One day after trading app Robinhood halted buying of red-hot stocks like GameStop and AMC, infuriating customers, the app turned off a key cryptocurrency buying feature on Friday.
The paid feature, Instant Buying, allows customers to transfer funds from a bank account and use the funds immediately, before they have been settled.
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“Due to extraordinary market conditions, we’ve temporarily turned off Instant Buying power for crypto,” Robinhood said in a statement to Yahoo Finance. “Customers can still use settled funds to buy crypto. We’ll keep monitoring market conditions and communicating with our customers.”
Robinhood did not say, in its statement or in its blog post about the restriction, what the extraordinary conditions were, nor did it cite specific cryptocurrencies.
But bitcoin (BTC-USD) was up 15% on Friday, a bounce accelerated by Elon Musk on Twitter; and meme-based token dogecoin (DOGE-USD) was up 165%, fueled by social media.
It wasn’t just Robinhood. Amid the market mania this week, TD Ameritrade and Schwab placed restrictions on margin trading in the surging stocks, limiting how much customers could borrow for trades; Webull, an app that Robinhood users fled to after Robinhood’s restriction, also restricted buying of the same stocks. The actions are seen as bullish for cryptocurrency and DeFi (decentralized finance applications), because they could bring new entrants to a space without traditional financial middlemen.
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After Robinhood’s actions this week, the tech unicorn, which has a $12 billion valuation and aims to go public this year, finds itself in hot water with everyone from lawmakers to customers.
New York Rep. Alexandria Ocasio-Cortez, Texas Sen. Ted Cruz, and California Rep. Ro Khanna are just some of the politicians to issue statements of outrage with Robinhood’s action on Thursday, which was seen as doing harm to retail investors. Robinhood has already been hit with a class action lawsuit from customers over these events. And the company is in the process of raising an emergency $1 billion in new funding to cover its cash shortfall.
In a blog post on Thursday, Robinhood said its halting of buying for surging stocks was “a risk-management decision” and that, “We have SEC net capital requirements and clearing house deposits… Some of these requirements fluctuate quite a bit based on volatility in the market and they can be substantial in the current environment where there’s a lot of volatility and a lot of concentrated activity in these names that have been going viral on social media.”
And in a series of tweets on Thursday afternoon, CEO Vlad Tenev said the app’s decisions on Thursday were “not made on the direction of any market maker we route to or other market participants.”
Daniel Roberts is an editor-at-large at Yahoo Finance and has covered bitcoin since 2011. Follow him on Twitter at @readDanwrite.
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