KEY POINTS
- Robinhood said crypto valuations helped drive its AUC growth in Q1
- The company added that its transaction-based revenue growth was 'primarily driven' by crypto revenue
- Robinhood Crypto received a Wells Notice from the SEC earlier this week
Financial services giant Robinhood on Wednesday reported its first quarter 2024 earnings, highlighting how its cryptocurrency arm, Robinhood Crypto, propelled growth during the first three months of the year and accounted for nearly 40% of the company's total transaction-based revenue of $329 million.
Robinhood reported that its cash sweep increased 113% year-over-year to $19.0 billion and its equity notional trading volumes climbed 40% year-over-year to $225.0 billion. However, its most significant growth came through crypto notional trading volumes, which saw a whopping increase of 224% year-over-year to $36.0 billion.
The company's assets under custody (AUC) also ballooned by 65% to $129.6 billion, "primarily driven by higher equity and cryptocurrency valuations and continued Net Deposits." It also noted that transaction-based revenues grew 59% year-over-year to $329 million, "primarily driven by cryptocurrencies revenue of $126 million," which saw a significant 232% increase.
"We delivered significant revenue growth and margin expansion in Q1 as we remain focused on driving another year of profitable growth in 2024," said Jason Warnick, Robinhood's chief financial officer.
Ahead of its Q1 2024 earnings report, Robinhood grew its Bitcoin holdings in the last six months by 14%, according to Conor Grogan, director of crypto exchange giant Coinbase, citing data from leading blockchain intelligence firm Arkham Intelligence. He noted how Robinhood's cold storage address is now the world's third-largest known single BTC wallet, owning 0.69% of the world's total Bitcoin supply.
Robinhood's stellar first quarter performance comes in the shadow of a Wells Notice served by the U.S. Securities and Exchange to Robinhood's digital assets arm, Robinhood Crypto (RHC), a move that states the regulator's intent to bring an enforcement action against the company.
CEO Vladimir Tenev addressed the matter during the earnings call Wednesday, saying it was a "disappointing development." He noted that Robinhood Crypto has a conservative approach toward its crypto business and holds its digital assets unit to the same compliance standards that it does with its brokerage business.
The Menlo Park-based fintech titan revealed over the weekend that RHC "received investigative subpoenas" from the SEC over its crypto listings and business activities, noting that it cooperated with the Wall Street regulator, but it was still served a Wells Notice.
The cryptocurrency community immediately came to Robinhood's defense, along with Republican Rep. John Rose of Tennessee and prominent lawyer Jake Chervinsky, who said the development suggests the SEC was "abusing" the Wells process and using it as a "scare tactic" against companies providing crypto-related services.
