Companies that don’t charge up-front fees, like PayPal , Square’s Cash App, Revolut, and, of course, Robinhood, make money a different way. They opt, instead, to take advantage of the “spread,” or the differences between the “bid” and “ask” price on any given trade. Like in the stock-trading business, many of them also get paid to route trades through certain market makers in a controversial practice called “ payment for order flow ,” which has recently come under fire by policymakers. People who buy crypto the supposedly fee-free way basically guarantee that they will not get the best price upon execution of a trade. Fee-shirking venues offer coins to buyers at higher prices and offer to sell people’s coins at lower prices than the best available rates, in other words. It’s a less transparent approach than the alternative: stating fees clearly at the outset. At the end of the day, customers will end up paying for crypto-trading services one way or another, whether through a fee or spread. And when crypto prices are so volatile, swinging thousands of dollars daily, does the comparatively minor fee charged by an exchange really matter? Robinhood thinks so. “As more people get into crypto, that narrative”—the insignificance of paying a fee, especially compared to the crypto market’s typically big price fluctuations—”will fade away and there will be more price sensitivity,” Brown told me a day after her conference appearance. “It’s a factor of market pressure. When users move their dollars to a place where they can get commission-free trading, I think we’ll see the rest of the market follow.” Robinhood hopes to pull off the same trick in crypto that it once pulled off in the stock market: Luring people with no-fee offers, stealing market share, and forcing the rest of the industry to adapt. But this time it’s already facing down fee-less rivals. And with the Securities and Exchange Commission lobbying to expand its authority to regulate crypto markets, payment for order flow coming under fire, and regulators signaling a crypto clamp-down to come, Robinhood’s magic may lose potency. Robert Hackett @rhhackett robert.hackett@fortune.com DECENTRALIZED NEWS Credits � The crypto market is trending higher Thursday after several rough days where digital assets and just about everything else seemed to sell off… Twitter debuted Bitcoin “ tipping “… Asset manager Invesco is working with Galaxy Digital on a Bitcoin ETF proposal … Robinhood shares popped more than 10% Wednesday after unveiling its plans to start officially testing crypto wallets … Virtu Financial wants to prove to the Securities and Exchange Commission that its execution of retail investors’ stock trades is better than the alternative… The company behind NBA Top Shot , Dapper Labs , has raised $250 million in funding at a $7.6 billion valuation… Circle has partnered with Plaid to make it easier for people to get their hands on the stablecoin USDC… Venrock ‘s David Pakman has joined CoinFund … Dark pools LeveL ATS and Luminex are merging … Help wanted sign for “ excellent political judgment ” goes up at Coinbase … Snoop Dogg has been dropping millions on NFTs… The Philadelphia 76ers will be wearing crypto.com patches on their jerseys next season… Super Bowl winning Bitcoin bull Tom Brady would “love” to get part of his salary in crypto. Debits � President Joe Biden is planning to name Saule Omarova , a crypto-critical law professor from Cornell University, as the head of the OCC… Securities and Exchange Commission Chair Gary Gensler does not see “long-term viability” for thousands of forms of money like cryptocurrencies … The world’s biggest crypto exchange, Binance , is facing an expanded investigation from U.S. authorities that now covers possible insider trading … Coinbase has axed its plans for a lending product (for now) after the SEC raised concerns that it could constitute an unregistered securities offering… The Treasury Department has sanctioned crypto exchange Suex for its role in facilitating ransomware crypto payments… Financial crisis short-seller Michael Burry is still worried about passive investing … The Federal Reserve is signaling its liquidity party could soon end… The former COO of loanDepot alleges the fintech mortgage lender cut corners last year in the middle of the housing market boom. FOMO NO MO Crypto markets have a front-running problem. On decentralized exchanges, bots are taking advantage of slow transaction times to jump ahead of other orders, Bloomberg reported Thursday, a strategy that closely resembles the ones that many in the world of stocks alleged high-frequency traders of using […]
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