Robinhood may enter the L2 space, bringing new players to the tokenization of U.S. stocks

Author: Deep Tide TechFlow

As USD stablecoins gradually attract market attention, companies both inside and outside the crypto space have begun to view U.S. stocks as the next target.

At the end of May, U.S. cryptocurrency exchange Kraken announced it would offer tokenized popular U.S. stocks to non-U.S. customers; on June 18, Coinbase's Chief Legal Officer Paul Grewal revealed that the company is seeking SEC approval for its "tokenized stock" service.

Tokenization of U.S. stocks is gradually becoming a visible business.

Now, this business may welcome a new player --- the well-known American internet brokerage, the "retail investor militia," and a key force in the movement to take down Wall Street --- Robinhood.

Previously, two insiders from Robinhood revealed to Bloomberg that they are developing a blockchain-based platform that allows European retail investors to trade U.S. stocks.

According to insiders, the technical selection for this platform may be Arbitrum or Solana, and the specific choice of partners is still under discussion, with the agreement not yet finalized.

This news can be interpreted in at least two ways.

First, Robinhood is directly integrating Arbitrum L2 into this new platform that allows European users to trade U.S. stocks as the foundational layer for its blockchain trading;

Second, a more likely scenario is that **Robinhood plans to utilize Arbitrum's Arbitrum Chains feature to develop its own dedicated L2 chain based on Arbitrum's technology stack (Rollup protocol, ** EVM compatibility, etc.).

Regardless of which situation ultimately prevails, market sentiment has already been stirred.

This also means that Robinhood may be stepping in to create a dedicated L2 for the business of U.S. stock tokenization, which would be more conducive to on-chain settlement and specialized operations.

At the upcoming EthCC in Cannes, France, on the 30th, Robinhood will also announce an important declaration at 17:00 local time (23:00 Beijing time), leading to speculation that it relates to its own L2 and U.S. stock tokenization business.

Meanwhile, A.J. Warner, Chief Strategy Officer of Offchain Labs, the company behind Arbitrum, will also attend the event, providing more room for simultaneous official announcements.

Recently, the price of ARB has been somewhat sluggish, but it surged over 20% in a 24-hour period, ranking high on the cryptocurrency gainers list.

More suggestively, Robinhood's European X account commented "Stay tuned" under a discussion thread about the conference agenda, which, combined with Bloomberg's report on providing U.S. stock trading to Europe, increases the likelihood of an official announcement regarding this feature.

Everything Has Traces to Follow

Robinhood's concept of U.S. stock tokenization is not a sudden idea.

In January of this year, CEO Vlad Tenev criticized the current U.S. regulations, stating that the U.S. has not provided a clear framework and rules for the registration of security tokens, hindering the promotion of tokenized products.

In a podcast in March, Tenev directly stated: "If you are overseas, investing in a U.S. company is very difficult."

This resonates with many investors who are keenly interested in U.S. stock trends but are not physically present in the U.S.; they urgently need a smoother way to trade U.S. stocks.

At the same time, Tenev also mentioned that they were considering tokenizing securities, indicating that this would be part of a broader push to integrate digital assets into the financial system.

Looking back, the signs of paving the way are evident.

Currently, Robinhood's customers in the EU can only trade cryptocurrencies, and the company obtained a brokerage license in Lithuania last month, allowing it to offer stock trading and other investment services in the EU.

Additionally, Robinhood signed an agreement last June to acquire the cryptocurrency exchange Bitstamp, and after the transaction is completed, Robinhood will be able to use Bitstamp's MiFID multilateral trading facility (MiFID) license to provide crypto-related derivatives.

With the license obtained and regulatory compliance achieved, the next consideration is which chain to choose for implementation.

Why Arbitrum Might Be the Choice?

From a technical perspective, Arbitrum is a fully EVM-compatible L2 solution, which means Robinhood can seamlessly migrate its existing Ethereum smart contracts and development tools without significantly altering its tech stack.

EVM compatibility is crucial for large fintech companies like Robinhood to quickly go on-chain; who would set it aside if they could leverage Ethereum's extensive developer community and existing infrastructure?

Furthermore, Arbitrum's Optimistic Rollup technology strikes a balance between transaction confirmation time and cost; in contrast, ZK Rollup incurs higher costs and relatively slower transaction confirmation times. As a platform that needs to handle large-scale user transactions, Robinhood is more likely to prioritize Arbitrum's mature technology and lower development barriers.

On the business side, this choice also avoids Coinbase.

Base is the L2 launched by Coinbase, which uses the OP technology stack, but since Robinhood competes directly with Coinbase in its main business, it is unlikely to run U.S. stock tokenization on Base.

Arbitrum offers the option of a custom L2 chain (Arbitrum Chains), allowing Robinhood to differentiate itself from Base.

One piece of information you might overlook is that Robinhood actually has experience collaborating with Arbitrum.

As early as ETHDenver in 2024, Robinhood announced a partnership with Arbitrum to simplify user access to Arbitrum through the Robinhood Wallet.

This indicates that there is already a foundation for technical integration and strategic alliance between the two parties, and Robinhood may choose to continue this collaboration, leveraging Arbitrum's existing technical support and brand effect to further expand its business.

Imitating Base, Distinguishing from Base

Although the news of Robinhood building its own L2 with Arbitrum has not been officially confirmed, it has already sparked widespread discussion in the crypto community.

The sharpest voices argue that this approach is a simple imitation of Base.

Base, launched by Coinbase, adopts an open strategy, inviting external developers to build DApps, thereby expanding the ecosystem and attracting users and assets. Part of Base's success can be attributed to this open ecosystem (for example, projects like Aerodrome and Uniswap migrating or building on it).

If Robinhood also builds an Arbitrum-based L2, open to external developers to expand the ecosystem and create more real asset on-chain use cases, despite the different tech stacks, this would already be highly similar to Base's business strategy.

The perception of "imitation" is largely due to the lag in timing.

Don't forget that Coinbase launched Base at the end of 2023, while Robinhood is only now announcing its Arbitrum L2 plans. This time difference makes Robinhood's actions appear to be a "follow-up" response to Base's success rather than an original strategy.

In traditional business sectors, fintech companies often tend to replicate proven models, which is indeed a safer strategy; however, imitating Base means that Robinhood will compete directly with Coinbase, which has established a first-mover advantage through Base. For Robinhood to overtake, it will need to invest more resources and effort.

The well-known data platform Token Terminal has also pointed out a "clear path" for Robinhood, which is to **amplify its advantages as an internet brokerage and take a "closed ecosystem" route opposite to that of ** Base :

Do not invite external application developers to join its L2, but migrate all of Robinhood's existing financial products (such as trading or investment tools), assets, and users onto the chain, allowing users to operate directly on-chain rather than relying on traditional centralized systems.

This idea is more Crypto Native, combining Robinhood's existing customer base with purely on-chain operations, but a more aggressive approach also means greater resistance, and Robinhood may not necessarily follow this path.

If we step back from Robinhood to observe the entire Ethereum ecosystem, some voices believe that this could exacerbate the fragmentation of Ethereum L2s.

Ethereum L1 has already lost a significant amount of initiative in the current landscape of numerous L2s; performance is secondary; more importantly, it faces complete marginalization and pipeline-ization. Creating a dedicated L2 for specialized operations is easy, but reviving Ethereum's former glory is difficult.

Ultimately, how Robinhood will choose remains to be seen, and we may get answers after today's ETHcc.