The Breakdown - Robinhood and Kraken Bet Big on Tokenized Stocks

Episode Date: July 2, 2025

Robinhood just unveiled major plans to offer tokenized stocks—including SpaceX and OpenAI—on their own Ethereum L2 blockchain, potentially reshaping private and public markets. NLW explores how Robinhood's move might democratize finance, threaten traditional venture models, and accelerate the convergence of crypto and traditional financial systems. Plus, Circle seeks a bank charter, highlighting crypto's rapid institutionalization. Brought to you by: Grayscale offers more than 20 different crypto investment products. Explore the full suite at grayscale.com. Invest in your share of the future. Investing involves risk and possible loss of principal. To learn more, visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Grayscale.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ -- ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.grayscale.com//?utm_source=blockworks&utm_medium=paid-other&utm_campaign=brand&utm_id=&utm_term=&utm_content=audio-thebreakdown)⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Tuesday, July 1st, and today we are talking about Robin Hood's big plans. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly. All right, friends. One of the things we've been talking about a lot recently is this idea of tokenization being a third leg of this bull market stool, and our first story today has a lot to do with

that. Robin Hood has unveiled their big real-world assets play, including tokenized stock, private equity, and even their own blockchain. The brokerage will begin to offer tokenized stock to European customers with over 200 stocks and ETFs on offer. The stock tokens will have zero commissions and will be available for 24-hour trading five days a week. CEO Vlad Tenav also said that tokenized stock in SpaceX and OpenAI would be available soon. At the announcement of End in Cannes, he did a live transaction of a million dollars worth of tokenized OpenAI stock to Robin Hood Europe to be distributed at a later date. Now, it was unclear if this was just a promotional giveaway or if private equity would be available to purchase for all users. Some have already reported receiving fractional OpenAI in SpaceX stock amounting to about $10 in value.

The company was clear that startup stocks wouldn't be tradable initially, but they're working on regulatory and governance blockers to make that happen. Point that they were trying to make is that the infrastructure is in place and functional. These tokenized stock offerings will all run on Robin Hood's own Ethereum Layer L2, built on the Arbitrum Stack, which is set to go live later this year or early next year. Following the event, Ten have posted a Block Explorer link to prove that everything is working, adding, turns out the OpenAI stock token transaction did indeed succeed. In addition to all the RWA announcements, Robin Hood also announced the launch of perpetual futures trading in the EU. The service will be provided through the BitStamp platform and grants up to 3x leverage.

Relatively mild in crypto terms, but still pretty wild for a retail product. The launch event did not go lightly on the narrative. In a press release, the company said that the launch of tokenized stock transitions the company's quote, crypto-only app to an all-in-one investment app powered by crypto. Ten have added, our latest offerings lay the groundwork for crypto to become the backbone of the global financial system. Now, unpacking the details a little bit more, this looks to many like a much better product than some recent tokenized stock offerings. Users will receive dividend payments directly

in the app, and Robin Hood explained the mechanism to back the tokens one-to-one with actual stock, minted and redeemable on demand. Not quite all the way to putting actual stock on the blockchain, but closer than some of the efforts we've seen before. Now, the implications of the launch are pretty wide-ranging. Justin Kahn of Alliance Dow commented that 100 crypto startups were just killed, adding, TradFi is coming. Big companies are good at the obvious ideas. There likely won't be much room for crypto devs for things like tokenized stocks, real estate, and other RWA's. Indeed, if Robin Hood manages to make a public market for large private company stock, that obviously changes the game. Raul Paul commented, the end of public versus private markets is beginning. Capital formation

is more efficient in crypto markets, lending markets too. This is democratization of finance, and it's only going to accelerate from here. CryptoVC. Rezo Schmertz wrote, Everyone sees democratization. I see private market repricing. When retail can buy tokenize SpaceX, VCs lose their markup games. Price discovery in private markets changes the entire venture power law. Robin Hood just became a liquidity provider, not a broker. Simon Taylor of FinTech Brain Food made the interesting observation that this all stems from the GameStop incident. In January of 2021, Robin Hood shut down trading after being hit with a $3.7 billion margin call, which they didn't have. Taylor commented,

The culprit? T-plus-2 settlement creating massive counterparty risk during volatility. One volatile day can bankrupt any broker when clearing houses demand billions and collateral. Robin Hood nearly died because of an antiquated settlement infrastructure. This isn't about crypto-hyper-European expansion. This is about eliminating settlement risk forever. Now, there are also significant implications of launching these products in Europe first. Robin Hood held the banner event for tokenized stocks in a French villa rather than in front of the Golden Bull on Wall Street.

Roshin Patel of HackVC tweeted, These are literally American companies yet Americans can't touch their tokenized stocks, quite likely trending to a world where it's easier for a retail Irish dude to buy OpenAI than some tech yuppie in San Francisco. Francisco. Thank you for the protection. Now, there is certainly another element of this, which is that markets outside the U.S. have less exposure to U.S. stock markets in general, and so there is some market logic as well, but still, Robin Hood has been very vocal about the need to change U.S. regulations to allow for actual tokenized stocks. However, rather than just sitting around at regulatory talk fest, they've just gone and launched a major product

that's only available in Europe. You've got to think that if anything could light a fire under the SEC to push through the necessary changes, it would be something like this. Now, Robin Hood weren't the only ones with a banner tokenized stock announcement. Yesterday, a consortium of companies including Bybit and Cracken went live with their tokenized stock product as well. Over 60 stocks are now available on Solana using existing defy infrastructure with tokenization operated by backed finance. Users can now trade micro-strategy, Tesla, Coinbase, and many other companies just as easily as they ape into the latest meme coin. Ironically, the consortium beat Robin Hood to the punch by becoming the first

to make their own stock available on a blockchain. The tokenized stock is offered under the brand name X stocks by a company called backed. That's B-A-C-K-E-D, not B-A-K-K-K-T. The announcement wasn't entirely clear if every token was backed one-to-one with electronic stock held in custody. However, backed is a regulated financial entity in Europe and promised that this, quote, reassures users in markets the tokens can be redeemed for their off-chain market price.

However, By-Bitt did claim the tokens were fully backed. The question of what you're actually trading and how big the counterparty risk is will become more important over time. For now, it's just a small flag to be aware of. The biggest part of the announcement is that these are fully interoperable defy tokens, meaning you can take loans against the tokenized stock in lending markets, trade it against an AMM for 24-7 liquidity, and hold the tokens in self-custody. They're using chain links interoperability infrastructure, making it easy to migrate the tokens onto different chains. The tokens are also available

on Cracken and ByBit centralized infrastructure if that's your preferred trading venue. Adam Levi, the co-founder of Bact, said, X-stocks represents a monumental leap forward in democratizing access to financial markets. By bringing familiar assets onto the blockchain with unprecedented accessibility, we are not just bridging traditional finance in defy. We're building the foundational blocks for a truly open, efficient, and inclusive global financial system where everyone can participate in wealth creation. The centralized markets won't be available to U.S. customers with on-chain trading

theoretically unavailable as well, but we'll see how that works out. Today's episode of The Breakdown is brought to you exclusively by Grayscale. Grayscale is almost certainly a name you know. They've been offering exposure to crypto for over a decade now and offer over 20 different crypto investment products, ranging from single asset to diversify to thematic exposure to crypto and the broader crypto industry. They have long been innovators at the intersection of TradFi and Crypto,

and one of the benefits for a lot of us is that Grayscan, products are available right through your existing brokerage or IRA. Now, of course, investing involves risk, including possible loss of principle. For more information and important disclosures, visit grayscale.com. Go to grayscale.com to explore their full suite of crypto investment products and invest in your share of the future. Similar to the Robin Hood announcement, this product also demonstrates why the SEC needs to figure out regulations as soon as possible.

While there is a full-blown argument going on on crypto Twitter about Solanovers, versus Ethereum as the best venue for tokenized stocks, the reality is that this isn't a zero-sum game. Mert, the CEO of Helius, had a more constructive take, writing, this is very cool. You can now swap into stocks like Nvidia directly on Solana. Internet capital markets are here. This is insane because these are U.S. stocks that are available to literally anyone with an internet connection. Now, some were concerned about fragmentation, with Mike Dutus of Sixth Man Ventures tweeting, The Future of Equities is absolutely a thousand different tokenization standards, no question.

Do you own R-Tesla, C-Tesla, Eth Tesla, Seoul Tesla, or XYS Tesla? That's a reasonable concern for those who live through the insane fragmentation of the early defy era, but it might not be the case this time around. Even though we're still in the first innings, X-stock seems to demonstrate that exchanges understand the need to unify around interoperable standards if this is going to work. Indeed, the competition is more likely to be between open standards and Walt Gardens. Oman Malikon, an adjunct professor at Columbia Business School, wrote, I can't speak to the decision-making process at Robin Hood, but I think deploying your own

L2 will almost always be more appealing to established enterprises than launching new products on an L1. Why? One word. Control. If you launch your own L2, you can control almost every aspect of the transaction lifecycle. Fees, block times, ordering, MEP mitigation, fork resolution, privacy, etc., etc. The only parts beyond your control are proof in data. Those are wholesale markets. Whatever fees or frictions they impose can be abstracted away. Products on L1s, on the other hand, must seat almost all control. He discussed the risk of fee spikes, sandwiching attacks, design changes, and downtime commenting, my expectation remains the vast majority of enterprises with existing users will do this math and launch their own L2s. It's fun to speculate who might go next. To me,

providing this type of market segmentation was always a clear advantage to the roll-up-centric scaling approach. As always, there is no free lunch in blockchain product design, but it's interesting to see two different products launching simultaneously with two very different sets of decisions on the tradeoffs. Switching to stable coins for a moment, circle, is applying for a bank license. This was always pretty inevitable, even if the Genius Act stripped out the requirements for stablecoin issuers to be fully chartered banks. Although Circle previously denied that they were taking this path, it was pretty clear that the additional regulatory burden would be worth it as the company attempts to take full advantage of a rapid growth cycle. Obtaining a federal

banking charter gives the detractors very few outs to claim the larger stablecoin issuer isn't regulated well enough. What's interesting is the type of bank charter circle is applying for. The company is seeking a very limited license. They won't be allowed to take cash deposits or make loans like a traditional bank. Instead, they will only be allowed to custody crypto assets for institutional clients. The upshot is that Circle will be able to custody their own reserves. Currently, their reserves are largely held in a bespoke money market fund provided by BlackRock with Circle as the sole customer. This provides them with ample liquidity and access to the repo market to earn yield by lending out their T-bills to other

institutions. But it also means Circle is paying BlackRock to manage their $61 billion in T-bills. primarily a bank charter gives Circle access to the Fed payment system, removing liquidity and the need for banking partners from the equation. Circle will most likely be able to access the repo market directly for a little extra yield, but mostly this will cut out the middleman. Rather than just saving on fees, you have to think a big consideration is also eliminating counterparty risk. Circle ironically had a near-death experience in 2022 with the collapse of Silicon Valley Bank, and since then they made big moves to drive counterparty risk towards zero. The company's stock, meanwhile remains one of the biggest bets on Wall Street. Although it's down almost 40% from

its all-time high last Monday, analyst opinions are wildly divergent. Bernstein believes that Circle is the quote, internet dollar network for the next decade, adding, Circle is building a market-leading digital dollar stable coin network with a strong regulatory edge, liquidity headstart, and marquee distribution partnerships. We view Circle as an investor must hold to participate in the new internet scale financial system built for the next decade. They anticipate that Circle will capture around a 30% share of the stablecoin market, which they view is growing to $4 trillion in market cap over the next decade. Their price target is currently set 30% higher, but not quite back at all-time highs. J.P. Morgan, meanwhile, is taking the other side of that bet. Analysts began converging on the

stock with an underweight rating and a price target that's 45% lower by the end of next year. They essentially backed out of a 45-times multiple on their earnings projection for 2027 and added a $10 premium for investor enthusiasm. Basically, they're saying that the fundamentals make no sense unless you're assuming stratospheric growth, which JPMorgan are not, writing, we see competition as a potential threat to Circle. The risk is that a few will succeed in taking enough share to reach critical mass in a business with low switching costs, allowing them to leverage the network built by Circle. There are certainly some big headwinds for Circle to achieve the insane growth targets that some are pricing in, but locking up a bank charter should

help them cement their place in the future of the financial system. So as always, friends, we are seeing the continued integration of the traditional and crypto financial systems. In fact, that is increasingly a division that is going to make less and less sense over time. And with that, we will close today's breakdown. Thanks as always for listening. And until next time, be safe and take care of each other. Peace.