Robinhood's CEO on the Plan to Tokenize Everything

28:12So in the U.S., we already have a pretty robust financial system. Robinhood exists, right? And you can onboard on Robinhood and buy stocks. You can buy them 24-5, which is pretty good. So there, the delta between the tokenized experience and what you have currently would be expanding to 24-7. And also, eventually, when we plug into DeFi, making all of the DeFi aspects, which are right now a little bit more niche, but incredibly powerful, available. So collateralized lending and borrowing. Self-custody. Self-custody is interesting. So right now, your stock in your Robinhood or other brokerage account is kind of locked into a broker.

28:59Right. So let's say that broker has issues, like a technical outage. You're kind of stuck. But if the stock were to be tokenized, not only would it become seamless to use another broker, you just kind of attach to your wallet, but the reliability would be much higher. I also don't have to worry about losing my seed phrase when I have stock in a traditional brokerage. Is that something that people are going to have to think about if they're trading tokenized equity? It's less concerning with traditional assets because there's always going to be a process to connect your token with the real asset.

29:38So, you know, it's a big problem with Bitcoin, for example, because there's no like physical representation. but if you have a tokenized dollar or an asset you will be able to there will be a process where you can claim the actual real thing sorry just to press on this further i'm trying to understand okay so a tokenized equity and it's gonna i think what's the chain you're using arbitrum like uh arbitrum at first but not for long we're we're actually rolling out our own blockchain oh you're going to have a base competitor. Yeah, in a way. I mean, it's just a layer. Isn't it real on top of Arbitrum though?

30:17It's going to be on top of Ethereum. It's a layer two. Okay. So you're building your own Ethereum layer two. Setting aside Europe or the United States, random person who has some USDC in Indonesia, will they be able to interact with this and then have Tesla exposure? Eventually, yes, that's the plan. And so like right now, if I want to own Tesla shares through Robinhood, like I tell you my name and I presumably give you some identifying information, etc. But in the future, in theory, anyone will be able to get exposure to these assets without actually having to reveal anything about themselves because they're just interacting pseudo anonymously on chain?

31:01In large part, yes. There's some caveats where, depending on the jurisdiction, we might have to, like, KYC some elements of the experience. For example, minting and burning the actual physical stocks and turning them back and forth into tokens will likely require KYC. But yeah, in the same way that you can transfer a tokenized stablecoin on chain, you'll be able to transfer tokenized stocks identically. And kind of for the same reasons that stablecoins have become more popular and have really gained mass adoption outside of the U.S. first, just because outside of the U.S., it's much harder to get a hold of U.S.

31:48dollars. tokenized stocks, I think, will gain a ton of adoption outside of the U.S. before the benefits and the technology accruing to the U.S. and kind of disrupting the structure here. And so just to be clear, if I have a tokenized stock, I can stake that, right, and use it to do other things. You will be able to connect it, yeah, to all of the DeFi capabilities. Now, exactly what those are, I think we're going to have a developer ecosystem and they're going to have to build a whole bunch of things. But yeah, you can put it in pools into collateralized lending pools. Staking is interesting because technically staking is dedicating tokens and resources to support the network itself.

32:33And so when you say staking a stock, a lot of people actually mean lending it, which I think will be able to be done eventually. Could you stake it to support the network, sort of old school as well? I think the way that that would actually work is you'd have to convert that into the network gas token and you would stake it that way. But I think it's a little bit early for us to get into yet. So you mentioned that you're only doing this on Arbitrum for a short amount of time and then you're transitioning to your own tech. Why? I guess is my question. Why start there and then do your own layer versus just starting out with your own thing?

33:18I think that the ambition is to actually make this the best chain for real world assets. So we're starting with stocks. We're also doing private stocks as well. But we want to tokenize everything that people would want to make tradable. So you can imagine real estate in the future, You can imagine carbon credits, really anything. But if you're going to use Ethereum, then why not start out with Ethereum rather than Arbitrum? Ethereum is the base layer one. And the problem with transacting directly on Ethereum is that the fees can be quite high. So that's why Arbitrum, which is a layer on top of Ethereum, they've been able to essentially consolidate lots and lots of transactions.

34:11and sync up to the base layer one chain at an infrequent cadence. Oh, I see. And that way you can kind of like split up what would be a large transaction fee into lots and lots of small transactions and get the cost down from, you know, high congestion. You know, Ethereum could be multiple dollars per transaction down to like individual cents, you know, a handful of cents. And I know we've been having this conversation for years now, But what happens to the gas fees if this really takes off and people start using this service en masse? Yeah, I mean, the gas fees are very scalable. Part of the benefits of being a layer on top of the chain is to some degree we'll be running sequencers and we'll be able to handle the gas fees.

35:03And I think that the goal would be for this to be essentially transaction cost free or very, very low cost.

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37:17Ready to bring your visions to life? Learn how at amazonbusiness.com. You obviously, as part of the core company competitive advantage is building tech, right? And one of the things that you did several years ago is you built your own clearing stack instead of using some third-party company. I forget what it was. You know, in your vision for Robinhood, could you ever see whitelisting some of your own tech? I think about Amazon and eventually it built its own computers and then it started selling them and then it started selling its warehouse capacity. As you build up these capacities, could you see selling it to other fintechs or access to these platforms?

38:00Yeah, and I think tokenized stock tokens is a great example of that. Same more. that that could become a standard. If you're another fintech and you may not be offering stocks to your customers, maybe you have a big international presence and you want to add stocks, you would just be able to integrate with our chain and then those stocks would be available to your customers. We also have a service called Robinhood Connect, which essentially took our trading services that we've optimized so finely for our own first-party app and made them available to third-party developers. So if you're a non-custodial wallet provider like a Moonshot or Uniswap or MetaMask, you have this problem of how do you streamline people getting their dollars into crypto and back out to dollars if they want to.

38:58So Robinhood Connect offers one of the lowest rates to do that just because we've optimized that so much that handing that out and giving that service to third parties is now easy for us to do. So we're going to continue to iterate on that. The chain will be full-fledged developer platform made available to third parties. And we always will continue to look for opportunities in the future to have our tech. I wouldn't call it white labeled, but at least made available to institutions and other customers. You know what's really interesting to me? I was thinking about like several years ago when crypto started taking off.

39:41And I used to make fun of these people. When crypto started taking off and you'd get these conferences and people would go on panels and they'd say, we're really interested in blockchain technology. Not Bitcoin, but blockchain. We're really interested in blockchain technology, not Bitcoin. And I never really knew what it meant. And it didn't seem to go anywhere. And it just seemed like a way like, okay, if I like worked for like a big, whatever, big legacy financial institution, I want to sound smart. I want to get invited to panels. I say like, oh, we're really excited about the blockchain here.

40:11Totally. Yeah. But actually, it kind of sounds like maybe they're being vindicated a little bit. Well, you've noticed that I'm not using the word blockchain or Web3. But you're using, we're talking about the, you're talking about the idea of chains. Yeah. And like I'm kind of sitting here in 2025 and it's like maybe I shouldn't have made fun of those people as much as I did because it does seem like chains per se as opposed to coins are kind of where a lot of the action is. I think you should make fun of those people a little bit because people have been talking a lot about this stuff for many, many years.

40:45There's been a lot of talk, including from me and more recently from some of our competitors. Yeah, lettuce on the blockchain. We're going to put fancy purses on the blockchain, which maybe you'll do. It'll happen. But yeah, there's been a lot of talk and not much action. So yeah, me personally, I try very hard not to brand stuff and say it's the next big thing. I just want to make products available that people use. And I think the best buzzwords come out organically because consumers are actually calling things. Yeah, sure. And the things arise naturally, right? And I think that there's a running gag that - I'm going to make fun of them less, though.

41:26I really am. Yeah, mass adoption is a year away. It's always kind of been a year away for the last 10 years. And the institutional money is always a year away, too. But it seems like it's happening. But yeah, I think that we're finally at the precipice of crypto technology not being just Bitcoin and meme coins and actually being applied to things that are useful in the real world. I'm kind of convinced. I will believe it when I see it. But if you have tokenized stocks, what regulatory regime does that actually fall under in the U.S. at least? Is that a security or is that a derivative or is that something else?

42:00How are you navigating that aspect of it? Well, so they're not permissible in the U.S. yet. But our belief is that in the ideal world, they would not be treated as a derivative. They would instead be treated as a security, kind of pari-pasu traditional stocks. So basically all of the protections, all of the structure that the SEC can kind of promulgate to individual stocks should pass through to stock tokens as well. And our belief is actually that this doesn't require new legislation. The SEC can basically make the rules. They can do rulemaking. They can even do relief in advance of rulemaking like they did for Reg ATS, if you guys are familiar, a few decades ago.

42:51So we've been working with them. And I think actually the folks at the SEC, Hester and the Crypto Task Force, we've been engaging in a lot of roundtables, including tokenization. I think they're pretty keen to make this happen. And I actually think the EU launch and showing that these tokens are useful, it works well, customers love it. It's a huge efficiency improvement and infrastructure improvement behind the scenes that makes all kinds of things that they care about easier. My hope is that that'll help kind of spur innovation and spur activity and acceptance worldwide, not just in Europe. The changing administration must have been huge for you.

43:34It was definitely a positive because, you know, probably over the much of the past, much of the period of 2020 to 2024, we had to play defense. Our business was under assault from multiple angles. And I think at first, when the administration changed, having that not be a huge factor was a huge relief. Just not having regulation by enforcement and not having to spend a significant amount of mindshare and resources on defending our business from this onslaught. And then that shifted into, okay, well, we've got to exercise a muscle that we haven't really had to exercise before, which is there's an openness to create new rules and to actually move forward and encourage innovation.

44:22What does that look like? What does it look like to actually work with an administration that wants to get on the front foot and make the U.S. the leader? And I think that's been very welcome. Yeah, I think you saw with the stablecoin bill, you'll see with market structure that I think we'll be able to execute on this. What's it been like working with them? Just give us some color of the actual process in this administration versus the last one. They've been moving fast, which is pretty amazing. I mean, Bo Hines and David Sachs care a lot about this. They care a lot about U.S. being number one in crypto as well as AI.

45:02they've been engaging industry and they're also like allergic to bureaucracy i think in the in the previous administration frankly it was it was hard to get a meeting right uh first of all i don't know for how long people weren't going into offices but like it was remote meetings it's hard to get this stuff done remotely made a substantive difference that made a substantive difference because i think it's really hard to solve complex problems with multiple stakeholders remotely. So even just something as simple as like having a roundtable wasn't really done, couldn't really be done in the previous administration because it was all just virtual chats.

45:42Everyone was working remotely. I have another crypto related question. One of the things I wonder about is who makes money in crypto? And by that, I mean, like at one point, there was a lot of excitement about the specific L1s, right? So Ethereum, Versalona, etc. But it's not clear to me that they're going to like collect tons of fees, especially, you know, it's like you're using a layer two. I don't know how much value or you're built and then you're going to build a layer two. I don't know how much value actually then accrues to, say, Ethereum. Circle recently came public doing incredibly well.

46:17That business seems like it's insanely good. On the other hand, they pay a lot of their money to Coinbase for distribution, et cetera. So I don't really know if they're going to like make a ton of money in the long time. Maybe it'll be the distribution. By the way, are you going to get in on that? At some point, will you be collecting money from the stablecoin issuers to the customers who hold that coin on your platform? Well, we announced last year that we joined the Dollar Global Network, which is a consortium with Paxos, Kraken, a bunch of other companies to create a new stablecoin that's going to be global in nature and will pay very competitive interest to holders.

47:00So the goal would actually be to take much of those economics and pay them in the form of interest to customers. Because if you think about it, if you're holding USDC or Tether, most other stable coins, you're not getting interest, which is fine. Coinbase users are getting interest indirectly though, right? If they hold USDC on Coinbase and Circle remits money to Coinbase and then Coinbase remits money to the user. They are getting rewards, which is true, but I think it's a little bit different than interest. And I think it's also not universal. I mean, you have to be holding it custodially. You can't be just like holding it on chain and you're certainly not getting it if you're using Tether or one of these others.

47:51So yeah, I think they can get rewards and incentives. But I think over time, they'll have to get interest as well. Because if you're not getting interest, you don't really have an incentive to hold US dollars in the form of stablecoin. The incentive would just be converted immediately and put it in a bank, which I think most crypto people would tell you it kind of defeats the whole point of using crypto. I think internationally, it's okay because those people just want dollars. Because you get a convenient service. Yeah. So you can get rid of, I think it's a good enough value proposition for now.

48:28But I think over time, as the interest is unlocked, the best stable coins will actually, the ones that ultimately gain market share are going to pay a very competitive interest rate. So that's going to become an axis for competition and the end user will benefit. So actually, to cut to the chase, I'm not sure that's a long-term sustainable, large revenue stream. I think it'll get competed away. Maybe no one will make money in crypto and it'll just be the benefit of the consumer. Well, OK, this is exactly the question I wanted to ask. OK, so who makes money here? When I think about capital markets, like if I'm an old school investor or an old school economist thinking about capital markets, I think like, OK, well, an investor comes along and they give a company money and they get equity in return and the company uses that money to go out and expand their business and eventually they pay back the investor.

49:21And then I look at investing nowadays. I'm sure you've heard this criticism before, but so much of it seems extremely synthetic. You know, tokens built on top of tokens on top of tokens. I guess my question is, to you, what is the actual purpose of capital markets and this type of trading? I do think that there's a valuable purpose of capital formation. I think it's gotten a little bit lost, or I'd say the retail investor in the U.S. has gotten disconnected from that purpose because not too many companies are going public nowadays. I think past few months have been an exception locally. But if you look out broadly, you know, back in the 80s or late 70s, you used to be able to get into a public company at IPO at a pretty low valuation and kind of get a thousand X or ten thousand X return.

50:19I mean, if you'd invested in Microsoft or Apple at IPO, you had a lot of upside left. So companies used to go public earlier. Nowadays, you've got SpaceX, OpenAI, companies that are worth hundreds of billions of dollars still staying private. And those gains are accruing to a smaller and smaller set of wealthy insiders. And I think that's another potential for the technology because, as I mentioned, we release SpaceX tokens to consumers as part of our To Catch a Token event. And what that will do over time is you'll have 24-7 liquid markets and private stocks as well. And I think that's going to be very exciting.

51:06And in the U.S., if those are permissible, which I think requires the crypto stuff, but also a relaxation of the accreditation standards, I think things start to get really interesting. because then you unlock capital formation at a greater scale and also participation for retail in some of these great opportunities. Like if you're a retail and you want to gain exposure to the AI boom, your options in the US are extremely limited. And I actually think that's a huge problem because the AI boom is very, very consequential to everyday people. I'm also looking at the Circle IPO. This thing is insane.

51:47It goes up like 20 % a day. I have a question about IPOs. I'd love to get your take on this. Every time there's an IPO that goes up, you have like these sort of like, Ninnia's like, actually, this was bad. And they left all this money on the table. There have been alternative routes to IPO-ing for decades, actually. In the late 90s, Google famously did a Dutch auction when it became public, etc. Yet the IPO as a thing persists. Do you have a theory for why? Why is it that the IPO model where the big legacy banks, they get their allocation and their best clients get this big bump, etc., and the company leaves money on the table, why does it persist for so long in your view?

52:32What does it say about market start? Is this a roundabout way of asking why Robinhood IPO'd? No, I mean, sure, maybe. But what is it about the traditional IPO that's so Lindy? Well, I think it's just the enshrined and regulatory rules. No, it's not. Google did a Dutch auction. There are clearly other ways to go. SPACs existed. They're coming back already. And yet good companies continue to basically go by the IPO road. Yeah, that's a good question. I would say those are all kind of variants of the IPO that people have experimented with. You have direct listings as well. Downside, of course, with a direct listing is you can't raise primary capital, which I think is useful to a lot of companies.

53:15They do look at it as a financing event. So I think there will be some iteration and some experimentation within the IPO sandbox like we've seen. But I think you look at tokenization of private companies, if we kind of pull on that thread, that presents an interesting alternative to companies as well, both for raising primary capital and for tapping into secondary liquidity for shareholders. I think it's not yet clear what the impact of that will be long term to capital markets, but it's definitely coming. So you mentioned the accredited investor limitations regulations in the U.S. and I've never really decided how I feel about them because on the one hand, they're supposed to protect uninformed retail investors, I guess.

54:11On the other hand, they do seem to lock people out of a lot of opportunities in the market. And one thing you hear from companies such as Robinhood is this idea of democratizing finance. Like that is the buzzword and the catchword. And we're going to bring all these opportunities. We created that, by the way. Oh, did you? That was our mission. Democratize finance for all. No, they talked about that with E-Trade. I was a day trader in 99. Also, peer-to-peer lending, they were all over that. Okay, but on that note... But fine, we'll let you see. They got it from us. Okay, but on this note, is there a limit to how far you can democratize finance?

54:49Or do you believe there should be any guardrails in terms of investor access? I think any is a big term. I mean, obviously, I can think of some examples of things that maybe shouldn't be democratized or at least democratized first. Like, I don't know if retail needs to be trading collateralized debt obligations or some of these heavily institutional products. But I think with private companies, it's a little bit of an easier discussion. I think that it's hard to imagine an argument for why retail should not have access to that. Like an argument that on its face isn't illogical. I mean, you have access to so many things.

55:36You can just spend your money on Amazon and buy all sorts of trinkets that immediately lose value and depreciate. You can buy meme coins, right? So the idea that those classes of ways to spend your money are okay, but buying OpenAI or SpaceX stock, I think on its face, it's illogical. Either we have to ban a whole bunch of other things that people do to blow their money. Amazon trinkets. My issue is that I think in a world where everything is available, you induce a lot of people to essentially find ways to fraud, to create fraud. Whereas a trinket is a trinket. Anyway, I think we have to let you go.

56:18We could talk for a really long time. Will everything be on chain in the future? I don't know about everything. Okay. But I think anything that people want to trade, buy or sell, and get liquidity on will likely find its way on chain. All right. Thank you so much for coming on OddLash. That was a blast. Thank you, guys. Thank you.

56:52Tracy, I really can't believe the degree to which like a blockchain. I mean, he didn't say blockchain, but it's every, all these companies have their own chain. So like Coinbase has its own chain called Base, Robinhood with its own chain. Like I thought that was so ridiculous, the idea like seven or eight years ago. And it's a little different. Like they're not putting tomatoes on chain. But like the change themselves where the coin is not that important, it sort of took off in a way that I wouldn't have guessed. Here's my question. If you're a person right now who is not trading crypto, is there anything in your day-to-day life that is trading or existing or being tracked on chain?

57:35I don't really think so. No, I don't think so. So we're still in the wait and see mode. People are still talking about it. And yeah, I guess like I'm open to the idea that chain technology is going to change things and make things different. But I guess like why hasn't it happened already? And then B, it sounds still like the barrier isn't necessarily technology. Like we have things that would allow you to do this, but it's still regulatory. I mean, it sounds like the reason it didn't happen is because all the Biden administration people were working from home and they couldn't they didn't have roundtable.

58:13No, it does sound like probably that is part of it, the sort of changing regulatory environment and the deep suspicion towards crypto, for better or worse, on the part of the Democratic Party in the U.S. Like obviously seems pretty real. And I do think it seems like that between the Genius Act moving forward in Congress and obviously the changing of the guard at the SEC, there is a real movement. And to my mind, it's not really like, and again, I always sort of go back and think about our episodes with Austin Campbell. To my mind, it's not like, okay, like there is some benefit to me right now in the existence of chains.

58:52But the idea that like legacy software for reasons that we all know is never going to get its act together to have something like 24-7 trading. for better or worse. I don't even know if 24-7 is trading, but some people want to do it because some people want to trade at 3 p.m. in the afternoon. And it sounds like, or what I suspect, and I think is probably like real or imminent, is that through chains that that will be something that becomes fairly common. I guess here's where I'm coming from. It seems to me that a lot of this is incremental rather than revolutionary. And when people were first talking about it, it was very much in those revolutionary terms and now it just seems like you know like yeah an imp an efficiency improvement i actually i totally agree with that i mean one thing this is definitely not is some sort of like cypherpunk vision where people are trading everything without the government being able to look at it that is definitely true but you know like the efficiency improvement is it's not nothing like it's not get me wrong it's not only not nothing so i think it's actually kind of a surprise to me because the way people talked about the thing with blockchains is that they're decentralized and costly.

1:00:04And you brought up the point of Ethereum gas fees. But if everyone can have these sort of basically low fee layer twos, because they're in large part centrally run, you sort of solve some of the compute issues because you don't have to coordinate all these different nodes around the world. It's the Robinhood chain. It's the Coinbase chain. It's whatever. Maybe it is more efficient than legacy infrastructure that has been updated and cobbled together for like literally decades and will be here decades from now. It's certainly true that you don't hear the gas fee complaints the way you used to, right?

1:00:44Like some of that's been solved. All right. Well, shall we leave it there? Yeah, let's leave it there. This has been another episode of the Odd Lots podcast. I'm Tracy Allaway. You can follow me at Tracy Allaway. And I'm Jill Weisenthal. You can follow me at The Stalwart. Follow our guest Vlad Tenev at Vlad Tenev. Follow our producers, Carmen Rodriguez at Carmen Armand, Dashiell Bennett at Dashbot, and Kale Brooks at Kale Brooks. For more Odd Lots content, go to bloomberg.com slash oddlots, where we have a daily newsletter and all of our episodes. And you can chat about all of these topics 24-7 in our Discord, discord.gg slash oddlots.

1:01:19And if you enjoy Oddlots, if you like it when we talk about the future of trading, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

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