Vlad Tenev said that tokenization and greater regulatory clarity will help prevent a repeat of the 2021 crisis.
- Tenev on Wednesday said that it was “the strangest and most visible equity market failures in recent history.”
- He said the 2021 crisis pushed Robinhood to raise more than $3 billion to shore up capital reserves and “pick our heads up and assess the situation.”
- The CEO noted that moving equities on-chain in tokenized form allows them to benefit from the real-time settlement properties of blockchain technology.
Robinhood CEO Vlad Tenev is thinking hard about how to avoid repeating past mistakes. The 38-year-old cofounder of the widely popular fintech app took to social media on Wednesday to reflect on events from five years ago, when the online brokerage went “from a hero to a villain” almost overnight in the eyes of retail investors after it halted trading in several stocks — including GameStop — during the "meme frenzy" that swept markets amid the COVID-19 pandemic.
“Retail investors who wanted to buy Gamestop were understandably livid ... Barely one month into my new role as the sole CEO of Robinhood, I had my first major crisis to manage,” Tenev said in the post.
The GameStop trading freeze in 2021 was a volatile time for Robinhood, as the company and other brokers suffered due to a two-day trade settlement system that left them unable to post sufficient collateral to clear their clients' orders.
Tenev on Wednesday said that it was “the strangest and most visible equity market failures in recent history.” “The underlying cause for the one-day pause was a set of complex clearinghouse risk-management rules designed to mitigate the risk of the then two-day-long settlement period for US stock trades,” he added.
Tenev's Suggestions For A Change
Tenev said the 2021 crisis pushed Robinhood to raise more than $3 billion to shore up capital reserves and “pick our heads up and assess the situation.” He noted that the company has advocated real-time settlement of U.S. stock trades, which led to shortening the two-day settlement to one day (T + 1).
“But in a world of 24-hour news cycles and real-time market reactions, T+1 is still far too long, particularly when you factor in that it really means T+3 on Fridays, or T+4 on long weekends,” Tenev said in the post.
He added that a new approach was needed, and that is where tokenization comes in. “Tokenization refers to the process of converting an asset, like a stock, into a token that lives on a blockchain,” Tenev said.
The CEO noted that, among other benefits, such as lower costs, native fractionalization, and 24/7 trading, moving equities on-chain in tokenized form enables them to benefit from the real-time settlement properties of blockchain technology. “No lengthy settlement period means much less risk to the system and less pressure on both clearinghouses and brokerages, so customers can freely trade how they want, when they want,” he added.
Regulatory Support
Tenev went on to add that much of this is not possible without proper “regulatory clarity.” He noted that “such efforts are moot” without regulatory support. “Current leadership at the SEC is embracing innovation and facilitating experimentation with tokenization. Additionally, Congress is actively considering the CLARITY Act,” he said.
According to Congress, the Digital Asset Market Clarity Act of 2025, or the CLARITY Act, would give the Commodity Futures Trading Commission a central role in regulating digital commodities and related intermediaries. This would occur at the same time, while preserving certain aspects of the SEC's authority over primary-market crypto transactions, subject to a new limited exemption from SEC registration requirements for fundraising. The bill would define a digital commodity as a digital asset whose value is "intrinsically linked" to the use of the blockchain, according to Congress's official website.
“By working with the SEC and pushing for sensible US equity tokenization guidelines via CLARITY, together we can ensure that trading restrictions like we saw in 2021 never have to happen again,” Tenev said.
What Is Retail Thinking?
Retail sentiment on Robinhood has dipped to ‘neutral’ from ‘extremely bullish’ a week ago, with message volumes at ‘normal’ levels, according to data from Stocktwits.
In the last 24 hours, the retail message volumes on the stock jumped 55% on Stocktwits, and over the past year, the ticker added 40% followers on the platform.
Shares of Robinhood have nearly doubled in the last 12 months.
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