaction venues to provide crypto products and services to its customers, allowing any ability to maintain a complete relationship with them, “in relation to and ability to” process of customer transactions related to RHC’s e-money services that could adversely affect our business, financial condition and results of operations, ”the company said.

However, this does not rule out the possibility that it may be possible to withdraw / deposit cryptocurrencies as it is stated in the submission that “we may offer this feature in the future”.

Earlier announcements suggest that Robinhood and PayPal are considering following in Revolut’s footsteps to enable cryptocurrency withdrawals in third-party wallets to strengthen their competition with exchanges’ electronic currency conversion.

Robinhood doesn’t allow users to withdraw crypto – Robinhood has to pay around $ 70 million in fine

In the first three months of 2021, the platform saw revenue from crypto transactions grow to 17% of total revenue, up from the 4% reported in the last 3 months of 2020.

“While we currently support a portfolio of 7 cryptocurrencies for trading, in the three months ended March 31, 2021, 34% of our crypto trading income was from transactions in Dogecoin (DOGE), compared to 4% in the 3 months of December Ended in 2020 ”, it says in the registration.

Meanwhile, Robinhood reportedly has to pay approximately $ 70 million in fines for system-wide outages and incorrect communications. The US financial industry regulator (FINRA) described it as “the largest fine ever imposed by FINRA, which reflects the scope and severity of the violations.”

$ 57 million will be paid as a penalty and $ 12.6 million as a refund plus interest. “FINRA takes into account the serious and widespread damage that customers have suffered, including millions of customers who have received false or misleading information from the company, millions of customers who have been affected by its systems, the company ceased operations in March 2020 and thousands of customers the company agreed to trade options when a customer did were inappropriate, “it said.

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