Commission-Free Trading App Robinhood in Talks With Regulators to Offer Banking Services

Francisco Memoria
  • Crypto and stocks trading app Robinhood is reportedly in talks with regulators to acquire a banking license.
  • Its goal is to offer its over 4 million US users services like savings accounts, presumably to take on larger financial institutions.

Robinhood, an app that allows its over 4 million US users to trade stocks and cryptocurrencies without paying fees, is reportedly in talks with regulators to offer banking services like savings accounts, which will effectively help it become an all-in-one financial portal.

According to Bloomberg, the California-based firm’s talks with regulators at the Office of the Controller of the Currency (OCC) are being “constructive,” but are still in their early stages and could fall apart. Robinhood’s goal is to offer banking-like products “through different licenses or partnerships.”

Bloomberg’s report cites anonymous sources who are reportedly familiar with the matter, but chose to remain unidentified as the talks are confidential. Often, startups offer banking services through partnerships or merges with existing institutions with said licenses, as getting a green light from regulators on banking services could take several months or even years.

Notably, a banking license allows startups to deepen relationships with consumers and encourage people to choose them over large financial institutions by offering a better user experience, the ability to access various products and features in one place, and higher interest rates.

Robinhood started offering commission-free crypto trading through its Robinhood Crypto platform earlier this year, and has been expanding throughout the US. Recently, the company raised $363 million at a $5.6 billion valuation, in a funding round that’s set to help Robinhood Crypto reach the whole country.

As covered, the company’s CEO is seemingly bullish on cryptocurrencies as the company’s CEO, Baiju Bhatt, has recently stated that sovereign nations will adopt cryptocurrencies. He said:

I think sovereign nations are going to have cryptocurrencies as their default currencies at some point. I think this is largely inevitable, whether that happens next year or in 15 years I don’t know but I’m almost 100% convinced that’s going to happen.

Baiju Bhatt

Robinhood, however, isn’t the only company in the crypto space looking to acquire a banking license. Goldman Sachs-backed payments firm Circle, which earlier this year acquired cryptocurrency exchange Poloniex for $400 million, revealed it was pursuing a license with the OCC earlier this month.

Similarly the largest exchange in the US, Coinbase, is reportedly in talks with the regulator regarding its business model and the possibility of obtaining a banking license.

BBC: Facebook Planning to Launch ‘GlobalCoin’ in Q1 2020

Siamak Masnavi

Social networking giant Facebook is planning to launch its own cryptocurrency (internally dubbed "GlobalCoin") and crypto-powered global payments network (internally called "Project Libra") worldwide by Q1 2020, according to a report published earlier today by BBC News, the world's largest broadcast news organization.

Project Libra's Origin Story

  • 8 May 2018: In a post on Facebook, David Marcus, the former head of Messenger, who was at that time also a board member (since December 2017) of crypto exchange Coinbase, revealed that he was leaving that role to set up a new group focused on exploring applications of blockchain technology across the whole of Facebook.
  • 13 December 2018: Cheddar reported that Facebook’s blockchain group is planning to "potentially disrupt the entire payments industry":

"At a private dinner Facebook hosted during a recent crypto conference, one attendee told Cheddar that Facebook employees pitched the idea of creating a decentralized digital currency for the social network’s 2 billion users."

  • 21 December 2018: Bloomberg reported that Facebook was creating its own cryptocurrency (a stablecoin) for money transfers within its highly popular messaging app WhatsApp.
  • 28 February 2019: The New York Times confirmed Bloomberg's earlier story, and said that, according to its sources, this project was "far enough along that the social networking giant has held conversations with cryptocurrency exchanges about selling the Facebook coin to consumers."
  • 8 April 2019: Nathaniel Popper, one of the two journalists who wrote the report in the New York Times, provided this update (on Twitter) about Facebook's cryptocurrency project:
  • 2 May 2019: The Wall Street Journal reported that Facebook was "recruiting dozens of financial firms and online merchants to help launch a cryptocurrency-based payments system," and that the core part of this initiative (code-named "Project Libra") is "a digital coin that its users could send to each other and use to make purchases both on Facebook and across the internet." Furthermore, this report said that, according to people familiar, Facebook was talking to "financial institutions including Visa Inc., Mastercard Inc. and payment processor First Data Corp." about investing in this project.
  • 17 May 2019: A report by Reuters said that FinTech company Libra Network was registered in the Republic and Canton of Geneva on May 2. Looking at the entry for Libra Networks, which was published on May 7 in the Swiss Official Gazettte of Commerce (SOGC), tells us:
    • Libra Networks LLC (registration number: CHE193533388) has its registered office in Geneva.
    • According to the English translation, the stated purpose of this company is "provision of services in the fields of finance and technology, as well as the development and production of related software and infrastructure, particularly in connection with investment activities, the payment operation, the financing, identity management, data analysis, big data, blockchain and other technologies."
    • The share capital is CHF 20,000 (100 shares, each with a nominal value of CHF 200); all of the shares are owned by Facebook Global Holdings II, LLC.

Facebook's Stablecoin: GlobalCoin

Here is what we have learnt from the BBC News report:

  • Facebook "is planning to set up a digital payments system in about a dozen countries by the first quarter of 2020."
  • The plan is to start testing the new cryptocurrency (some kind of stablecoin), GlobalCoin, by the end of 2019.
  • Facebook has been getting "advice on operational and regulatory issues" from the UK's central bank governor Mark Carney (whom Facebook founder and CEO Mark Zuckerberg reportedly met in April) and from U.S. Treasury officials.
  • Facebook is also in talks with global remittance firms such as Western Union "as it looks for cheaper and faster ways for people without a bank account to send and receive money."

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