Crypto Exchanges Eye Taking on Robinhood With Expansion Into Stock Trading

(Bloomberg) — Crypto exchanges FTX US and Bitstamp USA may offer stock trading to clients, an expansion that will increase their competition with old-school financial firms and newer, cool players like Robinhood Markets Inc.

Most Read From Bloomberg

FTX US is working on adding stock and options trading, and will likely launch in “a couple of months,” President Brett Harrison said Tuesday, repeating previous data from the company along those lines. The spokesperson will not elaborate.

It was not clear whether FTX US would seek to become an official exchange – a designation that only a handful of companies including the New York Stock Exchange and Nasdaq have won from regulators.

The fact that this question needs to be asked, though, highlights the breadth of crypto-trading firms compared to their counterparts in traditional asset classes. Cryptocurrency exchanges also tend to have brokerage arms through which clients can make trades that are routed to the exchange. More than stocks, the NYSE and Nasdaq are just stock exchanges. Brokerages such as Robinhood and Charles Schwab Corp. They are completely separate companies.

Meanwhile, smaller competitor Bitstamp USA, one of the oldest active cryptocurrency exchanges, is also considering entering stocks, non-fungible tokens and crypto derivatives, CEO Robert Zagota said in an interview.

Zagotta said that offering stock trading would create a simplified experience for Bitstamp’s more than 4 million users, but that it is “a very competitive space, and there are some very important players in it.” Such a move would require significant investments, he said, so “we have to be convinced that we have the right to win in this area.”

He added that if it decides to pursue this expansion, Bitstamp could build the product internally, with partners or consider acquisitions, which “could be an accelerator from a licensing perspective.”

According to Harrison of FTX US, whose former employer Jane Street was a big player in stock trading, initial stock features will include stock checking, displaying key fundamentals such as market capitalization and price-to-earnings ratios, and tracking portfolio performance.

Cryptocurrency exchanges have expanded to include new lines of business to reduce their dependence on trading returns. Volume on some of the largest cryptocurrency exchanges has plummeted during the recent market sell-off, and some analysts say a “crypto winter” may be on the way. Offering stock trading means crypto exchanges can attract meme stock investors, putting them on a collision course with the likes of Robinhood and eToro, which offer both cryptocurrency and stock trading.

Some cryptocurrency exchanges offer trading of tokenized versions of stocks such as Apple Inc. and Tesla Inc. , which reflects the prices of the securities it tracks, but that effort has faced regulatory pressure. Binance Holdings Ltd. has discontinued. , the world’s largest cryptocurrency exchange, announced support for stock tokens last October, just a few months after the product was launched.

When asked if Binance will consider offering stock trading, a Binance spokesperson said that it will “remain laser-focused on developing ground-breaking blockchain technologies for our users and expanding into markets that naturally complement the future of blockchain.”

Coinbase Global Inc. refused. , the largest crypto exchange in the United States, will comment on whether stocks are a potential area for expansion.

Most Read Bloomberg Businessweek

© Bloomberg LP 2022