Tokenized Stocks Could Avoid Future Trading Freezes, Says Robinhood CEO

TLDR

• Robinhood CEO Vlad Tenev suggests that tokenized stocks could prevent future trading freezes similar to the 2021 GameStop incident.
• Tenev attributes the GameStop freeze to outdated financial infrastructure and slow trade settlement processes.
• Moving stocks to blockchain technology could eliminate long settlement times and allow for real-time trading.
• Robinhood has minted nearly 2,000 tokenized versions of U.S. stocks and ETFs, totaling nearly $17 million.
• Tenev calls on lawmakers to pass the CLARITY Act to enable tokenized equities and real-time settlement in U.S. markets.

In the years following the 2021 GameStop trading freeze, Robinhood CEO Vlad Tenev suggests that blockchain technology, specifically tokenized stocks, could avoid a repeat of that chaos. Reflecting on the incident, Tenev pointed to outdated financial infrastructure as the root cause of the problems. He argued that tokenization could help streamline trading and reduce the risks that led to the trading restrictions on GameStop (GME) and other meme stocks.

Tenev Proposes Tokenized Stocks to Fix Trading Delays

In January 2021, Robinhood halted buys on GameStop, triggering outrage among retail investors. Tenev described the situation as the result of “slow, outdated financial infrastructure” combined with an unprecedented surge in trading volume. The brokerage faced massive collateral demands due to the two-day trade settlement system (T+2), which strained its ability to operate.

This led to Robinhood raising over $3 billion in emergency funding to continue its operations. Tenev acknowledged that many users were frustrated, particularly retail investors who had their trades restricted. The trading freeze left millions of users angry, as they could not participate in the market surge that surrounded GameStop at the time.

Tenev believes that moving stocks to blockchain technology through tokenization could solve the issues that arose during the GameStop trading freeze. Tokenization involves converting an asset, like a stock, into a token that operates on a blockchain, eliminating the need for long settlement periods. This would reduce risks to the system and allow investors to trade freely, without delays or restrictions.

With tokenized stocks, brokers would no longer have to rely on slow and outdated infrastructure, which can often result in the need for emergency funding. Tenev’s vision includes a system where trades settle instantly, eliminating the two-day waiting period that can cause liquidity issues for brokers and traders alike. By cutting down the settlement time to real-time, tokenized stocks could enhance market efficiency.

Robinhood’s Move Toward Tokenization and Blockchain

Robinhood has been experimenting with tokenized stocks for some time. According to data from Entropy Advisors, the company has minted nearly 2,000 tokenized versions of U.S. stocks and ETFs, totaling nearly $17 million. While this is still far behind tokenization leaders like xStocks and Ondo Global Markets, it is a significant step in the development of blockchain-based trading.

Tenev’s post highlighted that Robinhood’s upcoming features would include 24/7 trading and decentralized finance (DeFi) access. The company plans to add self-custody, lending, and staking, offering more options for retail traders in the near future. However, Tenev emphasized that for tokenized equities to become widespread in U.S. markets, regulatory action is needed.

Tenev has called on U.S. lawmakers to pass the CLARITY Act, which would prompt the SEC to create rules for tokenized stocks. He believes that this would be a crucial step toward enabling real-time settlement and a more efficient market for retail investors. Without regulatory changes, the full potential of tokenized equities may remain untapped in the U.S. market.

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