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

Robinhood is the world’s most successful FinTech trading company. They have already conquered TradFi. What are they targeting next? In June, they announced the acquisition of Bitstamp, the oldest crypto exchange. They’re increasingly investing in crypto and we felt it was important to know their plans. We brought the co-founder Vlad Tenev and we had a wide-ranging conversation covering topics like tokenization, Robinhood’s Wallet and L2, payment for orderflow and MEV, the SEC Wells Notice and much more. ------ 🎬 DEBRIEF | Ryan & David Unpacking the Episode: https://www.bankless.com/debrief-the-vlad-tenev-interview ------ 📣 SPOTIFY PREMIUM RSS FEED | USE CODE: SPOTIFY24 https://bankless.cc/spotify-premium ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2 ⁠ 🦄UNISWAP | BROWSER EXTENSION https://bankless.cc/uniswap ⚡️ CARTESI | LINUX-POWERED ROLLUPS https://bankless.cc/CartesiGovernance 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle 🌐 OBOL | STAKE ON DVs, SCALE ETHEREUM https://bankless.cc/obol 🗣️TOKU | CRYPTO EMPLOYMENT https://bankless.cc/toku ------ ✨ Mint the episode on Zora ✨ https://zora.co/collect/zora:0x0c294913a7596b427add7dcbd6d7bbfc7338d53f/47?referrer=0x077Fe9e96Aa9b20Bd36F1C6290f54F8717C5674E ------ TIMESTAMPS 0:00 Intro 6:35 Why Crypto 12:28 Robinhood Consumer Base 15:45 The Crypto Transition 24:52 Bitstamp Acquisition 34:10 Robinhood Wallet 40:43 Robinhood L2? 45:11 Payments 53:09 Robinhood vs SEC 1:04:29 Orderflow Business Model 1:11:05 Current Crypto Cycle 1:14:06 Vlad’s Vision 1:15:20 Closing & Disclaimers ------ RESOURCES Vlad Tenev https://x.com/vladtenev Robinhood Crypto https://robinhood.com/eu/en/about/crypto/ Robinhood Credit Card https://robinhood.com/creditcard/ ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures ⁠

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  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 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.

• 0:24Ryan Sean Adams?

  Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is Ryan Chod Adams. I'm here with David Hoffman and we're here to help you become more bankless. We have Vlad Tenoff on the podcast today. He's the co-founder of Robinhood, 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 they're a tradFi 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 fledged 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 talked about: the importance

• 1:09Ryan Sean Adams?

  of crypto to Robinhood's future, the DeFi mullet thesis for tradFi adoption, tokenization, the Bitstamp acquisition, Robinhood's Layer 2 plans, the SEC Wells notice that they received, payment for order flow and MEV, the regulatory environment in the US, whether or not retail is actually here, maybe the cycle is institutional-led, crypto assets versus equities, and the current cycle that we're in.

• 1:35David Hoffman?

  I think in the crypto space, we're used to everything developing so fast because the development cycles in crypto are just blazing fast. The meta changes so fast. Robinhood, of course, it's a tradFi company, doesn't move as fast as many of like our crypto networks, our crypto protocols. But it's also worthwhile to remember, and we discussed this in the episode, Robinhood moves blazingly fast compared to their like even more legacy counterparts.

• 1:59Ryan Sean Adams?

  Compared to their peers.

• 2:00David Hoffman?

  Compared to their peers, yeah. And so like Robinhood offering crypto assets inside of the Robinhood app, making a Robinhood wallet. They're already like Doing laps around any particular like, you know, TradFi compatriot. The, the part where we talk about how like Robinhood 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 Robinhood. Like what are they going to do with this biffy new exchange that they, they just bought? 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 Robinhood progresses into the future, I think is pretty important.

• 2:46David Hoffman?

  He definitely talks about like, you know, every single product line that Robinhood has to offer in this episode. So if you listen to this, you'll be no stranger to everything that Robinhood as a business can offer you. Uh, but then you also get a, an insight as to where Robinhood might be going next in the crypto world.

• 3:01Ryan Sean Adams?

  All right, guys, let's get right to the conversation with Vlad from Robinhood. But before we do, we want to thank the sponsors that made this episode possible, including our preferred crypto exchange. The one we recommend you use right now, that is Kraken. Go create an account.

• 3:16David Hoffman?

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• 3:57David Hoffman?

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• 4:39David Hoffman?

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• 5:21David Hoffman?

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• 5:57Ryan Sean Adams?

  Bankless Nation excited to reintroduce you to Vlad Tenef. He's 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 don't know if you have takes on that. The acquisition of Bitstamp 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.

• 6:32Speaker 00

  Thank you. Yeah, I'm glad to be here with you guys again.

• 6:35Ryan Sean Adams?

  All right. So the last time you were on was about two years ago. You guys were just rolling out a wallet. You'd been in crypto, but like dipping more of a toe in the water in crypto. And I gotta say, going into this, into that conversation is a little bit different than I feel going to this conversation. So going into that conversation, it felt like Robin Hood was coming a bit from the TradFi 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 bear market. You have your own Wells notice from the SEC, which many of our esteemed crypto companies have, during the ranks of Kraken and Coinbase and MetaMask and Uniswap.

• 7:16Ryan Sean Adams?

  So you've kind of proven yourselves, I would say. You get like a badge of honor. You're earning your stripes, really.

• 7:23Speaker 00

  I don't know if I'd go that far. No, we're still, we're still a small upstart in the space.

• 7:28Ryan Sean Adams?

  Well, congrats on what you've done and your commitment to crypto. It's not just a fair weather friend. Seems like you guys are here to stay. And I want to start with this question. So at the highest level, what, how important is crypto to Robin Hood right now?

• 7:43Speaker 00

  Yeah, I think, I think that's a deep question. I think that maybe the interesting perspective that I have is 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, over the past multiple years. And especially in retail, you know, we don't have as broad of an institutional offering and a B2B offering. We've been very focused on retail, direct to consumer crypto trading. And the market share is looking good. I mean, we're right up there with Coinbase and

• 8:27Speaker 00

  you know, the customers love using Robin Hood to trade crypto. We also have a big TradFi business and we can see both of these businesses simultaneously. And one of the things that we're seeing is how efficient it is to operate a crypto business. And a lot of the things that require centralized legacy counterparties in TradFi are being done.

• 8:56Speaker 00

  Just in in software. So for example, transfer agency, clearing and settlement. You mentioned Uniswap, market making, 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 TradFi side.

• 9:40Speaker 00

  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 TradFi. 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 named stocks. Now we offer uh over a thousand, over a thousand single name stocks on 24 hour market,

• 10:24Speaker 00

  which starts trading uh Sunday evening, uh 5 5pm PST, 8pm Eastern, and basically runs till uh till Friday evening. And one of the things we've been thinking about is, why not 24/7? 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 CryptoRail, since it's in software,

• 11:06Speaker 00

  You get 24/7 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 where software is providing a lot of these services allows for product experiences to be delivered much more simply. 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 meme coin trading and crypto assets and things like that.

• 11:47Speaker 00

  But I think that 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 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 I think financial services, including the way that currencies are managed, have kind of been a laggard in the space, but but this is just like technology further subsuming that and turning physical processes into software more aggressively.

• 12:28David Hoffman?

  Vlad, the Robin Hood perspective, 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 TradFi side. And then there's like institutional crypto, there's institutional TradFi, there's retail crypto, retail TradFi, and you're in all of them. You're 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? 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.

• 13:09David Hoffman?

  But the Robin Hood crypto consumer base is different, probably different than 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?

• 13:27Speaker 00

  Yeah, I think that it breaks down into different types of products and services depending on your segment. So for example, 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 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. For example, institutions and small businesses. And I think crypto fits into all three of those buckets.

• 14:12Speaker 00

  So crypto active traders are looking for low costs. Particularly as the trading volumes increase, they want to have the 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 disperse their trading activity across a large number of trading platforms. Because generally, if you're particularly if you're doing sophisticated things or cross margining, having like the capital all in one place is ideal. So that's the active trader front.

• 14:55Speaker 00

  The more buy and hold investors care about, 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 that have offered things like high yields and great rates just disappearing overnight. And so that's a big concern for them. And within that segment, I guess within both segments, you have this idea of self custody.

• 15:35Speaker 00

  And not a lot of people actually utilize self custody. But they do like to know that it's there if they need it.

• 15:45David Hoffman?

  Over time, would you say Robin Hood is going at the arc of Robin Hood? Is it becoming more crypto? Or are you just like equally optimizing on both?

• 15:55Speaker 00

  Yeah, I think that I like to think of our business as sort of three arcs. One is all the things that we're doing for active traders. And I'd say that crypto in that bucket is an asset class. It's also like a fundamental technology that might 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 typical traditional features like futures have been around for a very, very long time.

• 16:36Speaker 00

  And crypto derivatives, I think to a customer standpoint, feel more like a TradFi product than a crypto product in many ways. On the non custodial side, we view crypto as an accelerant to making all of our products international and being available across all sorts of different markets and jurisdictions. And I also think like over time, you'll see the TradFi and crypto worlds continue to merge and you'll see tokenization become a bigger deal. And that'll start in overseas markets first.

• 17:18Speaker 00

  I think that the US will actually be a laggard here to embrace tokenization. I think you'll see it in Europe and other markets internationally. But I think eventually it will come to the US as well. And I think predominantly that's for all the efficiency reasons and the fact that you can offer 24 hours and fractionalization more easily. I think you can also look at the success of dollar stablecoins, which are driving the lion's share of transaction volume on chain right now. I saw an article a couple of weeks ago that you guys probably saw it as well.

• 17:59Speaker 00

  USDT on Tron is now exceeding Visa in daily volume. And I think the reason for that is if you look overseas.

• 18:10Speaker 00

  People really want dollars. I think there was this, there's this narrative of Bitcoin being the greatest store of value for people in countries where currencies are hyperinflating 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, 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 know, the same holds true of US companies. People would love, I mean sophisticated

• 18:49Speaker 00

  individuals overseas who have money are turning to the US markets. They want US equities, they want US assets. And if you can enable people to have that on a much bigger scale, I think that's what tokenization enables. And you'll see it overseas first. 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 24/7, but with Robinhood, it's 24/5. So, pretty good. It's pretty easy to open a Robinhood 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

• 19:33Speaker 00

  job of that. And then we also have like this entrenched industry of all the clearinghouses, 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 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, cellphone usage, where the technologies was

• 20:18Speaker 00

  created in the US but adopted overseas. Tokenization, I think, is going to be the same. And a big part of it is the US is already good enough. So the incentive to go to the technological frontier of these technologies is much, much lower over here.

• 20:33Ryan Sean Adams?

  Yeah, I think that's right. It's kind of like Clayton Christensen's Innovator's Dilemma, where the US already has all the clearinghouses and all of the banking infrastructure, et cetera. So it doesn't really feel the burning need to kind of upgrade. And so other jurisdictions, emerging markets, et cetera, kind of like leapfrog us. The broad stroke of what I hear you saying, Vlad, kind of aligns with a thesis that Bankless has held, that David and I have long held. And I think it's actually starting to come to fruition. We've called this before, like the DeFi mullet thesis or the crypto mullet thesis. And it goes like, basically, you've got fintech in the front and then crypto in the back. And the idea behind this is that fintech companies, in particular companies like Robinhood,

• 21:16Ryan Sean Adams?

  are uniquely positioned to basically swap out your banking infrastructure. When I say banking infrastructure, I'm talking about the clearinghouses, the settlement, the old style of tokenization, the stuff that takes off banker holidays and that doesn't work the weekends and all of that legacy stuff, the mainframes of the world, the backend of finance. And over time, just kind of swap it out for the new crypto stuff. And the beauty is, you don't have to do it overnight. You can kind of do it 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 doing that and then maybe you acquire a crypto exchange, which you have.

• 22:00Ryan Sean Adams?

  And then you get into more crypto-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 is obviously the only entity that's going to discover this and go through this transformation, though you're positioned well, and you may be one of the first to kind of see this. But high level, do you think that's effectively what's going on here is we are 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 programmatic blockchains. And fintech is just going to basically hot swap the back end of its financial system. That's going to happen over the next 10 years.

• 22:45Ryan Sean Adams?

  How close is that aligned to what you're saying, what you're seeing?

• 22:48Speaker 00

  I think that's pretty close. I mean, with the with the caveat that incumbents are going to be slow. I mean, a lot of the incumbents have still not made the transition to servers, right? They're on mainframe. You have to you have to go from mainframes to servers. And then, of course, there's like, the on prem to cloud transition that Robin Hood didn't have to go through, because we were sort of like formed at 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

• 23:32Speaker 00

  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. And so we were kind of the first cloud native brokerage platform that got to scale. And then you have AI and crypto, which are the new platform shifts that can change the technology as well. So I think a lot of the incumbents are looking at looking for Cobol and Fortran developers. And that's a big problem. And yeah, I think the question will be

• 24:11Speaker 00

  Are they gonna jump and adopt crypto? Well, you kind of have to either discard all of the old stuff 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 on premise unless someone's figured out something that I haven't seen yet. But 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 processes that I have, which will, which further accelerates some of these trends that you guys have been mentioning.

• 24:52Ryan Sean Adams?

  All right, so let's talk about what you're doing now. Let's talk about some of the recent things that we've seen coming out of Robinhood. And we'll start maybe with the Bitstamp acquisition. So Robinhood is set to acquire Bitstamp. This is a press release that I'm reading. For folks that don't know, Bitstamp is an exchange, an OG crypto exchange, actually started in 2011. When, fun fact, when I created one of my first crypto exchange accounts, I was going through, this was like one of the accounts that I have a legacy, you know, account on all the way back from 2014.

• 25:24Speaker 00

  Yeah, me too, actually.

• 25:25Ryan Sean Adams?

  Yeah, okay, so Bitstamp, 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'd you guys do it?

• 25:34Speaker 00

  I think that, you know, as we were thinking about our long-term plan, we knew that we would have a Robinhood exchange at some point. 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, retail relationships, 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. And then, you know, when we came across Bitstamp,

• 26:16Speaker 00

  we saw a big opportunity because they have a long reputation. They have a lot of licensure, global footprint, great institutional relationships. And we saw an opportunity to accelerate the build out of what would otherwise be our own exchange by at least 18 to 24 months. And that got us very excited. And, you know, it's also important to get some street cred with the community. You know, now, now we can say that we're one of the OG, we're the oldest running crypto business that continuously operates. I mean, of course, assuming the, the 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.

• 27:01Speaker 00

  Nobody else in the business.

• 27:03David Hoffman?

  As old as Mount Gox.

• 27:06Speaker 00

  I, where I also had an account. I feel like, uh,

• 27:09David Hoffman?

  My condolences.

• 27:09Speaker 00

  That seems like it's wrapping up.

• 27:13Speaker 00

  Long storied history of getting Japanese letters in my email.

• 27:18David Hoffman?

  The Robinhood exchange feels incredibly disruptive. At least in the crypto space, we're not totally foreign to new exchanges cropping up. Like it's still a young space, new exchanges coming, coming up all the time. A bit stamp, of course, not new, but just like the idea of like Robinhood 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 the equity space, because I mean, exchanges are exchanges, no matter what assets are traded on them. Is that part of the intent?

• 27:52Speaker 00

  Well, when you look into, uh, tokenization, which we, we talked a little bit about, and that's a space that Robin is very interested in. And I think, uh, is well positioned to be a leader in. One of the things that you look at with, with, with tokenization is where are you going to trade them? And of course they have to be listed on, uh, reliable exchanges. And the more assets that, uh, that we have.

• 28:22Speaker 00

  You know, the more important it becomes to have the underlying exchange technology as well. So for sure, I think it enables a lot of things for us, not just in traditional crypto assets.

• 28:34Ryan Sean Adams?

  Some of our listeners might be asking this question. When you say, you know, Robin Hood is expanding into kind of the crypto exchange territory, they might say, hey, wait a second, Vlad, you guys already 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 Bitstamp news?

• 28:57Speaker 00

  Yeah, I guess it depends on your definition of an exchange. I mean, some people call exchanges things that convert from dollars to cryptos or cryptos and other cryptos. And I think to by that definition, you could call, I mean, with the Robinhood 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. 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 place a transaction through

• 29:39Speaker 00

  your Robinhood app, we're not matching buyers and sellers together. We're, we're actually just acting as an agent and transmitting your order to the market where where they're being matched.

• 29:52Ryan Sean Adams?

  Okay.

• 29:52David Hoffman?

  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 BlackRock's Biddle Fund. But there's many efforts that are also like meaningfully growing underway. You kind of think that your position with the acquisition of Bitstamp might just be able to just completely leapfrog all of your legacy competitors in terms of being the location to being the dominant liquidity marketplace for tokenized assets whenever the crypto industry can figure out how to tokenize more assets. Is that that's your position?

• 30:32Speaker 00

  Well, I think when I look at tokenization, I think stable coins are actually a, you know, pretty basic form of of tokenization. So I don't think, I think we're already there. I don't think there's like much that needs to be done. You know, assets are being tokenized. Stable coins, which are kind of akin to tokenized treasuries or dollars or money market funds are gaining adoption and you're going to see that market evolve and you'll see more and more assets being tokenized. And in a world where more assets are tokenized, you're going to have a couple of different participants. One is kind of the traditional exchanges and non-traditional.

• 31:16Speaker 00

  So, you know, Uniswap and other decentralized exchanges and liquidity pools will have a part to play there. You will also have asset custodians. So the traditional assets that are being tokenized are going to have to be stored somewhere. And the custodians there will have to have the ability to deal with TradFi regulations and TradFi rails and you're gonna, you're gonna have to work with the conventional system. And, and so like, you're also going to want to minimize the number of counterparties because if you can kind of like do everything in one place,

• 32:00Speaker 00

  the user experience is better, the underlying economics are better, and users will, will have to pay less. And so I think the natural, the natural sort of like contenders in the space are those that have the ability to custody traditional assets and have core competency there, but also have the crypto rails and easy access to, to both sides. And I do think Robinhood is well positioned in that space.

• 32:31Ryan Sean Adams?

  How about with Bitstamp? Are you guys positioned to do some like, some more of the staking 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?

• 32:50Speaker 00

  Yeah, 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.

• 33:06Ryan Sean Adams?

  Oh, so you do offer it in the EU right now, staking through Robinhood? Or is that through Bitstamp? Or through Robinhood? Okay.

• 33:12Speaker 00

  Yeah, you can stake on our Robinhood EU custodial app. I think we just rolled out Solana staking a couple of weeks ago. Yeah, I mean, staking, yeah, from a technology standpoint, is pretty straightforward. I mean, like, most of that is just node management. And it's also fairly easy for a customer to stake themselves if they wanted to use our non-custodial wallet. So yeah, I would be surprised if like centralized staking was was a really big thing 10 years from now. But, you know, customers also like a clean user experience. And so that's some of these like

• 33:56Speaker 00

  decentralized products do suffer from usability problems. So I think that's what I'm I'd like to think the decentralized version and kind of self custody will win out, but it remains to be seen.

• 34:10Ryan Sean Adams?

  Let's talk about the decentralized version, the self custody winning out and what you what you're seeing there and what you're looking at. So you guys have had a self custody custodial wallet for a while, what we call a bankless wallet, because again, it's your keys and your crypto when you have your own custody, self custody, right? So what's what's the plan for this? And I think from the crypto side of things, I guess I will say, we had hoped that non custodial wallets would take off more than they currently have, is a statement that I'll make. And I think a lot of bankless listeners hearing this will agree with this. And we've been played like transaction fees are difficult, seed phrases are difficult, the UX behind this stuff is is hard currently right now. We're a few steps before smart contract wallets,

• 34:55Ryan Sean Adams?

  which feel a bit more like the best user experiences we've seen in TradFi. So the builders have had to build things in order to start to catch up to what we already have access to. And, you know, an app like Robinhood, you know, the custodial version, or an app like Venmo. But we're getting there, we're getting close. What's your outlook on self custody wallets? And what are you doing with the Robinhood wallet?

• 35:17Speaker 00

  I think that you're going to see more integration of self custody components into products that are traditionally considered custodial and vice versa. So I don't think you're going to have too many pure play self custody only solutions that that like survive in the marketplace for very long. I think that this is going to be a component. It'll it'll be componentized and featureized within larger ecosystems. And I think you're already starting to see like products that started off non custodial in nature, adopting more

• 36:02Speaker 00

  and more custodial and tradfi elements and vice versa. So for example, even via MetaMask, like a big sort of development in the past couple of years is them investing a lot in their on and off ramp technologies and connecting with traditional money rails so that you can get your US dollars really easily and buy with one tap and with minimal fees. Actually, Robinhood Connect is a big player there. We process a lot of a lot of MetaMasks on ramp volume and

• 36:32Ryan Sean Adams?

  Wait, really? So what is that? What's Robinhood Connect?

• 36:35Speaker 00

  Robinhood Connect, you can think of it, it's an on ramp, the lowest cost on ramp in the markets that we operate typically. And, you know, we partner with MetaMask, we partner with Uniswap and some of the some of the other DeFi wallets. And simply put, the goal is to offer you the simplest and lowest cost way to take your dollars from your bank account or debit card and convert them into your crypto of choice, fully non custodially in nature. And the way we were able to do that is we we had to the big problems

• 37:14Speaker 00

  in the space are fraud, money reversals, the cost of accessing, the cost of like operating the money rails. And because we built a big business serving consumers with our crypto business, we were able to kind of break it apart and offer that as a service to businesses.

• 37:33Ryan Sean Adams?

  I didn't know you guys were doing that. You basically just took this capability they already have and decoupled it and offered it as a service. And now you get a like fiat on ramp type service that you can provide crypto wallets.

• 37:44Speaker 00

  Yeah, absolutely. And in the wallets that we serve, yeah, we tend to like quickly, for those that optimize by cost, we typically quickly tend to rise to the the top because we offer low costs because we had to solve all these problems for ourselves. But anyway, my original point, the DeFi products are becoming centralized because they want, they figured out that customers really have dollars and they they want to make it as easy as possible to get into crypto. And then I think over time, you're starting to see some of the centralized products integrate non custodial wallet functionality as well. And

• 38:24Speaker 00

  I think the the early form of that was through Robinhood wallets, like in our custodial app, we offered the ability to withdraw and deposit on live blockchains. And we've been continuing to invest in that, making it faster, finding ways to make the fees lower. And so I wouldn't be surprised for the distinction to sort of like disappear at the product level over time, like the self custodial wallets will end up looking more like centralized platforms and vice versa, and will end up taking the best functionality of of both into one product experience. And of course, the the the sort of like unpredictable part is how regulations

• 39:09Speaker 00

  are going to evolve in the space. But I think there might be zigs and zags, but over the long run, these will be the same products.

• 39:17David Hoffman?

  One of the products or announcements that you guys have announced relatively recently is a partnership with Arbitrum, which is where I think probably Robinhood has its biggest on-chain footprint, if you will. I think the way that this works is that the Robinhood wallet, if you make a swap, it swaps on on Arbitrum. And then both Robinhood and Arbitrum have agreed to just kill the fee that's associated with that. And that's pretty cool. I'm guessing that this partnership expands. At least that's my intuition. That's my gut feeling. I'm wondering where this whole thing might might go from here.

• 39:51Speaker 00

  Yeah, we like the Arbitrum guys, and they've been great partners. So we'd like to do more there. We also have been working with pretty much all the blockchains. And a lot of people are building interesting things. And our philosophy tends to be

• 40:12Speaker 00

  Yeah, we want to partner with as many people as possible and bring the best of what they have to offer to our customers. So generally, I think Robinhood is like adverse to working with one partner, you know, because not everyone can do everything and can serve customers in a number of ways. So, you know, we've partnered with Polygon folks in the past, we've worked with all the chains, and we just want to pick whoever can help us deliver the best customer experience and the best reliability.

• 40:43Ryan Sean Adams?

  And so Vlad, I don't know if you can confirm or deny any rumors, but I'd like to hear kind of what you think about it. So we've had many crypto exchanges that have expanded into developing their own chain, or at least supporting their own chain. So you have Binance, of course, and they have the BNB chain now that's kind of affiliated, and that's been a longstanding chain, a Layer 1, as we would call it. You'd have Coinbase, who's gone in the Layer 2 direction, kind of like partnering with optimism for that and kind of rolling their own functionality into that. It seems to be a strong base for support. Does Robinhood have any chain-type aspirations? You know, the first step is a non-custodial wallet. Maybe the second step is an entire non-custodial chain. What do you think of this?

• 41:27Speaker 00

  I think that Robinhood's core competency is these areas where traditional finance and crypto kind of merge and meet, because we've got such a big presence and knowledge of both, and I think that makes us quite unique. And that's why we've been focusing on those interface points. So on and off ramps are kind of a great example of that. Tokenization is another great example. And I think the way that we would think about creating our own chain or

• 42:03Speaker 00

  You know, other protocols or bitstamp the exchanges, can it kind of help us accelerate that? Can we accelerate our vision of being the best interface and really on-ramp in the general sense between crypto and the traditional world? Because I think that's something that we can do better than no one else, and it takes advantage of our scale and our capabilities and all of the work that we've done to get like extremely deep in TradFi. And, you know, whether we're building our own chain or offering like specific crypto-native products is really more a secondary way to enable that vision.

• 42:45David Hoffman?

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• 43:30David Hoffman?

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• 44:13David Hoffman?

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• 44:56David Hoffman?

  advice and Toku can help to optimize your taxes so you pay the least possible amount of taxes while still maintaining legal compliance. With Toku's guidance, you can concentrate on building your company while Toku handles the logistics. Token launches don't have to be complicated. Talk to Toku today to get a free initial token valuation. What about the world of payments, both in the TradFi space, but also maybe also in the crypto space? I know you guys just came out with a spiffy new credit card. So you're getting into the world of credit cards. What about payments? Are you guys trying to like penetrate into that market as well?

• 45:26Speaker 00

  Yeah, I think that we'll want to make it easy for our customers to pay each other and to spend at merchants, credit card being a great example of how we can do that. The economics are powerful, right? If you can give people 3% rewards on on every swipe, that's a strong value proposition and that's resonated really well with with early users of the credit card and the demand for that is is growing very, very fast. The bet that we made was that we could probably take our customer acquisition and incentive costs to zero with this product by just making it so good. And it seems like that's playing out. In terms of crypto payments.

• 46:10Speaker 00

  I think that in the US, you have the problem of credit cards being very difficult to compete with. And in this one, it's not, it's not just that they're good enough. They're actually like significantly better. Like it's, it's going to be hard to offer anything that competes with 3% rewards in crypto in a sustainable way over the long run. So I think you'd have to look overseas as a way to do that. And, and I think overseas, the, the picture is a little bit better and you can look at remittances and cross border. And also intra-country payments in areas that don't have developed banking systems.

• 46:51Speaker 00

  And I think Robinhood will be a player there. To some degree, we are with non-custodial. But we're, we're also like branching out and expanding the core Robinhood products and services in global markets. And, and so I think you should expect payments to, to be a part of that.

• 47:08David Hoffman?

  I do want to ask about that 3% business model because 3%, 3% is like, it's pretty good. It's pretty good. That's pretty high. I actually do have like the Robinhood credit card and as we were prepping for this pod, yeah, right?

• 47:20Ryan Sean Adams?

  Yeah, I was jealous. I was like, where'd you get that? 3% is pretty generous.

• 47:25Speaker 00

  That's awesome. Have you been using it?

• 47:27David Hoffman?

  Yeah, I've been using it. Yeah. So I just like press, I didn't actually realize like how the points work. Cause like whenever I like swipe the card, they're like, oh, points. I'm like, oh, funny points. More points in my life. But then I realized that like, there's a little tab where you can actually like disperse it, like you actually get it in cash to your Robinhood account. And the only thing that I use my Robinhood account for, the one thing is to buy Coinbase stock. And so it just turned into Coinbase stock. So it's actually for, it's like 3% cash back. But for me, it's actually 3% just like free Coinbase stock. Is that kind of the business model? Like you can offer like, like I think the Apple card does 2%. Other cards like do 2%, 2% has been like the industry standard. That extra 1% is just because like the likelihood of the consumer to like, keep it back inside of the Robinhood

• 48:13David Hoffman?

  ecosystem is sufficiently high. Is that, is that where the margins come from?

• 48:16Speaker 00

  Uh, yeah, and maybe I'll ask you like, has the card, uh, my guess is it's like top of wallet or near top of wallet for you, right?

• 48:25David Hoffman?

  Well, okay, so I I'm a big Apple card user, so there's three things in my Apple, my Apple Wallet, which is my credit card, which is the Robin Hood, my ID, and then a business card. Yeah. So yes, it's it's one of the three things, but I actually use Apple Pay like 99% of the time anyways.

• 48:40Speaker 00

  But Apple Pay with your Robin Hood card?

• 48:42David Hoffman?

  My Robin Hood card, yes, right?

• 48:43Speaker 00

  Yeah, yeah, because Apple Pay, I think, gets you 3% cash back on Apple purchases.

• 48:48David Hoffman?

  On on Apple products, which I'm not, I'm not buying an Apple product every single day.

• 48:53Speaker 00

  Yeah, I mean, that that's also what we're seeing. It's becoming top of wallet rapidly for everyone that adopts it. And there, there's a lot of noise on social media about the rollout going slowly. But it's just because people want the card so much. The digital experience is so good, they like the physical card. The family features and the virtual cards work well also. And of course, the rewards, uh, and we've rolled out 50,000 of them, which is basically on par. If you look at kind of what other successful credit card businesses have done in their first year, we're like right there. So, um, yeah, the, the rollout is progressing.

• 49:31Speaker 00

  Uh, and in terms of the business model, um, one of the things that, uh, that you can do is look at public companies that offer credit card businesses, you know, Capital One's probably the best example there. And you can see that the revenue comes from two basic things. One is the interchange, which is revenue from each swipe. And the rewards are are contra revenue on that item. The bigger piece is actually net interest. So that that's the interest generated from holding balances for customers that are revolving. And, um, a cost to that piece is, uh, well, cost of funds is is netted out.

• 50:12Speaker 00

  It's contra revenue, but, uh, the loan loss provisions are another part of there. And if you look at, uh, what they can do, which means total revenues, uh, generated by the, uh, a typical card business divided by transaction volume, you get to something in the 5% to 6% range. And of course, there's headcount, there's marketing expense, and those are actually the largest costs, which as a technology company, we believe that we can lower significantly beyond what the incumbents are doing. So that's the belief. Five percent and six percent are a lot higher than three, so we'll have some margin to play with. But there's a lot of

• 50:57Speaker 00

  details and a lot of learning that we have to do. We have to look at borrowing activity, spending activity, make sure that the underwriting is really, really good. But the benefit that we have is people love this product, and we've got some of the best people in the world that want to come help us work on it, too. So I think that it'll be really good. And early reviews from customers are just exceptionally high. So it has a five-star rating with thousands of reviews on the App Store. Maybe you've seen the app itself, but it's like extremely easy to use, and it's a very nice experience. I've got my kids and my whole family is on

• 51:38Speaker 00

  the card, which they really love. They love going to the toy store and paying for their toys with their own credit card. So I think this thing is going to be really, really good. Like, it's not evenly distributed yet, but I think it has the potential to change the credit card business and the credit card industry.

• 52:00Ryan Sean Adams?

  This kind of gets to like three things that I like, that I appreciate that Robinhood is in the space. Like, the first thing is you have like 25 million customers, something like this, like a lot of customers, and you're offering services that typical crypto exchanges don't really offer, right? So you sort of get the person who just wants a credit card, but then maybe suddenly they're crypto curious. And then Robinhood has an on-ramp to kind of convert them to crypto. I gotta say, Vlad, for an organization like Bankless, for a media company that's all about the evangelism and propagation of crypto, we love tapping into new markets, right? And like, get them hooked on it early. So that's nice. The other thing I think that's nice is, I feel like if Robinhood is investing in it... You guys seem to take a very pragmatic approach, right?

• 52:45Ryan Sean Adams?

  In terms of like, hey, we're not going to do something. There's not a big place for crypto to fit in our credit card product set. So we don't do it. And the places where you do invest, like it's very pragmatic. And you're seeing some places where crypto, from an infrastructure perspective, can really benefit your business and improve the existing traditional finance system. So it just like feels like real to me. And then the third thing, which is maybe our next discussion is, you are now part of the squad that is resisting the SEC. Unfortunately, or fortunately, I suppose. So in May, Robinhood joined the ranks of organizations. This went public. I'm not sure how much you can actually say about this,

• 53:28Ryan Sean Adams?

  but that received a good old nasty gram from Gary Gensler's SEC, a Wells notice. And this is very familiar to people who've been in crypto. I mentioned a few other organizations that have them. It's almost become flat like a badge of honor of like, you get one of these, it means you're like, you're doing things in crypto, basically. And so I want to start by you talking about that and kind of the reaction and what you're doing. But first of all, getting that letter, getting this reaction from the SEC. What was your first reaction to seeing this? And had you been in conversation with them? Or did this just come out of the blue?

• 54:04Speaker 00

  Yeah, we talk to the SEC all the time across all of our businesses. You know, we have several regulated broker dealers, a clearing firm, and of course, the crypto business. So we've been in conversations for a while. A lot of that was disclosed in our quarterly filings. For example, that, you know, they were investigating certain aspects of the crypto business, including whether any of the coins we list, they believe are securities. And we've been, we'd also been engaging proactively with the SEC. You guys probably remember.

• 54:45Speaker 00

  In a bunch of interviews, Gary Gensler came out and said, we're open to crypto firms. If you want to do anything interesting, you know, come in and talk to us.

• 54:55Ryan Sean Adams?

  Just come in my office and register. We just want to have a talk.

• 54:59Speaker 00

  Yeah, so, you know, we're like, we took that seriously and we went in and we attempted to register. And of course, we did a lot of work. We spent a lot of our resources coming up with what we believe was a pretty good mechanism to register, which, which was, it's a little bit technical, but it's called a special purpose broker dealer. So we came up with this construct, special purpose broker dealer. You can trade crypto assets and essentially these conversations, and we probably had like 16 of them.

• 55:34Ryan Sean Adams?

  16?

• 55:35Speaker 00

  Yeah, yeah, we were, we were going in there 16 times.

• 55:41Speaker 00

  And then at some point, it kind of became clear that it wasn't really going anywhere. And I don't know what was going on behind the scenes, but eventually we just get an email and, and they were like, well, we don't want to talk with you guys about this anymore.

• 55:58Ryan Sean Adams?

  Wow.

• 55:59Speaker 00

  There was that.

• 56:00Ryan Sean Adams?

  Yikes. A Wells notice is not a lawsuit, but it's the, I guess, the intent of a lawsuit. That's what it is.

• 56:08Speaker 00

  Well, yeah, and I mean, that's, that's another thing, like, it used to be that 90% of the time when you would get a Wells notice, litigation would, would follow. But now you kind of have these Wells notices that have been hanging around for a while and just kind of sitting there, which, which is a new thing. I mean, and I think to some degree, like, the seriousness of a Wells notice is almost being lost by.

• 56:36Ryan Sean Adams?

  Yeah.

• 56:38David Hoffman?

  We, that we introduce it as congratulations, not, oh no, I'm sorry.

• 56:44Speaker 00

  But anyway, yeah, we went in, in good faith. I do want the US, I think long-term, the US is going to have to embrace this technology because it's legitimately useful and. We don't want to send it overseas. We believe customers should in this country have the freedom to choose what they want to do with their money and access these technologies if they want to. And we think it'll be good for the country. So I think eventually we'll get there. And I think that we'll have to play a big part in pushing for that to happen sooner and accelerating that. So it's a, it's, it would be a shame if, I think it would be like contra the mission of the US to go the route of China and India and just like ban cryptocurrency.

• 57:31Speaker 00

  Overall, I don't think we want to be in that direction. And that's one form of stable equilibrium. The other part is to like integrate it and embrace it and clear rules for how companies can adopt it. We're not getting that either. And we're kind of in this unstable place in between right now. And yeah, we're going to push for it to be resolved and hopefully it is resolved.

• 57:54Ryan Sean Adams?

  Vlad, do you have a take on what's motivating this? What do you think? Like, why, why is this going on? Why are we getting Wells notices in crypto? I mean, the crypto industry's perspective is that it's been unfairly targeted, that we have some members of sort of the administrative state and other like areas in the political apparatus that are kind of like saying crypto is bad and just going after it in targeted way. Do you have any takes on this?

• 58:18Speaker 00

  Yeah, I think that the administrative state is, I mean, the administrative state is pushing back because the US is a leader in financial services. I mean, we've set the standard worldwide in many cases. And so a lot of big companies and organizations have a lot to lose from a changing of the guard here. I mean, even you look at stable coins, stable coin adoption, which surprisingly, you know, like that's like the most, there's, there's stable coin bills that are in pretty advanced stages. They're making their way through Congress.

• 59:00Speaker 00

  And that hasn't been kind of like in the direct line of fire of regulators. But You know, if you can create a stablecoin easily, then that's something that's kind of scary to the to the banks, right? And they they've spent all of this time and invested all of this resource in building up regulatory infrastructure. And they have to comply with all of these onerous reserve requirements and capital requirements. They can't grow very fast because their growth is limited by the OCC. And so, you know, from their perspective, they're looking at a stablecoin issuer and they're like, oh, well, these guys can hold treasuries and issue stablecoins too, and they don't have to deal with any of this.

• 59:42Speaker 00

  That seems a little bit unfair to them, right? And so you can understand why they would fight it. And that the fact that like the industry is so powerful and advanced here, just just sort of like explains why there's more friction.

• 59:59Ryan Sean Adams?

  You just use the term fight it, and I feel like that's been kind of a shift that we've seen over the past two years and something that that David and I have devoted a lot of time to on banks, just kind of like covering it. Because crypto has felt like it's had to pivot into like just survive mode, fight mode, kind of resist mode. And like through through two forms, one is resisting these types of things from the administrative state. So if you get a Wells notice, if you get brought into a court case, rather than kind of like settle, it's just like organizations like Uniswap and Coinbase and Kraken doing things like pushing back and like countersuing in some cases, right? It's just like it's time for that or else where does it stop? So taking it to the courts, and I'm curious what what Robin Hood's intent is.

• 1:00:41Ryan Sean Adams?

  So if this Wells notice turns into something, are you guys gonna like take this to the courts? And then second to that is also the question of getting involved kind of politically. So we've seen a lot of this from crypto organizations, you have Stand With Crypto, other organizations that are just saying, hey, this is now a political thing. If we want to change the administrative state, and we have, it goes back to kind of like politics and legislature and who our politicians are, getting involved in that process about more than we have been. Crypto let SBF do it for a while, that was a really bad idea. So now better organizations are kind of stepping in. What is Robin Hood doing to kind of resist and join the fight here?

• 1:01:19Speaker 00

  Yeah, I mean, I think the whole SBF thing was a big step backwards. Yeah, because somehow like Washington embraced SBF.

• 1:01:30Ryan Sean Adams?

  Yes, we sent the wrong guy to Washington, that's for sure.

• 1:01:33Speaker 00

  Big, big egg on the face of a lot of people who wish that those photos would just disappear. Unfortunately, um, look, our intention is to, we don't really want to be in litigation. And we're in a lot of it, right? We've, we've had the unfortunate experience of being in a, being in an industry and innovating, not just with crypto, but you know, traditional assets as well. And disrupting, and sometimes it's necessary to go all the way to, to conclusion and be able to see something through in order to resolve something.

• 1:02:14Speaker 00

  But our intention isn't to litigate for litigation's sake, but we, we have to stand up for, for what we believe is right and defend our business. And that's really what we're doing here, you know, we're defending ourselves, defending our industry, and we believe we're, we're in the right because we're actually a highly regulated and compliant participant in the space, unlike some of the others where, you know, you, there is a legitimate point to make that they knowingly are skirting regulation and, and taking a ton of, of risk and playing fast and loose. But we've been pretty conservative with coin listings.

• 1:02:56Speaker 00

  We've been, you know, taking heed at what the position of the regulators are. So I, I think like the fact that the, the idea of litigating against Robinhood is like almost comical to be relative to all of the activity that's happening in the industry.

• 1:03:16Ryan Sean Adams?

  As a result of the Wells notice, have you guys changed anything? Is there anything, was there anything that was impacted? Or did they just like not give you enough information to be able to like actually change any sort of business lines or products that you offer?

• 1:03:29Speaker 00

  No, we haven't changed anything. I mean, we've responded to the Wells notice and you know, we don't really have an update to share it there. I think the good thing is we just have a lot of, a lot of stuff to build in the US. And so we actually feel pretty good about the crypto business regardless of which administration is in power, whether it's Democrats or Republicans. Because you know, even if there's some lack of regulatory clarity for some amount of time, I think eventually it'll get resolved. And in the meantime, we can focus on improving the customer experience, bringing down pricing, adding more active trading tools.

• 1:04:12Speaker 00

  So the team in the US as well as internationally has just been cranking super hard on making the experience better. So the roadmap will be full and maybe some things will shift here and there depending on what the regulatory environment is over the next year, but we've got plenty to do.

• 1:04:29Ryan Sean Adams?

  So Vlad, here's kind of a nerdy question. I was, I was just thinking about as we're getting to this conversation, which is basically the Robin Hood business model and how it kind of like relates to the crypto business model and the blockchain business model. Of course, Robin Hood has zero commission trades and sort of a revenue stream on payment for order flow. And one thing that David and I say when we try to explain what blockchains are, how they generate fees is blockchain sell blocks and they, they sell it in two forms, either in a transaction fee, which is interesting, or the ordering of a transaction, basically order flow, right? And they can adopt both of these mechanisms. Some are skewed towards like one, some are skewed towards the other. If you think about Robin Hood, it's mainly skewed towards the payment for order flow

• 1:05:14Ryan Sean Adams?

  business model. And in crypto, like there's tons of debates about this, like order flow. Is it good? Is it bad? Is it arbitrage? Some, some kinds are toxic, some are not. Call it MEV is another term. For it internal and I guess sometimes it's celebrated, right? Sometimes it's, oh, it's a revenue driver for this particular blockchain. That's what gives the token some sort of upside value. Other times it's kind of castigated as this is predatory to users. And you've been in kind of like the payment for order flow business for a while. So like, what are the goods and what are the bads that come of it? Do you have any advice for us? How does it, how does it go wrong when it goes wrong? And like, what's been your general experience that's relevant to crypto?

• 1:05:57Speaker 00

  Well, a couple of things. One is Robinhood actually has eight businesses now that generate 100 million plus in annual revenue.

• 1:06:06Speaker 00

  So it's probably more diversified than you might think, based on kind of the headlines. And more than half the revenues are actually net interest based. And this shifts up and down, but net interest exceeded transaction based revenue at some point last year. And we were able to make more revenue from interest than transactions. There's also stock lending. There is instant withdrawals, spread on gold deposits. And of course, like interchange on the credit card is, has been increasing.

• 1:06:48Speaker 00

  Payment for order flow, I wouldn't compare to MEV. I think MEV is like this like weird thing that would not be allowed in traditional.

• 1:07:01Ryan Sean Adams?

  Oh, really? Interesting. Get into that more.

• 1:07:04Speaker 00

  Yeah. Yeah, I mean, payment for order flow does exist in crypto as well. I mean, it's not called payment for order flow, but it's basically revenues generated by routing through market makers. And to some degree, like. It's closer to spread than anything else. It's like whenever there's a spread between the bid and the offer of an asset, that's a profit pool that's split between the end customer, the broker and the market maker or the exchange. And one way to think about payment for order flow is it's the component that's going to the broker. The fee is the component that's getting going to the exchange.

• 1:07:48Speaker 00

  And in traditional financial markets, we call the part that's going to the customer price improvement. So price improvement plus payment for order flow plus exchange fee or risk equals equals the spread. MEV by which you mean reordering transactions in the order by which they go to miners and are processed by miners.

• 1:08:12Ryan Sean Adams?

  Yeah, basically, the value of that, the value of being able to kind of slip your order or order the transactions in some way, whatever the economic value of that is, that that would be the MEV portion of like ordering a block, right? And this is where you see, you know, Ethereum make generate revenue like this. Layer two is generate revenue through through block ordering, also Solana. So the interesting thing about this is, of course, like this is why MEV is such an intense area of focus, particularly in crypto and for blockchains is because in crypto, obviously, because these networks are decentralized, we're trying to solve MEV type problems at the protocol level

• 1:08:53Ryan Sean Adams?

  rather than rely on kind of like the legality of a nation state. Otherwise, you start to lose the the whole decentralization aspect. And why MEV has been such a thorny problem and why people at the Ethereum Foundation and other, you know, other researchers really are honing in on it. So I guess that's TBD whether we solve it or not in crypto at the various blockchain level.

• 1:09:18Speaker 00

  I mean, I think that, yeah, one interesting thing, there is, yeah, I don't think MEV has a real analog, but.

• 1:09:28Speaker 00

  There is a rule called Reg NMS in traditional financial markets, in the securities markets. It's called Rule National Market System. And basically, what it does is it governs the prices that assets are executed at in a multi-exchange, multi-market center setting. So, you know, back in the day, and there were multiple exchanges, right? You'd have exchanges in Chicago, Boston, New York, and they'd all be trading the same things. And then all of these off-exchange venues and dark pools started being created, where you can have like, order flow that doesn't even make it to the exchange.

• 1:10:14Speaker 00

  And then the question is like, what governs what price orders in the dark pool get executed at? Is it just like, the best efforts of the administrator of the dark pool? And maybe in some cases, if the people that are putting their orders in there aren't sophisticated, they could get taken advantage of, right? So that was the principle. So Reg NMS made it so that any orders that are executed off-exchange, and there's a few caveats, but the basic idea is off-exchange orders have to be executed at the best price across all of the exchanges, or better. And so all this infrastructure, like the consolidated tape was created to create a benchmark.

• 1:10:56Speaker 00

  And if you're trading off-exchange, you have to sort of like, improve upon the best listed price.

• 1:11:05Ryan Sean Adams?

  See if we can solve this without regulation, but it's still an issue for crypto. Vlad, I want to ask you about kind of the cycle that you're seeing right now. Obviously, we've had a weird week with respect to like, different macro events. It's definitely been up and down this week. Some have said this is going to be an institutional-led cycle, at least for crypto. And I'm wondering what you kind of see. Of course, we have the Ethereum ETF. Institutional flows seem very strong. I've seen some of the earnings reports for Coinbase, for instance, and it's kind of institution-led. What's your take on this? Is retail here yet, at least like, in crypto? I'm sure they haven't left with respect to equities. It's a lot different this time around than it was in 2021, last bull cycle that we saw where we had stimulus checks.

• 1:11:51Ryan Sean Adams?

  It was, you know, very retail-led. Is this different?

• 1:11:54Speaker 00

  Yeah, I think it mirrors that of equities somewhat in the sense that if prices are going up, you have a lot of casual investors that reengage with the asset class. And you saw that happening in the first quarter of this year. You know, prices went up, lots and lots of people came back and started trading crypto. A lot of those folks that are kind of like gone away in 2022 and 23. And you saw that in Robin Hood's monthly active users, for example. A lot of crypto people came back. Crypto volumes and revenues went up quite a bit.

• 1:12:35Speaker 00

  Then you see this contingent of active traders and they tend to trade more sophisticated products. In crypto, it's like crypto futures and perpetual swaps outside of the US. That tends to be a little bit more resilient, but there's an analog to active traders for our traditional US assets like options. They tend to, you know, make money. They have strategies that can operate in every environment, even the ones where it's going sideways or going down. So those tend to be resilient. And then, you know, you have the institutional flows, which seems to be mainly Bitcoin and Ethereum ETFs were kind of the big thing there.

• 1:13:19Speaker 00

  And Bitcoin ETFs have amassed a lot of volume very, very quickly, very fast growing. Ethereum ETFs, a little bit less so, but you know, we're keeping our eyes open to that. I think so far in July and August, we've been seeing just very large volumes, 20% higher than what we've seen in June across the board.

• 1:13:45Speaker 00

  And August so far has been tremendous. Customers are buying the dip. The first week of August, we saw over a billion in net deposits with about half a billion just in this Monday alone. So retail seems to be buying the dip here across pretty much all asset classes.

• 1:14:07Ryan Sean Adams?

  That's cool. It took some courage to buy the dip, particularly this week. Vlad, this has been a pleasure. Maybe as we close things out, so David and I have the pleasure of the years to host many of the crypto exchange leaders, various CEOs and founders, some of which, by the way, are in jail right now, actually.

• 1:14:25Ryan Sean Adams?

  Others are still with us, fighting the fight.

• 1:14:28Speaker 00

  Wow.

• 1:14:29Ryan Sean Adams?

  And we asked them kind of this question of just like, why are you here? And what does the end game look like for your particular exchange? Let me ask you, like Vlad, what is Robin Hood here in crypto to do? And what does the end game look like? Say, five years from now, where does Robin Hood want to be with respect to crypto?

• 1:14:47Speaker 00

  I think that five to 10 years from now, we want to facilitate anyone, anywhere in the world, to buy and sell and hold any financial asset and perform any financial transaction. And we think that Robin Hood can provide great service, be the best place for our customers to do that. And I think crypto is going to be a huge part of that, not just as an asset, but more so as a fundamental technology shift.

• 1:15:20Ryan Sean Adams?

  Well, best of luck to you on that endeavor, Vlad. Certainly propagating crypto is aligned with the Bankless mission. So appreciate all the work that you're doing there. It's been a pleasure.

• 1:15:29Speaker 00

  Thanks, guys. Always happy to be here.

• 1:15:31Ryan Sean Adams?

  Got to let you know, of course, Bankless listener, none of this has been financial advice. You know crypto is risky. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.