Crypto Exchanges Eye Taking on Robinhood With Expansion Into Stock Trading

(Bloomberg) -- Cryptocurrency exchanges FTX US and Bitstamp USA may offer stock trading to customers, an expansion that would ramp up their rivalry with old-school finance stalwarts and hot newer players like Robinhood Markets Inc.

FTX US is working on adding stock and option trading, and a launch could potentially come in “a couple months,” President Brett Harrison tweeted on Tuesday, reiterating previous statements from the company along those lines. A spokesperson wouldn’t elaborate.

It was unclear whether FTX US would seek to become an official exchange -- a designation only a handful of companies including the New York Stock Exchange and Nasdaq have won from regulators.

The fact that question even needs asking, though, highlights how much broader crypto trading firms are than their counterparts in conventional asset classes. Crypto exchanges also tend to have brokerage arms through which customers can place trades that get routed to the exchange. Over in stocks, the NYSE and Nasdaq are just exchanges. Brokerages like Robinhood and Charles Schwab Corp. are completely separate enterprises.

Meanwhile, smaller rival Bitstamp USA, one of the oldest active crypto exchanges, is also mulling entering stocks, non-fungible tokens and crypto derivatives, Chief Executive Officer Robert Zagotta said in an interview.

Offering equities trading would create a streamlined experience for Bitstamp’s over 4 million users, but it’s a “very competitive space, and there are some very significant players in it,” Zagotta said. Such a move would require significant investments, so “we have to be convinced that we have a right to win in this space,” he said.

If it decides to pursue that expansion, Bitstamp may build the product in-house, with partners or consider acquisitions, which “can be an accelerator from a licensing perspective,” he added. 

According to FTX US’s Harrison, whose earlier employer Jane Street is a big player in stock trading, initial equity features will include stock screening, display of basic fundamentals such as market capitalization and P/E ratios, and portfolio performance tracking.

Cryptocurrency exchanges have been expanding into new business lines to lessen their dependence on trading revenue. Trading volume at some of the top crypto exchanges has declined during the recent market selloff, and some analysts say a “crypto winter” could be under the way. Offering equities trading means crypto exchanges could capture meme stock investors, setting them on a path to collide with the likes of Robinhood and eToro, which offer both crypto and stock trading. 

Some crypto exchanges provide the trading of tokenized versions of stocks like Apple Inc. and Tesla Inc., which reflect the prices of the securities they track, but that effort has faced regulatory push back. Binance Holdings Ltd., the world’s largest crypto exchange, ceased support of stock tokens last October, just a few months after launching the product. 

When asked if Binance would consider offering equities trading, a Binance spokesperson said it’s “going to remain laser-focused on developing leading blockchain technologies for our users and expanding into markets that more naturally compliment blockchain’s future.” 

Coinbase Global Inc., the largest U.S. crypto exchange, declined to comment on whether stocks are a possible area of expansion.

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