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Robinhood Crypto Taps Chainalysis to Monitor for Money Laundering

As Robinhood announces its partnership with Chainalysis, it has remained steadfast in saying that it's putting "safety first" for its users.

3 min read
Robinhood is a popular crypto and stock trading app. Image: Shutterstock

Robinhood still hasn’t set a release date for its crypto wallet app. But in the spirit of its “safety-first company” ethos, the company has announced it will use Chainalysis Know Your Transaction (KYT) and Reactor software to manage compliance for its Robinhood Crypto brokerage app and, eventually, the wallet.

The KYT software flags suspicious transactions for the Robinhood team in real time, which helps the company monitor for money laundering. Reactor provides an interface to guide the Robinhood team through in-depth analysis of onchain data once they’ve found what looks to be suspicious activity. 

The company also said that it will be having its teams complete Chainalysis certification programs.

“The executive team has spent significant resources and capital to embed [the “safety first” policy] into every level of the organization,” said Ben Einstein, Robinhood Crypto head of partnerships. “Chainalysis works closely with regulators and law enforcement to develop industry best practices and that approach is aligned with Robinhood’s commitment to working with policymakers in a collaborative manner.”

The intense focus on safety and compliance comes at the end of what’s been a tumultuous year for Robinhood. At the start of November, the company suffered a “data security incident” that resulted in the theft of 5 million customer email addresses

The company has also seen its share price fall 43% since it went public at the end of July. After making its debut at $34.82, then hitting an all-time high of more than $70 a week later, the stock was sitting at $19.99 as of Friday afternoon.

The biggest upset, by far, came when the app halted trading of GameStop shares in the middle of coordinated effort by members of the WallStreetBets Reddit group buying the stock to drive institutional traders, who’d been cashing in on short selling its stock for years, off their positions at a loss. 

As the Reddit users drove up the price, at least two hedge funds had to abandon their positions. The service outage on the Robinhood app left a bad taste in users’ mouths, ultimately leading to an investigation by the Financial Industry Regulatory Authority (FINRA).

In June, when lagging prices were already cutting into its revenue from crypto trades, FINRA hit Robinhood with a $70 million fine citing harm caused by misleading communications, system outages and inappropriate approvals for complicated trades.

Robinhood Crypto COO Christine Brown, after joining in April this year, has been steadfast in saying she wants the company to stay on the right side of regulators and be conservative when it comes to adding new crypto assets to its platform.

“We want to make sure that we're working on assessing everything from a regulatory perspective really well,” she told Decrypt a month ago at the Crypto Goes Mainstream event co-hosted with Yahoo Finance. At the time, she said the company’s new crypto wallet had a waitlist of 1.6 million. 

Robinhood launched an alpha version of its wallet for select users in October, but it has yet to say when it will release it for the rest of its users. 

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