Robinhood CEO Open Letter: We Are in the Early Stages of a Tokenization Supercycle

Author: Vlad Tenev, Robinhood CEO

Compiled by: Jiahua, ChainCatcher

It is becoming increasingly clear that we are in the early stages of a global tokenization supercycle. Last year, I described it as an unstoppable freight train that will ultimately consume the entire financial system.

Since then, tokenization has entered the mainstream public eye and is no longer just a topic of discussion. Outside the U.S. market, Robinhood began launching related products early on and continues to drive the development of this emerging industry.

Just over a month ago, we launched the Robinhood Chain mainnet at the "The World Is Flat" event in London, which is the first blockchain specifically designed for real-world assets (RWA). Since then, it has become the fastest EVM chain to reach 100 million transactions.

Stock Tokens are one of the core foundational components of Robinhood Chain. Currently, users from over 120 countries and regions can gain economic exposure to more than 190 U.S. stocks through it, with each stock token backed 1:1 by the corresponding stock.

However, there is a very obvious gap here:

Stock tokens are currently not available for use in the U.S.

The debate surrounding the tokenization of U.S. stocks is roughly divided into two camps.

On one side are enthusiastic supporters who keep asking: When can we trade tokenized stocks in the U.S.? On the other side are skeptics: What is the point of this?

After all, unlike many overseas markets, U.S. investors can easily access U.S. stocks. Companies like Robinhood already provide various low-cost and user-friendly investment channels.

There is also considerable debate about what structure stock tokens should adopt.

Currently, Robinhood Stock Tokens have corresponding underlying securities as full backing, allowing holders to gain economic exposure to these assets on-chain, including dividends. This does not equate to directly holding the underlying stocks themselves. But if we focus solely on this point, we will miss the real changes.

For the first time, we can tokenize economic exposure to high-quality financial assets, allowing these tokens to be freely transferable, programmable, self-custodial, and traded 24/7 in an open financial ecosystem.

And this is just one structure of tokenization. As regulatory frameworks mature, we expect the design of stock tokens to continue evolving, and in the future, we may even see tokenized equity that carries full rights of traditional stocks.

Tokenization is one of the best paths to modernizing the U.S. financial system and can provide more people with the opportunity to own financial assets, and U.S. investors should also benefit from it.

Tokenization is not about "going on-chain for the sake of going on-chain." The real change is rebuilding the infrastructure behind asset ownership, allowing assets to flow freely like information on the internet. For U.S. investors, this new infrastructure can directly bring three advantages.

1. Real-time settlement makes the market more resilient

The GameStop incident must not happen again.

I wrote specifically about this issue in January, and here’s a brief recap.

The core trading restrictions during the GameStop incident mainly stemmed from the risk management rules established by traditional clearing institutions surrounding the two-day settlement cycle.

Since then, we have pushed the entire industry from two-day settlement, or T+2, to one-day settlement, T+1.

Even so, there remains a time gap between the execution of a stock trade and its final settlement. To reduce the risk during this period, brokers still need to prepare a large amount of cash.

But on the blockchain, stock tokens can be traded, settled, and transferred in real-time.

Real-time settlement means that the risks and funding pressures faced by the entire system will significantly decrease, especially during times of severe market stress.

2. Native support for 24/7 trading

Today, financial markets are highly globalized, but significant news does not only occur during regular trading hours.

Major events often happen after the market closes or even on weekends. By the time the market reopens on Monday, prices may have changed dramatically.

For decades, institutional investors have been able to manage such risks through complex hedging strategies, but individual investors typically do not have that capability.

Therefore, 24/7 trading is not just a tool for capturing new opportunities; it is also a risk management tool.

Robinhood has already promoted 24/5 trading in the U.S. through traditional financial infrastructure, and we will continue to innovate towards a market that never closes.

However, achieving this through traditional means requires connecting different exchanges and alternative trading systems, making the entire process very complex.

On a blockchain like Robinhood Chain, 24/7 trading and asset fractional ownership are native capabilities.

We have already seen the potential of this model on Robinhood Chain and other protocols.

Even on weekends, users outside the U.S. still trade stock tokens worth millions of dollars.

The internet does not rest, and the market should not rest either.

3. Assets can be freely transferred, and financial platforms must truly compete

Tokenization also allows users to have more control over their assets while forcing financial platforms to compete with each other.

In the traditional financial system, transferring assets from one broker to another through the traditional ACATS transfer system often takes several days and is a cumbersome process.

Many people ultimately do not transfer their assets because no one wants their assets to be in an uncertain "transfer" state for an extended period, especially when the market is still fluctuating.

Tokenization allows assets to be transferred instantly on a global scale.

They can move between different traditional financial platforms or directly enter the DeFi world.

When the barriers and costs of asset transfer significantly decrease, financial platforms will be forced to compete on price and innovation.

Users can choose based on which platform offers the best experience, rather than being trapped in a closed ecosystem.

And transferability is just one of the advantages brought by self-custody.

Self-custody means that users can directly hold stock tokens in their own crypto wallets.

In addition to giving users greater control over their assets, self-custody also allows these assets to have more uses, such as lending through DeFi or serving as collateral for trading.

We have seen developers building stock token applications on Robinhood Chain that even we did not anticipate.

As we continue to refine the RWA foundational components and provide developers with more tools, we believe this trend will only accelerate further, ultimately forming an increasingly active on-chain economy.

But to truly unlock these advantages in the U.S., technology alone is not enough.

Over a century of securities legislation and regulation has created an extremely complex rule system in the U.S., much of which is built around the previous generation of market structures and technologies.

Many of these rules do play an important role in protecting investors and maintaining market integrity.

However, at the same time, their specific implementation has further solidified traditional financial infrastructure, which has increasingly failed to keep pace with modern technological developments.

Market participants have already begun to turn to blockchain-based systems.

But policymakers also need to push for rule modernization, allowing the market to adopt truly more advanced infrastructure while retaining the goals of investor protection and market integrity.

Moreover, they must accelerate the pace.

Other jurisdictions will not wait for the U.S. to catch up, and this will ultimately have very far-reaching implications.

Tokenization of listed stocks is just the beginning.

The tokenization of listed stocks can help us gradually build the necessary infrastructure, liquidity, and on-chain ecosystem, further supporting a broader range of asset classes.

The next direction that is already vaguely visible is those assets that currently have higher barriers to entry and more limited liquidity, especially equity in private companies.

Of course, technology alone cannot eliminate all barriers.

For example, the current "qualified investor" criteria in the U.S. still keep the vast majority of Americans out of the private market.

But if we can first establish the infrastructure for listed stocks, we have the opportunity to pave the way for broader market access, better liquidity, and entirely new forms of asset ownership.

U.S. investors should also benefit from this innovation.

After all, many of these tokenized assets are already U.S. assets, and American companies like Robinhood are driving this innovation.

If the future ownership system around U.S. assets is established by other regions of the world while U.S. investors themselves cannot participate, it would be a very strange outcome.