Robinhood Markets (HOOD -1.03%) is taking a big step to becoming a more serious player in the cryptocurrency market. Last week, it announced that it will be launching crypto wallets, giving traders on the platform more mainstream uses for the digital currencies that they've been buying and selling. 

It's a bigger move than you think. If you're not active in the cryptocurrency market, you might not realize that Robinhood was never a complete player in this game. It lets users buy and sell seven different types of cryptocurrencies on its platform, but all that they can do is sell them back when they're done speculating.

There's no way to spend them on purchases, even at places that accept crypto. There is no way to move them to a different exchange to take advantage of features like staking or lending to generate decent passive income during the ownership process. The launch of crypto wallets is the first step in freeing up those accounts to make crypto more functional, but Robinhood Markets better not stop there.

Someone putting a golden coin with a Bitcoin logo into a golden piggy bank.

Image source: Getty Images.

Gaps in the crypto game

Most of the leading crypto platforms offer features that Robinhood doesn't presently make available to its users. The inability to spend crypto as actual currency is a glaring blind spot, and that's one thing that the Robinhood crypto wallet will remedy. 

Less desirable to Robinhood (but still necessary to be taken seriously in crypto) is the ability to transfer the digital currencies to other platforms. Moving crypto around is part of the game, especially as different platforms offer varying income rates for folks willing to stake their tokens or letting the exchange lend it out. Many platforms also let you borrow funds at attractive rates using your crypto holdings as collateral.

Robinhood isn't a player in any of these niches, but with the freedom of crypto wallets, it won't be long before the platform gets up to speed with these offerings so it doesn't lose its traders to greener pastures. 

Let's also make it clear that Robinhood isn't going anywhere if it's still offering just seven different cryptocurrencies by the end of next year. It doesn't have to offer every flavor of crypto that's available, but how far would it have gotten as a platform if it only let users buy seven different stocks or option contracts?

It would be a shock if Robinhood doesn't introduce its own stablecoin in 2022. Coinbase Global (COIN -2.95%) has USD Coin (USDC -0.01%), but even some of its smaller rivals including Gemini,, and Celsius have their own proprietary crypto denominations. There is only so far that Robinhood will go offering 0.3% interest on idle cash balances. 

Let's also talk about the Robinhood debit card. Right now, it just draws from an account's cash balance, but crypto players offer more. Coinbase offers as much as 4% back in crypto on purchases with its card. Smaller players are even more aggressive with some of their card offerings. It just makes sense for the Robinhood debit card to tie closer to crypto, especially since less than 10% of Robinhood's revenue is coming from stock trades these days. Options and crypto trading are the real drivers at Robinhood right now.

Beyond the crypto

Robinhood's push into crypto wallets is a smart move, but the company also can't neglect the rest of its offerings. One knock on it is that it doesn't offer mutual funds. You can argue that it's not important. Most Robinhood users are focusing on stock options and crytpo. Traders can also just buy exchange-traded funds to scratch that mutual fund itch.

Another argument defending Robinhood is that no-load mutual funds are freely available without a commission just about everywhere. It's not a game that needs to be upended the way it did with commission-free trading in the stock market. The counter here is that it would help grow Robinhood's audience, especially with older investors who feel more comfortable with garden-variety mutual funds.

Speaking of funds, it's neat that Robinhood perpetually updates the list of the 100 top stock holdings of its users. Isn't it just a matter of time before Robinhood packages that as an index fund -- even as an ETF?

Right now Robinhood is rolling. Revenue soared 131% in its first quarterly report as a public company. In a year in which so many market debuts are broken IPOs, Robinhood is trading at a gain. It has 21.3 million monthly active users, who are entrusting it with more than $100 billion in assets. The company has come a long way in a short time, but the obvious runway is so much longer.