Robinhood Crypto: Risky Business Without Insurance Protection

Robinhood is a popular trading platform that offers commission-free trades through a web and mobile app. It allows users to place orders for over 17 cryptocurrencies, including Bitcoin, Ethereum, Dogecoin, and Shiba Inu. While Robinhood has never lost cash, stocks, or crypto through a cyberattack, its crypto holdings are not covered by the Securities Investor Protection Corporation (SIPC) insurance that protects its stocks and ETFs. Robinhood does, however, carry crime insurance that protects its crypto assets against losses from theft and cybersecurity breaches. This insurance is provided by certain underwriters at Lloyd's, the world's leading insurance marketplace, and is placed by Lloyd's registered broker, Aon. Additionally, Robinhood holds the majority of its crypto in cold storage, which is entirely disconnected from the internet, providing an extra layer of protection.

Robinhood Crypto is not FDIC or SIPC insured

Robinhood Crypto is a completely separate business entity from the brokerage account and savings account. The brokerage account is SIPC insured, and the cash management account is FDIC insured. There is no federal insurance in place to protect cryptocurrencies.

Robinhood does, however, take several measures to keep your crypto investments secure. The majority of your coins are held in cold storage, entirely disconnected from the internet, with only a small amount kept in online storage to support day-to-day transactions. Robinhood also carries crime insurance that protects a portion of the assets against losses from theft, including cybersecurity breaches. This insurance is underwritten by certain underwriters at Lloyd's and placed by Lloyd's registered broker, Aon.

Robinhood also employs strict operational security when managing crypto. For example, coin transfers require authorization from a select, constantly rotating group of people, and Robinhood's security team routinely reviews code and infrastructure. Third-party security experts are also engaged to test their systems, helping Robinhood build some of the most secure systems in the industry.

While Robinhood has never lost cash, stocks, or crypto through a cyberattack, it is important to note that crypto investments are not federally insured and there is always a risk of loss.

Robinhood carries crime insurance to protect against theft and cyber breaches

Robinhood is a highly secure platform for trading stocks, ETFs, and cryptocurrencies. It has never lost cash, stocks, or crypto due to a cyberattack. The platform has a range of security protocols in place to ensure the safety of its users' assets.

Robinhood carries crime insurance to protect its users' crypto assets in the event of theft or cyber breaches. While the exact coverage amount is not disclosed, this insurance policy provides an additional layer of protection for digital assets. It is important to note that this insurance does not directly protect users from losses in crypto value.

Robinhood also sweeps cash balances into FDIC-insured banks daily, covering cash balances up to $250,000 per user. Additionally, stocks and ETFs on the platform are insured up to $500,000 through the Securities Investors Protection Corporation (SIPC). However, it is important to note that SIPC coverage does not protect against losses in the market value of securities.

Robinhood implements robust security measures, including two-factor authentication, password hashing, data encryption, and Transport Layer Security (TLS) to safeguard sensitive information. These measures ensure that users' personal and account information remains private and secure.

Crypto withdrawals are disabled by default

Robinhood is a highly secure platform for investing in stocks, ETFs, and cryptocurrencies. It offers various security measures to protect its users' assets, including two-factor authentication, password hashing, and sensitive data encryption. One notable security feature specific to cryptocurrencies is that crypto withdrawals are disabled by default.

This feature is implemented because cryptocurrency withdrawals inherently pose a higher security risk than stock withdrawals. Cryptocurrencies, unlike stocks, can be withdrawn and transferred to an anonymous, private wallet, making it challenging to track down the funds in the event of a security breach. By disabling crypto withdrawals by default, Robinhood adds an extra layer of security, making it nearly impossible for attackers to withdraw users' crypto assets.

While this feature enhances security, it may create some inconvenience for crypto users who want to withdraw their holdings. In such cases, users can choose to enable crypto withdrawals through the Robinhood Wallet. However, doing so introduces a potential security risk, as attackers could then withdraw crypto if they gain access to the user's account.

To balance security and usability, Robinhood provides a range of security tools and educational resources to help users protect their accounts and make informed decisions about their crypto investments. It is recommended that users familiarise themselves with these security features and take proactive steps to secure their accounts, such as enabling two-factor authentication and using strong passwords.

Robinhood has never lost crypto through a cyberattack

Robinhood is a popular investment and trading platform that allows users to buy and sell stocks, ETFs, and cryptocurrencies. The platform gained prominence by being one of the first to waive commissions on trades for stocks and ETFs.

In November 2021, Robinhood disclosed a significant data breach that impacted the personal information of approximately 7 million users. This incident was caused by a social engineering attack where a hacker manipulated a customer support employee over the phone to gain access to certain customer support systems. Despite this breach, it is important to note that Robinhood has never lost crypto through a cyberattack.

Robinhood employs a variety of security measures to protect its platform and users' assets. Firstly, they use two-factor authentication (2FA) to add an extra layer of security to user accounts. Additionally, Robinhood hashes all passwords using the BCrypt hash function, making it difficult for attackers to access passwords even if they penetrate the system.

Robinhood also prioritizes the security of sensitive information. They encrypt sensitive data, such as Social Security numbers, phone numbers, and other personal information, before storing it. Furthermore, they utilize Transport Layer Security (TLS) to ensure that sensitive information sent by users cannot be intercepted by attackers.

While Robinhood has never lost crypto to a cyberattack, it is important to recognize that there are still risks associated with using any digital platform. No financial app can claim to be 100% secure, and users should always be aware of potential threats and take steps to protect their information and assets.

Robinhood offers 24/7, commission-free trading

Robinhood gained its popularity as a brokerage account when it became one of the first to waive commissions on trades for stocks and ETFs. It has also introduced fractional shares to make its offering even more advantageous to young investors. Both of these features are available with Robinhood Crypto.

Robinhood Crypto is currently unavailable in Hawaii and Nevada due to the speculative nature of cryptocurrencies. However, the company is striving to be open for business in all 50 states as soon as possible.

Robinhood Crypto is a separate entity from Robinhood Financial. This means that stocks and ETFs will have additional protections, including SIPC insurance, while cryptocurrencies will not. Robinhood Crypto carries crime insurance that protects a portion of the assets against losses from theft, including cybersecurity breaches. However, this insurance does not directly protect users from the loss of their crypto.

Robinhood also supports immediate access to deposits. This means that users no longer have to wait 3-5 business days for their cash to settle and can instead start trading right away. This is a significant advantage for crypto traders aiming to take advantage of short-term price swings.

Overall, Robinhood's 24/7, commission-free trading makes it a convenient and accessible platform for investing in cryptocurrencies. While there are risks associated with any investment, Robinhood takes several measures to protect its users' assets and provide a secure trading environment.

Frequently asked questions