Five years after Robinhood (HOOD) stunned users by suspending trading in GameStop (GME) and other meme stocks, CEO Vlad Tenev said blockchain-based stocks could help prevent something like this from happening again.
In a post on X commemorating the anniversary of the trading freeze in January 2021, Tenev said the disruption was not the fault of bad actors, but poor infrastructure. “What happens when you combine slow and outdated financial infrastructure with unprecedented trading volumes and volatility for a small number of stocks,” he wrote. “Large deposit requirements, trading restrictions, and millions of dissatisfied customers.”
At the time, Robinhood and other brokers faced huge collateral demands due to the industry's two-day trade settlement system. To stay afloat, Robinhood has raised more than $3 billion in emergency funding. “Retail investors who wanted to buy GameStop were understandably furious,” Tenev continued.
Regulators have since shortened the cycle from T+2 to T+1, or one-day settlement, but Tenev said this was still not fast enough. “T+1 is still too long in a world of 24-hour news cycles and real-time market reactions,” he said, noting that it could still be several days before Friday's trade is finalized.
His solution is to move the stock on-chain. “Tokenization refers to the process of converting assets, such as stocks, into tokens that reside on a blockchain,” Tenev wrote. “Longer settlement periods mean significantly less risk to the system and pressure on both clearinghouses and brokerages, giving customers the freedom to trade when and how they want.”
Robinhood was one of the first major companies to adopt stock tokenization. According to RWA.xyz, the company has minted nearly 2,000 tokenized versions of U.S. stocks and ETFs, totaling just under $17 million, according to data from Dune Analytics' Entropy Advisors. This is still far behind tokenization leaders xStocks and Ondo Global Markets, which each have over $500 million in offerings.
“We plan to unlock 24/7 trading and DeFi access in the coming months,” Tenev wrote, pointing to upcoming features such as self-custody, lending, and staking.
But for the U.S. market to follow suit, regulators will need to act, he said. Tenev urged lawmakers to pass the CLARITY Act, which would force the SEC to create rules regarding tokenized stocks. “Let's seize this moment to fully unlock real-time payments for retail traders,” he said.
