Why Robinhood’s CEO Touted Tokenization 11 Times on Its Q2 Earning Call

Robinhood CEO Vlad Tenev referenced tokenization nearly a dozen times during the company’s second-quarter earnings broadcast on Wednesday, highlighting how the once-esoteric term is becoming a cornerstone of the retail brokerage’s crypto strategy.

In total, Tenev referenced tokenization 11 times, while also mentioning Robinhood’s stock tokens on a handful of occasions. The digital assets, which offer synthetic exposure to private companies like SpaceX and OpenAI, were unveiled for European users in June, alongside company ambitions to build its own Ethereum layer-2 scaling network.

During the hour-long broadcast, Tenev invoked tokenization within five minutes, a term used to describe the process of representing real-world assets using tokens on a blockchain.

In some ways, the episode mirrored Facebook parent Meta’s pivot away from the metaverse in 2023, when CEO Mark Zuckerberg referenced artificial intelligence 20 times on an earnings broadcast.

Tenev described tokenization as “the biggest innovation in capital markets in over a decade,” saying investors will benefit from 24/7 trading, instant settlement, and self custody. Robinhood can make “all sorts of assets” accessible for users that weren’t feasible before, he said.

Robinhood’s stock price has nearly tripled this year, rising 179% year-to-date to $104 on Thursday, according to Yahoo Finance. Despite a cooldown in crypto trading revenue, the firm posted stronger-than-expected sales and profits in the second quarter.

Crypto exchanges Binance and now-defunct FTX dabbled in tokenized stock trading during the pandemic-era crypto boom, but the umbrella term faded into obscurity amid regulatory heat until BlackRock CEO Larry Fink touted tokenization as “the next generation for markets” in 2022.

Now, with the SEC committed to advancing tokenization frameworks under a crypto-friendly White House, Robinhood is positioning itself as a major player in the space, and one that could potentially benefit from the same regulatory tailwinds as crypto-native firms for years to come.

Asked by an analyst for feedback that Robinhood is getting on tokenizing private assets, Tenev said that it’s addressed a mainstream criticism toward digital assets, namely the claim that they’re not tied to anything with “fundamental utility” and are ephemeral like memes.

Aside from customers’ apparent demand for stock tokens, Tenev said the product’s rollout demonstrated “the power of crypto technology and show[ed] a roadmap to what Robinhood could be if it was rebuilt from the ground up on crypto rails.”

But not everyone was satisfied with Robinhood’s stock tokens, including OpenAI, which slammed the product as an unauthorized attempt to tokenize its equity. Not long after, the U.S. Securities and Exchange Commission warned firms that their tokenized offerings must comply with securities laws, and a blockchain isn’t a valid way of getting around that.

Tenev told Decrypt last week that he thinks the regulator’s warning was not specific to Robinhood, and on Wednesday, he noted that “some things need to happen” regulatory-wise to unlock tokenization’s true potential, including a look at investor accreditation laws.

At the end of the day, Robinhood said that it’s still in the first phase of its tokenization strategy, which involves creating a sustainable supply of stock tokens. The second phase will involve getting the tokens to trade on Bitstamp, a crypto exchange that Robinhood acquired this year.

Phase three, Tenev said, will allow users to plug stock tokens into decentralized finance, or DeFi protocols. DeFi applications allow users to self-custody their assets and transact natively on blockchain networks.

“We have the technical capabilities to do all of this,” he said. “It’s just a question of going through the regulatory process, and we think that’s basically the optimal path.”

Robinhood did not immediately respond to Decrypt.