Crypto Regulation Fears Appear To Be Fading After Robinhood And Coinbase Stock Jump

After FTX's demise in November of last year, regulators have been paying close attention to the cryptocurrency sector, which has put pressure on the stock prices of key participants like Coinbase Global and Robinhood Markets.

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Regulators are closely scrutinizing these businesses, but for the time being, it appears that the stock market is mostly ignoring concerns about a crackdown.

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The Securities and Exchange Commission served a subpoena to Robinhood (ticker: HOOD), a trading platform for retail investors that heavily emphasizes cryptocurrency. Robinhood announced this in filings on Monday. The company reported that the SEC's subpoena sought information related to platform operations, cryptocurrency listings, and digital asset custody at Robinhood.

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According to Robinhood, the subpoena was issued in December, "shortly after FTX filed for bankruptcy on November 11, 2022, and following the bankruptcies of several other major cryptocurrency trading venues and lending platforms earlier in 2022." The company also mentioned lenders Voyager Digital and Celsius Network as well as the hedge fund Three Arrows Capital.

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For its part, the stock market appears to be shrugging. Tuesday saw a 3.5% increase in Robinhood stock while an 11% increase in Coinbase stock, a broker wholly dedicated to cryptocurrency. Comparatively, the S&P 500SPX +0.26% has increased by merely 0.3% on Tuesday.

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The outperformance in Coinbase, a crypto-native company wholly focused on the digital asset market, is particularly intriguing to see. Digital assets are not a fundamental component of the broker's business, which is still dominated by options, even though Robinhood doubled hard on cryptocurrency throughout the previous bull market—and even into a large portion of 2022, releasing new services amid tumbling values.

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Like its rivals Paxos and Kraken, Coinbase is becoming more and more dependent on diversification into industries like stablecoins and interest-bearing "staking" services. With FTX's demise, there has been growing concern about a broader industry crackdown. Coinbase itself has reported SEC monitoring over the past year.

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Nevertheless, with advances in Coinbase and Robinhood accelerating on Tuesday, it's possible that investors aren't only ignoring governmental scrutiny but are encouraging the stocks.

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