What is Robinhood Doing in Crypto? | Co-Founder Vlad Tenev

in another sense crypto is just like technology moving forward and it's it's part of a long running Trend that has gone back uh multiple decades at this point and is kind of accelerating with AI of software sort of like systematically reassembling the foundations of like all parts of society welcome to bankless where we explore the frontier of Internet money and internet Finance this is Ryan Chan Adams I'm here with David Hoff and we're

here to help you become more bankless we have Vlad tenoff on the podcast today he's uh the co-founder of Robin Hood which is one of the most successful fintech companies I think in living memory they've got 25 million different users lots of accounts and what's interesting about Robinhood is there a trafi company that's really increasingly invested in crypto they're kind of bridging Both Worlds and then in June they announced the acquisition of the bitstamp crypto exchange that hasn't happened yet but once that happens that would make them a fully Ed crypto

exchange David and I felt it was important to know their plans like what is Vlad doing in crypto what's his outlook on the space so a few things we talk about the importance of crypto to Robin Hood's future the defi mullet thesis for trafi adoption tokenization the bit stamp acquisition Robin Hood's layer 2 plans the SEC Wells notice that they received payment for order flow and me the regulatory environment in the US whether or not retail is actually here maybe the Cy cycle is Institution lead crypto assets versus equities and

the current cycle that we're in I think in the crypto space we're used to everything developing so fast uh because the the development Cycles in crypto are just blazing fast every The Meta changes so fast Robin Hood of course it's a try company doesn't move as fast as many of like our our crypto networks our crypto protocols but it's also worthwhile to remember and we discussed this in the episode Robin Hood moves blazingly fast compared to their like even more Legacy counterparts their peers compared to their peers yeah uh and so like Robin Hood offering crypto assets inside of

the Robin Hood app making a Robin Hood wallet uh they're already like doing laps around any particular like you know Trad F comp patriarch the the part where we talk about how like Robin Hood was has the privilege of being like born into a server rather than a Mainframe allows them to like do things that like you know a typical Bank wouldn't be able to do I kind of thought that was pretty interesting uh and so it's just like worth keeping an eye on on Robin Hood like what are they going to do with this Biffy new exchange that they they just bought uh Vlad says the word tokenization a good number of times in

in this podcast and so seeing seeing what he's up to and seeing where his aspirations lie as Robin Hood progresses into the future I think is pretty important uh he definitely talks about like you know every single product line that Robin Hood has to offer in this episode so if you listen to this you'll be no stranger to everything that Robin Hood as a business can offer you uh but then you also get a an insight as to where Robin Hood might be going going next in the crypto world all right guys let's get right to the conversation with Vlad from Robin Hood but before we do we want to thank the sponsors that made this episode possible including bankless

Nation excited to reintroduce H Vlad tenf he is the co-founder he's the CEO of one of the most popular fintech trading platforms ever that's ever been in existence I think now increasingly it's looking a little bit like something we're more familiar with which is a crypto exchange lots to talk about today including the future of crypto maybe we'll get in some politics Vlad I if you have takes on that the acquisition of bit stamp that you guys recently did also a Wells notice from the SEC congrats on that by the way it's a badge of honor in the crypto space so lots of

things to get into Vlad welcome back to bankless thank you yeah it's I'm glad to be here with you guys again all right so uh the last time you were on was about two years ago you guys were just rolling out a wallet um you've been in crypto but like dipping more of a toe in the water in crypto and I got to say going to this into that conversation is a little bit different than I going to this conversation so going into that conversation it felt like uh Robin Hood was coming a bit from the trafi sector coming as an outsider into crypto in this conversation Robin Hood has spent

another two years in the space you've gone through the bare Market uh you have your own Wells notice from the SEC which many of our esteemed uh crypto companies have joining the ranks of Kraken and coinbase and metamask and and Unis swap so you've kind of proven yourselves I I would say you get like a badge of honor you're earning your stripes really um I don't know if I'd go that far or no we're still we're still a a small upstart in the space well well congrats on what you've done and your commitment

to crypto it's just not just a fair weather friends seems like you guys are are here to stay and I I want to start with this question so at the highest level um what how important is crypto to Robin Hood right now yeah I think I think that's a a deep question um I think that maybe the interesting perspective that I have is uh we have a large crypto business right we we report on our revenues and our trading volumes and you can see with the data that we've

been gaining market share over the past uh over the past multiple years and uh especially in in retail you know we don't have as broad of a institutional offering and a B2B offering we've been very focused on retail direct to Consumer crypto trading and the market Shar is looking good I mean we're right up there with coin base and uh you know the customers love using Robin Hood to to trade crypto we also

have a uh big trafi business and we can see both of these businesses simultaneously and uh one of the things that we're seeing is how efficient it is to operate a crypto business and a lot of of the things that require centralized Legacy counterparties in trafi are being done uh just in in software so for example transfer agency clearing and settlement you mentioned

Unis swap Market making um uh stock lending I mean these are things that entire businesses and centralized organizations are set up to do that uh can can just be done in software and that does two things one it lowers the cost of serving customers and operating the business by roughly uh an order of magnitude and that's because the more counterparties you have those counterparties need to be supported and

there's fees and complexity and folks that manage all these relationships on the trafi side when it's software it's it's much simpler so so we can see the power of it in terms of operating the business much more efficiently providing the same basic types of services but the second thing is from a customer standpoint there's actual functionality that having the software Foundation provide allows in crypto that is very very hard to get in in trafi so for example one of the things that we've

been a Pioneer in is uh 24-hour market which is the ability to trade us equities around the clock and we were the first to do that for individual name stocks now we offer uh over a thousand over a thousand single name stocks on 24-hour market which starts trading um Sunday evening uh five 5:00 PM PST 800 PM Eastern and basically runs till uh till Friday evening and one of the things

we've been thinking about is why not 247 like why can't we just do it on Saturdays and Sundays and what about holidays like it would be amazing to be able to uh access the capital markets on Christmas for example and the reason is that uh the centralized Clearing Houses aren't open during weekends so they they have to have people coming in to actually manually facilitate this activity and on crypto rail since it's in software you get

247 uh basically for free and you get fractionalization for free which in traditional markets is extremely complex to manage so it's not just the efficiency but it's also this New Foundation uh where software is providing a lot of these Services um allows for product experiences to be delivered much more simply so so I think that's the real advantage and so I think almost like the importance of crypto might be the wrong question because like when a lot of people think about crypto

maybe what you're referring to is like things like mem coin trading and crypto assets and things like that um uh but but I think that in another sense crypto is just like uh technology moving forward and it's it's part of a long running Trend that has gone back uh multiple decades at this point and is kind of accelerating with AI of software sort of like systematically reassembling the foundations of like all parts of

society and and I think financial services including the way that uh currencies are managed have kind of been a lag in the space but but this is just like technology further subsuming that and turning physical processes into software uh more more aggressively the Robinhood perspective I I think is pretty interesting because I think you guys operate in four different quadrants that I think we're not very used to in the crypto space because you guys are both on the retail and

institutional side and you're both in the crypto and trafi side uh and then there's like institutional crypto there's institutional trafi there's retail crypto retail trafi uh and you're in all of them you're you got perspectives over all of them and I'm wondering like as the Robin Hood consumer base what are they looking for out of a crypto product um the crypto listeners that are listening to this product are going to be like the crypto natives these are the people who are going to be like we self custody we touch the chain uh but the Robin Hood

crypto consumer base is different than probably different than um what might be the typical listener of the podcast what are the consumer preferences of your base of customers and what are they looking for both out of crypto products both out of the institutional side of things and the retail side of things yeah I think that it breaks down into different types of products and services depending on your segment so for example um you've got active Traders and the way we actually kind of think about our business is all the things we do for

active Traders all things that we do to be the primary Financial institution across the board for the next generation of customers and that's Millennials but also gen z uh and Beyond and then all the things that we do to take the things in both of those buckets and expand them internationally and expand them to other customers uh for example institutions and small businesses and I think crypto fits into all three of those buckets so

crypto active Traders are looking for low costs particularly as the trading volumes increase they want to have the uh easiest and lowest cost experience they want Advanced tooling like awesome charting and access to data feeds that are real time and they also care about coin selection because they would prefer to not uh disperse their trading activity across a large number of trading platforms because generally if

you're particularly if you're doing sophistic iated things or cross margining having like the capital all in one place is is ideal so that's the active Trader front the more um Buy and Hold investors uh care about uh care about security and safety and being with a platform that they know is going to be around for a really long time they care a little bit less about the active Trader things but they they want to make sure like Regulatory Compliance is tight

and they've experienced a lot of these breaches and a lot of companies uh that have offered things like high yields and great rates just disappearing overnight um and so that's a big concern for them um and uh within that segment I guess within both segments you have this idea of self- custody and not a lot of people actually uh utilize self- custody but uh they do like to know that it's there if they need it over time would you say Robin

Hood is going at the Arc of Robin Hood is it becoming more crypto uh or is are you just like equally optimizing on both yeah I think that uh I I like to think of our business as uh sort of three arcs one is all the things that we're doing for active Traders and I'd say that you know crypto in that bucket is an asset class it's also uh uh it's also like a fundamental technology that might uh facilitate the global expansion of it

but for example like crypto spot trading is incredibly important also crypto derivatives are important and these are sort of like an amalgamation of crypto as an asset class with uh typical traditional features like Futures have been around for a very very long time and crypto derivatives uh I think to a customer standpoint feel more like a trafi product than a than a crypto product in many ways um on the uh

non-custodial side um we view crypto as an accelerant to making all of our products uh International and being available across uh all sorts of all sorts of different markets and jurisdictions and I also think like over time you'll see the trafi and crypto worlds continue to merge and uh you'll see tokenization become a bigger deal and that'll start in uh overseas markets first um I think that the US will

actually be a lagered here uh to embrace tokenization I think you'll see it in Europe and other markets uh internationally but I I think eventually it will come to the US as well and I think predominantly that's uh for all the efficiency reasons and the fact that you can offer 24 hours and fractionalization more easily um I think you can also look at the success of dollar stable coins which are driving the The Lion Share of transaction volume

on chain right now I I saw an article a couple weeks ago that um you guys probably saw it as well usdt on Tron is now uh exceeding Visa in in Daily volume and I think the reason for that is if you look overseas um people really want dollars I think there was this there there's this Narrative of Bitcoin being the greatest store of value for uh people in countries where currencies are hyper inflating and they want to kind of

flee the local currency and and they want to store value but it appears that people want dollars and kind of counterintuitively uh crypto has become a mechanism for people to get their hands on dollars in these markets and and that's kind of driving a lot of this activity that that you're seeing so you should assume that you the same holds true of us companies people would love of I mean sophisticated individuals overseas who have money are um turning

to the US markets they want us equities they want us assets and if you can uh enable people to have that on a much bigger scale I think that's what tokenization enables and you'll see it overseas first um it'll lag in the US for a couple of reasons number one we already have it decently well in the US like maybe it's not 247 but with Robin Hood it's 245 so pretty good uh it's pretty easy to open a Robin Hood account

so even though it's maybe not decentralized most people don't really care and they just want access and we can we do a pretty good job of that and then we also have like this entrenched industry of all the Clearing Houses all the counterparties all the market makers and they're happy with how things are going by and large they don't want major changes and there's going to be like friction to make major changes to to the system over here so I think that that's

why things will be slower in the US and it's kind of one analogy I give is like the US sort of like pioneered a lot of advances in transportation and now it feels like we're behind like High-Speed Rail has taken off in China and a lot of markets and is not really here in the US and Global Payments is another example cell phone usage where it kind of the Technologies was created in the US but adopted overseas um tokenization I think is going to be the same and a big part

of it is the US is already like good enough so the incentive to go to the technological Frontier of these Technologies is is much much lower over here yeah I think that's right it's kind of like you know Clayton Clayton christensen's innovators dilemma where that like the US has already has all the Clearing Houses and all of the the the banking infrastructure Etc so it doesn't really feel the burning need to kind of upgrade and so other jurisdictions merging markets Etc kind of like leapfrog us I the the the broad stroke of what I hear you saying Vlad kind of

align with a thesis that bankless has held that David and I have long held and I I think it's actually starting to come to fruition we've called this before like the the defi mullet thesis or the crypto uh mullet thesis it goes like basically you've got uh fintech in the front and then crypto in the back and the idea behind this is that um fintech companies in particular companies like Robin Hood are uniquely positioned uh to basically swap out your banking infrastructure over when I say banking infrastructure I'm talking about the

Clearing Houses the settlement the like old style of of tokenization the stuff that that doesn't that takes off Banker holidays and that doesn't work the weekends and all of that Legacy stuff the the main frames of the world the backend of finance and over time just kind of like swap it out for the new crypto stuff and the beauty is you don't have to do it overnight you can kind of like do it as you're as you're doing it right now so first you have assets that are crypto assets listed that are settled on chain and then what do you do you break into a non-custodial wallet

and so you start you doing that and then maybe you acquire a crypto exchange which you have and then you get into more Crypton native type use cases and over time you're kind of like hot swapping the financial backend from the old Legacy system to this this new system and I don't think that Robin Hood's obviously the only uh entity that's going to discover this and and go through this transformation though you're positioned well and you may be one of the first to kind of uh see this but high level do you think that's effectively what's going on here is we are uh software is eating the world you

know the Chris Dixon line and now software it's finances turn you know it's all done in paper and faxes and Legacy mainframes and now we're making Pro programmatic blockchains and fintech is just going to basically hot swap the the back end of its Financial system and that's going to happen over the next 10 years how close is that aligned to what you're saying what you're seeing I think that's pretty close I mean with the with the caveat that um incumbents are going to be slow uh I mean a lot of the incumbents have still not made the

transition to to servers right they're on main frame so you have to you have to go from Main frames to servers and then of course there's like uh the on-prem to Cloud uh transition that Robin Hood didn't have to go through because we we were sort of like formed at uh at the point where Cloud became kind of good enough there was still a little bit of friction actually like there was a lot of pressure for Robin Hood to be on Prem because the market makers and

counterparties didn't really trust Amazon to provide reliable Services even though in hindsight we know Amazon services are much more reliable than you managing your own on-prem infrastructure um and so we we were kind of the first cloud native uh brokerage platform that got to scale um and then you have ai and crypto which are the new uh platform shifts that that can change the technology as well so I think a lot of the incumbents are looking at looking

for cobal and Fortran developers and and that's big problem um and yeah I think the the question will be are they going to jump and adopt crypto well you kind of have to uh either discard all of the old stuffff or like really quickly go through all the shifts because you're not going to be able to run a blockchain node on a Mainframe uh on premise um unless someone's figured out something that I haven't seen yet but um I think

that's a real problem for incumbents and I think it's further exacerbated with AI when now you're thinking about okay like how am I going to train models and augment or replace a lot of the internal process that I have which will which further accelerate some of these trends that you guys have been mentioning all right so let's talk about what you're doing now let's talk about um uh some some of the recent things that we've seen coming out of Robin Hood and we'll start maybe with the the bitstamp H acquisition so um Robin Hood is set to

acquire bitstamp this is a press release that uh I'm reading for for folks that don't know bitstamp is an exchange in OG crypto exchange actually started in 2011 when fun fact when I created one of my first crypto uh Exchange accounts I was going through this was like one of the accounts that I have a legacy uh you know um account on all the way back from 2014 and too actually yeah okay so bit stamp I mean I like I remember them back from way back then and especially in Europe it has a pretty strong reputation so what's the strategy here why' you

guys do it I think that you know as we were thinking about our long-term plan we knew that we would have a Robin Hood exchange at some point uh I think that needs to exist and the question was really do we build it ourselves or do we see an opportunity to accelerate that and of course an exchange has the underlying technology but also the licenses the institutional relationships uh retail relationships uh less important for us because we already have

those and that's an area where where we feel like we're differentiated and we have a strength um and then uh you know when we came across uh bitstamp we saw a big opportunity because they have a long reputation they have a lot of lure Global footprint great institutional relationships and we saw an opportunity to accelerate the buildout of what would otherwise be our own exchange by at least 18 to 24 months and that got us

very excited um and you know it's also important to get some street cred with the the community you know now now we can say that we're one of the OG uh we're the oldest running uh crypto business business that continuously operates I mean of course assuming the the uh acquisition closes as we expected to and everything but uh yeah I look forward to being able to say that yeah we've been we've been running our exchange since 2011 nobody else in the long time old as old as Mount gox where I also had an account uh I

feel like uh my cond that seems like it's wrapping up long storied history of getting Japanese letters in my email the Robin Hood exchange feels incredibly disruptive uh at least in in the crypto space we're not totally uh foreign to new exchanges cropping up like it's still a young space new exchanges coming coming uh up all the time uh a b Camp of course not new but just like the idea of like Robin Hood being an exchange a crypto exchange uh I think would would be interesting for us

what would be even more disruptive if that also you took the bit stamp technology and started to apply that back towards uh the equities space because I mean exchanges are exchanges no matter what assets are traded on them is that part of the intent well when you look into uh tokenization which we we talked a little bit about and that that's a space that Robin is very interested in and I think uh as well positioned to be a leader in um one of the things that you look at with with with tokenization is where are you going

to trade them um right and of course they have to be listed on uh reliable exchanges um and and the more assets that uh that we have um you know the more important it becomes to uh to have the underlying exchange technology as well so for sure I think it it enables a lot of things for us not just in in traditional crypto assets some of our listeners might be asking this question when we say you know um Robin is expanding into kind of the crypto

exchange territory they might say hey wait a wait a second Vlad you guys already uh traded crypto assets weren't you already a crypto exchange so what distinction are we making here when you say like bitstamp is a crypto exchange versus all of the assets that the crypto assets that Robinhood has traded prior to this bit stamp uh news yeah I guess it it depends on your definition of an exchange I mean some people call exchanges uh things that convert from dollars to cryptos or cryptos and other cryptos and I think to by that

definition uh you could call I mean with the Robin Hood app now you can put in dollars and convert it into crypto and with the non-custodial wallet you can also swap between between cryptos directly um but what bitstamp provides and what I mean when I say exchange is the core matching engine technology of matching buyers and sellers so that we currently don't provide and when you uh place a transaction through your Robin Hood app we're not matching buyers and sellers together we're uh we're actually

just uh acting as an agent and transmitting your order to the market where where they're being matched MH okay I say so this idea about tokenization tokenization has been a word in crypto ever since that I've been in crypto and it does feel like the engine is finally starting to turn over in the last year or so especially with the introduction of black Rock's uh bidle fund uh but there's many efforts that are are also like meaningfully um growing underway you kind of think that your position uh with the acquisition of bit stamp might just be able to just

completely LeapFrog all of your legacy competitors in terms of being the location to being the dominant liquidity uh Marketplace for tokenize assets whenever the crypto industry can figure out how to tokenize more assets is that that's your position well I think when I look at tokenization I think stable coins are actually a a you know pretty basic form of of tokenization so I I don't think I think we're already there I I don't think there's like much that needs to be done um you know assets are being tokenized uh uh stable coins which

are kind of akin to tokenized treasuries or dollars or money market funds uh are gaining adoption and you're going to see that market evolve and you'll see more and more assets uh being tokenized and in a world where more assets are tokenized uh you're going to have a couple of different participants one is kind of the traditional exchanges um and non-traditional so you know Unis Swap and and other decentralized uh exchanges

and liquidity pools uh will will have a part to play there you will also have asset custodians so uh the traditional assets that are being tokenized um are going to have to be stored somewhere and the the custodians there will have to have uh the ability to deal with trafi regulations and uh tra rails and you're going to you're going to have to work with the conventional system and and so

like you're also going to want to minimize the number of counterparties because um if if you can kind of like do everything in one place the user experiences better the underlying economics are better uh and users will will have to pay less and so um I think the natural the natural sort of like contenders in the space are those that have the ability to cust traditional assets and have core competency there but also have uh the the crypto rails

and easy access to um to both sides and and I do think Robin Hood is well positioned in that space how about with the bit stamp are you guys positioned to do some like um some more of the staking uh type Services you know that that's been blocked in various ways in the US and maybe from a capability perspective you haven't had that before but what are you thinking of getting into with respect to staking or even institutional lending things like this yeah th those are big institutional businesses as you

pointed out you know the SEC has taken the position that staking is a security in the US so that's why we offer staking in the EU but unfortunately we're not able to offer it in the US you do offer it in the EU right now staking through Robin Hood or is that through bitstamp or through Robin Hood okay uh yeah you can stake on our Robin Hood EU uh custodial app uh I think we just rolled out Solana staking a couple of weeks ago yeah I mean staking um yeah from a

technology standpoint is is pretty straightforward I mean like most of that is just node management and you know it's it's also fairly easy for a customer to stake themselves if they wanted to use our non-custodial wallet um so yeah I I I would be surprised if like centralized St was was a really big thing 10 years from now um but you know customers also like a a clean user experience and so the