Robinhood’s crypto revenue is the lowest it’s been in 3 years, but it still stans crypto—and Dogecoin

Depending on one’s level of skepticism toward the broader industry, the expansion abroad was either perfect timing—Bitcoin’s price has almost tripled since the beginning of the year—or too little, too late. Many have written the customary “crypto is dead” obituary in the past year amid broader regulatory scrutiny.

But for Tenev and his lieutenant, entry into the EU is part of Robinhood’s larger engagement with cryptoland over the past five years—a period that’s seen the firm’s fees from crypto trading range from just a few percentage points of net revenue to accounting for nearly half.

“I think,” Tenev told Fortune, “it’s still very early innings in crypto.”

Boom to bust

In early 2018, Tenev’s financial services app, whose bread-and-butter revenue source long came from equities trading but has since expanded to earning interest off of deposits and other assets, dipped its toes into crypto mania on the heels of one of Bitcoin’s many surges. “We took a little bit of a risk by becoming the first traditional financial services company in the U.S. to really embrace it,” Tenev said, referring to the crypto market.

In addition to Bitcoin, the online brokerage initially added Ether as an asset users could trade, and it continued to expand its crypto offerings through 2019, adding Litecoin, Bitcoin Cash, and the memecoin Dogecoin. 

It was the dog-themed cryptocurrency, originally created as a joke, that briefly made crypto one of Robinhood’s most lucrative verticals. Amid the memestock fervor in the first half of 2021, which briefly boosted Robinhood’s revenue to all-time highs, traders flocked to the online brokerage to buy and sell Dogecoin. Fees from trading the memecoin accounted for 32% of the company’s net revenue in the second quarter of 2021, unprecedented demand that briefly crippled Robinhood’s crypto trading software.

“We sort of became one of the largest crypto platforms in the world practically overnight,” Tenev said, adding later that his company’s brand “became almost synonymous with crypto in 2021.”

But since that dog-inspired delirium, Robinhood’s crypto revenues have declined, dropping from a height of $233 million during the surge to just $23 million in the third quarter of 2023. 

“I can’t control the price of Bitcoin or the total volumes in the market,” Tenev said. “But if we’re growing market share steadily during bear markets, and growing it much more quickly in bull markets, I think that’s an indication that our strategy is the correct one.”

Amid the revenue decline, Robinhood’s crypto business has also fallen under regulatory scrutiny. In August 2022, New York’s top financial regulator fined Robinhood’s crypto unit $30 million. In December 2022, the Securities and Exchange Commission issued an investigatory subpoena to the firm regarding its crypto business. And in June, the SEC sued Binance and Coinbase, naming SOL, MATIC, and ADA as unregistered securities in its lawsuits. Robinhood delisted the cryptocurrencies from its exchange shortly afterward.

Kerbrat, the company’s head of crypto, declined to provide any more detail about the SEC’s subpoena: “At this point, nothing else has happened.”

Expanding, regardless

What has happened, however, is that the publicly traded company has continued to expand its footprint in the world of decentralized money—even amid the turbulence.

In late 2021, it announced that it was creating its own means of crypto transfers, which it subsequently released in 2022. And in 2023, it both released its own self-custody wallet as well as Robinhood Connect, which gives users the option to port crypto they’ve bought on the Robinhood platform onto other crypto apps.

Now, the company is launching in Europe, in what appears to be a much friendlier legal environment for blockchain boosters. In mid-2023, the EU passed a regulatory framework for the cryptocurrency industry called MiCA, or Markets in Crypto-Assets Regulation, a measure of regulatory certainty that many in crypto celebrated as a win.

“At least in the crypto industry, there is a great deal of clarity around the path to regulation,” Thomas Perfumo, the head of strategy at the crypto exchange Kraken, told Fortune, in reference to the EU’s regulatory regime. He also said that his exchange, one of the market leaders in the area, isn’t threatened by Robinhood’s entrance.

Robinhood seems to be taking advantage of that clarity. With its EU expansion, it is relisting SOL, MATIC, and ADA—which the SEC alleged were unregistered securities—as well as eight other cryptocurrencies not available in the U.S. “We will keep adding for sure,” Kerbrat said, referring to potential products in Europe. (He declined to be more specific about those additions.)

Kerbrat and his team are making moves just as the crypto market looks to recover from the latest Crypto Winter. In fact, Robinhood recently announced that its crypto trading volumes were up 75% in November.

And Dan Dolev, an analyst at Mizuho Securities, told Fortune that the potential approval of a Bitcoin exchange-traded fund, essentially a means for investors to buy the cryptocurrency through traditional brokerage accounts, could be a boon for the company. Because one of Robinhood’s main sources of income is from stock trading, it could reap fees from the trading of the ETF on its platform, whereas competing exchanges may see volumes flag as users decide not to buy and sell Bitcoin directly on their platforms.

“I do think that continuing to be committed to [crypto] is the right strategy,” Devin Ryan, an analyst at JMP Securities, told Fortune, of Robinhood’s approach.

‘Connecting the real world and fiat with crypto’

Does that commitment still involve Dogecoin, especially as the company continues to try to distance itself from the froth of memestocks and coins in 2021? For now, the answer seems to be yes. “We don’t see Dogecoin as a negative asset for us,” Kerbrat said. And during his interview with Fortune, Tenev enthused about the cryptocurrency’s status as an “inflationary coin” and its different “properties.”

Dolev, the Mizhou analyst, believes that the long-running questions of whether Dogecoin (and cryptocurrencies writ large) are serious assets ultimately benefits the online brokerage. “For better or worse, crypto is a very big marketing element,” he said. “So it draws attention, whether or not there’s actually a future there.” 

But beyond the marketing hype, Tenev and his team view crypto not just as a collection of coins but as a set of potentially game-changing technologies. “We do want to be a leader in connecting the real world and fiat with crypto,” he said.

The prognostications of blockchain’s potential benefits continue to overhang the financial industry, and given Robinhood’s early commitment to the tech, it may be one of the best positioned to reap the rewards—as crypto grows up and moves beyond the dogs and into the banks. “As you think about firms that are set up to kind of bridge the gap between the traditional finance economy and the digital economy,” said Ryan, the JMP Securities analyst, “Robinhood, arguably, is one of the better positioned.”