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If the SEC finds that any cryptocurrency currently trading on Robinhood is a security, they will have to immediately drop off trading for that particular asset.
As per the 10K filing, Robinhood received this subpoena back in December 2022, a month after crypto exchange FTX filed for bankruptcy. The subpoena talks about a number of different things such as “cryptocurrency listings, custody of cryptocurrencies, and platform operations”.
Robinhood stated that the SEC subpoena comes in response to several crypto bankruptcies that took place in the last quarter of 2022. The filing notes:
“In December 2022, following the 2022 Crypto Bankruptcies, we received an investigative subpoena from the SEC regarding, among other topics, RHC’s supported cryptocurrencies, custody of cryptocurrencies, and platform operations.”
This is certainly not the first time that Robinhood has been receiving a subpoena from a US regulator. Back in April 2021, Robinhood received a subpoena from the California Attorney General’s Office. Back then, the crypto regulator was seeking information about Robinhood’s trading platform, coin listings, custody of customer assets, and custody of customer assets.
Last year in August 2022, the New York District of Financial Services (NYDFS) also slapped a $30 million fine on Robinhood for failing to “invest the proper resources and attention to develop and maintain a culture of compliance.”
Will Robinhood Stop Crypto Trading?
In its filing, Robinhood noted that all majorly depends on the extent to which the SEC determines whether the cryptocurrencies it supports are securities. If so, Robinhood might have to stop trading those particular digital assets. Additionally, such an action by the SEC would also attract regulatory penalties, customer liabilities, as well as judicial or administrative sanctions.
Usually, courts issue investigative subpoenas at the request of other persons or entities. The purpose is to obtain the preliminary information necessary to decide whether they want to pursue further legal action against the subpoenaed person or entity.
Currently, Robinhood supports 18 different cryptocurrencies on its platform including the types of Bitcoin, Ethereum, and Dogecoin. In order to get started, investors can get started with as little as $1 worth of digital assets.
During the COVID pandemic, Robinhood witnessed massive growth amid stimulus checks, low-interest rates, and the ease of its app. Since liquidity was high during this period, crypto trading on the platform picked up instantly upon launch.