Regulations
Robinhood CEO to reportedly testify before US House committee over GameStop
Cointelegraph By Helen Partz
Robinhood CEO Vlad Tenev will reportedly testify before the United States House Financial Services Committee over the firm’s role in the volatile trading of GameStop and other volatile stocks.
According to a report by the American political publication Politico, Tenev is expected to participate in a virtual hearing headed by Representative Maxine Waters (D-Calif.) on Feb. 18. Politico’s report cited anonymous people familiar with the matter.
Waters officially announced the Financial Services Committee’s plans to hold a GameStop-related hearing on Feb. 18. Entitled “Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide,” the hearing will focus on recent market volatility issues involving GameStop and other stocks.
“I am concerned about whether or not Robinhood restricted the trading because there was collusion between Robinhood and some of the hedge funds that were involved with this,” Waters reportedly said.
The announcement did not specify what witnesses will participate in the hearing. Robinhood has not officially announced Tenev’s participation so far. The firm did not immediately respond to Cointelegraph’s request for comment.
As previously reported, some U.S. regulators have already drawn attention to Robinhood’s handling the GameStop short squeeze. On Jan. 29, the U.S. Securities and Exchange Commission hinted that it was looking at Robinhood’s issues with GameStop, expressing concern over “extreme price volatility of certain stocks’ trading prices.”
Robinhood’s GameStop saga started on Jan. 28 when the company suspended buying for GameStop stock and other shares that were allegedly pumped through the r/Wallstreetbets Reddit community. Robinhood subsequently restricted trading for as many as 50 stocks on Friday before narrowing the restrictions to eight stocks on Feb. 8. Still, Robinhood users are limited to just one GameStop share.
On Feb. 1, Robinhood’s Tenev discussed the firm’s move to restrict trading with Elon Musk on the audio chat app Clubhouse. Tenev reportedly said that the decision about restrictions was made by a clearinghouse and was based on the capital requirements. He also denied allegations that trading firm Citadel Securities — the largest market maker in options in the U.S. — had pushed the firm to impose the limits.
Cointelegraph By Helen Partz
A senior analyst at asset management firm Bridgewater believes that regulation could potentially make Bitcoin (BTC) a good asset for institutional investors.
Bridgewater director of investment research Rebecca Patterson claimed that regulatory certainty around Bitcoin would solve some of the cryptocurrency’s biggest problems associated with high volatility and low liquidity.
In a Feb. 24 interview with Bloomberg, Patterson said that issues like volatility and liquidity remain the main hurdles for Bridgewater’s potential move into Bitcoin.
“Right now Bitcoin can move 10% on a tweet, that’s not exactly a store of wealth for most institutional investors. So the volatility of Bitcoin is about 10 times that of your dollar, it’s still double that of the Venezuelan bolivar,” the executive said.
Patterson went on to say that both the volatility problem and liquidity issues would subside if Bitcoin becomes a better-regulated asset:
“The more you get a real regulatory ecosystem developing around Bitcoin and other currencies, the more other types of investors are going to be comfortable coming in, that’s going to bring liquidity, that’s going to reduce the volatility.”
“So I guess if there was one thing I were watching first, it would be seeing more regulatory certainty,” Patterson said, adding, “I’m not sure when that’s going to come in the U.S.”
Patterson also said that she doesn’t look at Bitcoin as an “alternative currency” but rather as digital gold. “If anything, it’s an alternative to gold or digital gold. I think that would be the better comparison,” she said. Patterson said that many investors have been looking to Bitcoin over concerns about inflation triggered by central bank money printing. However, for Bridgewater, Bitcoin still needs to prove its status as digital gold:
“As institutional investors, we don’t know yet if it’s going to be digital gold, it may be over time, but I don’t think we can say that with confidence yet. And that affects whether or not our client should own it.”
Cointelegraph By Andrey Shevchenko
As Coinbase plans to pursue a direct listing on the stock market, which would see its existing shares be traded on United States stock exchanges, the exchange has submitted an S-1 report to the Securities and Exchange Commissio, which details all the relevant data that would help investors conduct due diligence on the company.
The document represents the first time that Coinbase publicly revealed sensitive details like revenue and ownership structure.
The filing reveals that the exchange posted a direct revenue of $1.1 billion in 2020, a significant increase from $482 million in 2019. About 96% of this revenue is derived from transaction fees charged to users, with the remainder coming from subscription services. A further $136 million revenue was generated from sales of Coinbase assets to fulfill over-the-counter transactions.
The company’s operating expenses are significant. In 2020, they totalled over $880 million, with the majority being due to research and development, sales, and general administrative expenses. However, $135 million of the total expense is labeled as “transaction expenses.” The prospectus explains that these consist of blockchain miner fees and transaction reversal costs, as well as staking and verification expenses.
It is worth noting that the company actually lost $46 million due to operations in 2019, as its revenue of $533 million was not enough to cover its $579 million in losses, primarily due to administrative and development costs. For 2020, its net income amounted to $327 million.
For 2020, it is interesting to note that institutional trading generated most of its volume, though retail participation was stronger in the last quarter of 2020 than in previous months.
Finally, the ownership structure of Coinbase shows that its CEO, Brian Armstrong, only holds 11% of the company, though he has a larger share of Class B shares, which hold governance power.
The filing shows that Marc Andreessen, general partner and co-founder of venture firm a16z, holds 24.6% of all Class A shares, which will be listed on stock markets. Fred Ehrsam, co-founder of Coinbase and now general partner at Paradigm Capital, still holds 11.4% of Class A shares, in addition to 9% of Class B stock. In total, executives and board directors individually hold over 53% of Class A shares and 54% of Class B shares.
The largest individual shareholder appears to be Andreessen and a16z, who are poised to benefit the most from Coinbase’s listing.
Cointelegraph By Helen Partz
The Securities and Exchange Commission of Thailand has launched a public consultation on proposed cryptocurrency investor qualification rules.
According to an official announcement Thursday, the Thai SEC is now seeking public comments on proposed qualifications for crypto investors including certain income and trading experience requirements.
As part of the initiative, the Thai SEC is planning to hold a live hearing through its Facebook page on March 24. The public consultation will continue until March 27, the authority said.
According to a proposed consultation paper, the regulator is planning to set solid limits on cryptocurrency trading in Thailand, including requiring local crypto investors to possess net assets of at least 10 million baht ($332,500) as well as have an annual income of 1 million baht ($33,250). According to the proposed rules, investor net worth will not include the value of real estate used for permanent residence.
As part of the new investor qualifications, the SEC is also looking to require traders to have investing experience and education. Local traders should have at least two years of experience in securities or derivative trading or obtain a special certification from the authorized institutions.
The SEC initially announced its plans for crypto investor requirements earlier this month. By initiating the new rules, the authority aims to ensure proper investor protection measures as local interest in crypto investments surges.
“Cryptocurrency is a financial innovation that is exposed to high volatility. Investment in this digital asset thus requires knowledge and understanding and a risk profile that is not so sensitive to investment loss,” the new announcement notes. Ruenvadee Suwanmongkol, the secretary general of the SEC, told Bloomberg that investors who do not qualify for trading will still be able to invest through licensed fund managers or financial advisers.
“It’s a big concern as most crypto investors on domestic exchanges are very young, such as students and teenagers. We realize those people love innovations and technology, but investments in these assets have enormous risk,” Suwanmongkol said.
The SEC did not immediately respond to Cointelegraph’s request for comment.
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