Robinhood’s Tenev: US tokenization rules lack lasting certainty, warning off big investors

Robinhood CEO calls for clearer tokenization rules

Robinhood CEO Vlad Tenev said uncertainty around US tokenization rules could stop investors from putting large amounts of money into tokenized markets. He made the comments during the company's third-quarter earnings call on Tuesday.

Tenev praised the Securities and Exchange Commission's recent temporary exemption that opened a path for onchain trading of US stocks. But he said that short-term fix is not enough. He called for more rulemaking or legislation to give markets long-term clarity.

Note: The article is reported based on Robinhood's third-quarter earnings call as covered by the source. Quotes from the CEO are paraphrased from the report unless otherwise noted.

Key numbers from the earnings call

• Robinhood said tokenized stocks currently sit outside the SEC's innovation exemption because they do not offer the same rights as regular shares, such as dividends and voting.


• The firm plans to launch private-company stock tokens overseas, once regulatory arrangements are in place.


• In the US, Robinhood is working to find a way to offer private-company tokens that meets current accreditation rules.


• More tokenization rules or legislation are expected to be needed, even though the temporary exemption was a positive step.

What the SEC exemption requires

The SEC's innovation exemption only covers tokenized stocks that give holders equivalent rights to conventional shares, including dividends and voting rights. Robinhood's existing products are structured as tokenized debt securities backed by real shares. That means they provide economic exposure to the stock price without the full set of shareholder rights, and therefore fall outside the exemption.

Wider resistance to tokenized stocks

Tokenized stock offerings have run into pushback from some traditional issuers. Microsoft, Alphabet and Goldman Sachs were among 16 companies that objected to their shares being offered on a proposed OKXICE trading venue. AMC's CEO also publicly criticized Robinhood's tokenized stock products.

Binance Research projects $349 billion market by 2030

Despite the regulatory uncertainty, Binance Research forecasts the tokenized equities market could reach $349 billion by 2030 under its base-case scenario. That would be a large rise from $4.43 billion as of Sept. 15.

Note: This projection comes from Binance Research and is an estimate, not a confirmed outcome.

Robinhood reports a 55% drop in crypto revenue

Tenev's comments coincided with Robinhood's third-quarter results. Cryptocurrency revenue fell 55% year on year to $120 million, while crypto notional trading volume declined 38% to $50 billion.

Trading volume on the Robinhood app fell 48% to $21 billion, while Bitstamp volume dropped 28% to $29 billion. On the other hand, Robinhood's prediction market business grew sharply, with event-contract revenue rising sixfold to $173 million and contracts traded increasing more than sevenfold to 16.4 billion.

Overall net revenue rose 12% to a record $1.42 billion, below analyst expectations. Adjusted earnings per share came in at $0.60, missing estimates by 4 cents.

What is still unclear

The article does not specify when new rules or legislation are expected to be introduced. It also does not state when Robinhood plans to launch private-company stock tokens overseas, other than saying the launch is subject to regulatory arrangements. The company said it would share more on its US tokenization plans in the near future.

What happens next

Robinhood says it will share more information on its US tokenization plans soon. The firm is continuing to work toward a US path for private-company stock tokens that satisfies current accreditation requirements.

Sources

• Cointelegraph

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