The future of Robinhood's crypto products is in doubt amid recent headwinds

Popular stock brokerage Robinhood will likely scale back on its aspirations for its cryptocurrency trading unit, Robinhood Crypto, following the departure of its business head, according to a person familiar with the situation. 

Robinhood Crypto launched in 2018 and quickly lured in more than 1 million customers to Robinhood. Throughout 2019, Robinhood expanded the numbers of states in which the service was available as well as the number of cryptocurrencies available for trading.

In 2020, the unit was exploring the rollout of several new crypto products and features including yield and interest products, deposits and withdrawals, and the addition of new coins. Whether those products will come to fruition in the near-to-medium term seems less certain following the exit of Sina Nader, who joined Robinhood Crypto in 2019 to "strengthen" the service, according to a source familiar with the exit. The firm is looking to fill a Crypto Operations Manager role, who would oversee the existing business, as The Block previously reported. 

The person said recent headwinds at Robinhood—including several high-profile outages—has lessened the firm's appetite for launching products at the bleeding edge and expanding into new jurisdictions. As reported by The Wall Street Journal earlier this month, the firm cancelled its launch in the UK indefinitely. 

The firm has also drawn the ire of financial media and pundits for providing retail traders with access to complicated financial products and leverage.

As outlined in a recent piece by the New York Times' Nathaniel Popper, Robinhood's easy-to-use interface has helped it build a client base of newbie traders topping ten million and pushed its valuation above $8 billion. Relative to their main competitors, however, users of Robinhood have been drawn to options.

Users of the platform, according to Popper, traded "nine times as many shares as E-Trade customers, and 40 times as many shares as Charles Schwab customers, per dollar in the average customer account in the most recent quarter."

As Popper summarized: "[I]ts users buy and sell the riskiest financial products and do so more frequently than customers at other retail brokerage firms, but their inexperience can lead to staggering losses."

The suicide death of 20-year-old Alex Kearns—who said in a note he took his life after seeing a negative $700,000 balance on his Robinhood account— brought the question of user education to the fore. Lawmakers, including Rep. Lauren Underwood of Illinois, called on Robinhood to enhance its platform by adding safeguards to prevent such tragedies. 

In response, Robinhood has made changes to its platform, making it more difficult to access options.

"We're rolling out improved in-app messaging this week to help customers better understand the mechanics of early options assignments, and we recently published more resources on our help center," the firm said of the changes in a tweet explaining a series of platform enhancements. 

A spokeswoman for Robinhood declined to comment when reached. Nader also did not respond to a message seeking comment.