While I know Robinhood is the easy target of most due to the bumps it has run into over the years it should be noted that they have managed to bounce back from each and every setback thus far. Yesterday the New York State Department of Financial Services (NYDFS) slapped Robinhood with a $30 million fine for its crypto division. Interestingly enough though this fine was seen coming months ago by Robinhood as they had said that they expected to pay a $30 million settlement to the NYDFS for a 2020 investigation so this was not really something out of the blue.
Where this whole thing gets so confusing and mixed up in a way that I feel only a regulator could pull off. The issues that New York went after for this first-ever fine were a failure to timely transition from a manual transaction monitoring system to one that was more appropriate for the number of users it had and that Robinhood Crypto violated the law when it certified compliance with the department. While the issues are definitely concerning to a point the regulator really seemed to fail to grasp how/what crypto regulation should look like and be enforced and can be seen with the two issues that were the reason for the fine.
The first issue that they flagged about transitioning to a new system is the typical vague answer that no one can really pin down. How fast is a timely transition and what is the system that is adequate for its user size and transactional volume? By leaving it up for debate it really does not do anything to even address this type of thing from happening again since no standards are set. This then leaves people like myself wondering what the regulator really wants from companies and how anyone can launch a startup in a realm of such uncertainty.
I honestly could not help but laugh with the second one. It is my opinion that no company should ever be in charge of certifying their own departments for any sort of legal requirements. If a company is going to break them or bend them it is a pointless step to then go back and say well see you said it was good when it wasn't because at the end of the day they still broke the law. So when I see that Robinhood Crypto is in trouble for certifying compliance within its department I see it as something that almost has to be a joke. What good are regulators if they are not the ones certifying compliance with rules and regulations I mean it is their one job yet they have tried to pass it off to other companies?!
These fines considering the size and operations of Robinhood are really small things that do not even really pertain to how the company is now. They have hired an outside consultant to evaluate its compliance as they are required to do but again what is a regulator's job if they are not doing this and passing it off to other businesses? Robinhood had a bad quarter and has since said they are laying off roughly a quarter of their staff to handle the stock market and crypto market downturns. To me, this type of action does not address anything and rather makes the market much more toxic and questionable to operate in. Without clear rules, regulators pawning off regulating, and people moving out of the state the idea to make New York a crypto hub is hard to wrap your head around.
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