Robinhood Tokenize Stocks

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Introduction

Welcome to the Tokenized newsletter, brought to you by the creators of the Tokenized Podcast; Simon Taylor of Fintech Brainfood and Pet Berisha of Sporting Crypto, written by Jeremy Batchelder.

We are the newsletter for institutions that need help preparing for a Tokenized future.

We run through the headlines every week, what it means for you and a market readout. Always with an institutional, business-focused perspective. 

Join us every week as we meet your Tokenization needs.

Stories You Can't Miss 📰

🏹 Robinhood Tokenize Stocks

Trading platform Robinhood has rolled out tokenized versions of over 200 U.S. stocks and ETFs to European users. They’ve also launched Crypto perpetual futures and are also launching their own Layer 2 blockchain with help from Arbitrum.

Key Points:

• EU users can now trade 200+ U.S. stocks and ETFs, including private companies like OpenAI and SpaceX. This comes soon after Kraken and ByBit have launched similar products — with crypto business Republic also offering tokenized private stock trading.

• Perpetual futures for EU traders, routed through Bitstamp (the exchange acquired by Robinhood for $200M)

• Robinhood’s decision to build on Arbitrum was partly motivated by the ability to connect with other entities within Ethereum’s ecosystem

The Tokenized Take:

• This promises 24/7 liquidity, but also creates liquidity fragmentation in the short term. Wrappers fragment, but like stablecoins, there will be a unification at some point that unlocks even more liquidity.

• This is exciting in markets where stocks are not easily available, especially U.S. based stocks. For European traders, these can be expensive, especially in retail.

• As per Rob Hadick, Dragonfly, this form of wrapper can create liquidity problems, but longer term with primary markets coming onchain, we will see equities move in real size onchain with dramatic liquidity increases.

📱 Kraken Launch Payment Product ‘Krak’

Crypto exchange giant Kraken has unveiled Krak, a peer-to-peer payment app supporting 300+ assets across 160+ countries with zero transaction fees. The app blends crypto rails with traditional finance, offering instant global transfers and up to 10% rewards on crypto holdings.

Key Points:

• In their announcement Kraken say that 1.4bn adults remained unbanked and international remittance fees often exceed 6%, with some corridors exceeding double digits

• Krak has no subscriptions or lockups

• It uses the USDG stablecoin

• Krak will soon enable borrowing and spending with physical & virtual cards

The Tokenized Take:

• The convergence continues. Kraken moved into stocks (like Robinhood) and launched their own layer 2 solution Ink.

• Kraken is varying their product lines ahead of a potential IPO. As crypto IPO mania ensues, there is pressure on exchanges to vary their product offerings and income streams to be more robust in the face of more challenging markets down the line.

🏦 Circle Apply for National Trust Charter

USDC stablecoin issuer Circle has applied to the Office of the Comptroller of the Currency (OCC) to establish "First National Digital Currency Bank, N.A.”

Key Points:

• This would make Circle only the second crypto company with a federal trust bank charter after Anchorage Digital

• The charter would allow Circle to manage reserves and provide custody

• This comes in the same week that Ripple has applied for a Federal Bank Trust Charter

The Tokenized Take:

• Circle have always been one of the most regulated and licensed businesses in crypto. This is another step in that direction, trying to maintain that edge against competition.

• If Banks start issuing stablecoins, as widely reported over the last few months, they will suddenly become competitive with Circle.

• Circle might be the next after Anchorage to get a charter, but they will certainly not be the last as the convergence continues.

📰 Some More News:

🏦 Tokenization, Stablecoins & Finance

• Grove Announces Launch of Institutional-Grade Credit Infrastructure DeFi Protocol with $1 Billion Allocation to Tokenized Janus Henderson Anemoy AAA CLO Strategy (Read more here)

• SoFi to Launch Blockchain Remittances With Stablecoins as Crypto Returns to Platform (Read more here)

• Rain, Toku Debut Stablecoin Payrolls for Workers in Over 100 Countries (Read more here)

• Crypto exchange Kraken debuts peer-to-peer payments app Krak (Read more here)

• Market Cap of Euro Stablecoins Surges to Nearly $500M as EUR/USD Rivals Bitcoin's H1 Gains (Read more here)

• GF Securities HK issues interest bearing RMB GF Token with HashKey (Read more here)

• Two-thirds of Koreans want to invest more in crypto as won-based stablecoin hype builds: Survey (Read more here)

• Tokenization Firm Midas Introduces Private Credit Product with Fasanara, Morpho and Steakhouse (Read more here)

• Stablecoin startups surpass 2021 venture capital peak as institutional money pours in (Read more here)

• The Robinhood Chain is currently being built on Arbitrum to power the future of asset ownership (Read more here)

• Circle targets national trust bank license; Ripple eyes RLUSD central bank reserves (Read more here)

• Global Dollar Network expands with EU launch of USDG stablecoin by Paxos with backing from Robinhood, Kraken and others (Read more here)

🤑 Funding and M&A

• Yield.xyz nets $5M Multicoin bet to eliminate ‘backend Frankensteins’ (Read more here)

💼 Government & Policy

• Hong Kong Sets Out Plan to Regulate Crypto, Encourage Tokenization (Read more here)

• Fed Chair sees crypto going mainstream, expects more bank engagement (Read more here)

• Bank of Korea Halts CBDC Project as Government Submits Stablecoin Bill: Report (Read more here)

• Kazakhstan plans national cryptocurrency reserve using seized assets, state-mined coins (Read more here)

Simon’s Market Readout 💬 

People are rightly excited by all the announcements coming out of Robinhood, including the launch of perpetual futures and tokenised stocks on a custom Ethereum L2.

That is genuinely headline-grabbing news and genuinely exciting, but people also have lots of different takes about it under the hood.

While it promises instant 24/7 liquidity, it also potentially creates liquidity fragmentation.

Let me explain what I mean.

If you're going to wrap a stock, typically what you do is create a special-purpose vehicle (SPV) or some other kind of mutual fund, then you wrap the stock inside that fund. So you'd have Robinhood Tesla stock and Kraken Tesla stock, and some other form of Tesla stock. These things all end up a little bit fragmented, like stablecoins before we had Tether and USDC—there's going to be a lot of inefficiencies. For a professional trader, that looks a lot less exciting than the existing markets. Maybe the spreads are wider. Maybe it's not as efficient.

But if you zoom out to what happened with stablecoins, two things occurred.

1. We saw a power law—Tether and Circle are by far the dominant issuers, so the liquidity problem was solved by those issuers. They've gone to multiple chains, support multiple wallets, and they're pretty much everywhere.

2. Two, the fastest adoption was in markets where dollars weren't easily available.

Now think about markets where stocks aren't easily available, especially US-based stocks—for example, across Europe. In Europe, it's quite expensive to get access to stocks, and Robinhood's business model of payments for order flow (PFOF) isn't easily available. So if you think about this from Robinhood’s perspective, what they've got is the ability through distribution to create a very large network of tokenized stock trading to a new market where the closed loop is big enough, and the spreads are good enough by themselves to make the business case make sense.

We're entering a world where stocks get issued directly onchain, just as we're seeing currencies now issued directly on-chain in Brazil and in the US.

We're seeing tokenized deposits, we're seeing stablecoins take off, and we're already seeing tokenized stocks coming to market with direct issuance of stocks onchain—as SuperState just announced.

Liquidity is fragmented, yes.

There are opportunities to fix that, and there are business cases where that makes sense globally.

But while all of that's happening, those inefficiencies and fragmentations are being resolved in stablecoins, and they're being resolved in tokenized stocks and all tokenized assets with direct issuance on-chain.

Those two forces will converge, and it's for this reason we called the show and the newsletter "Tokenized."

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