← The Wolf Of All Streets
The Wolf Of All Streets
“Everything You Know About Bitcoin Is About to Change” | Johann Kerbrat At RobinHood
00:53:34
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- [00:00]
A
Bitcoin trading 24. Seven tokenized stocks. Instant settlement. The next financial system is being built right now and Robinhood wants to run it. Today I'm joined by Johan Kerbrat, general manager of Robinhood Crypto, to discuss how one of America's biggest trading platforms is quietly preparing to replace Wall Street's broken.
- [00:19]
B
Plumbing with blockchain rails.
- [00:21]
A
We dive deep into tokenization, the future of StableCoins under the Genius act, and why the US is falling behind Europe's MICA regulation.
- [00:28]
C
You also have to look at the current state of things in the us you have a very fragmented system where you have different regulators in different states, you need different licenses. We can launch XYZ in one state, but not on the other states.
- [00:41]
A
Johan also opens up about Robinhood's expansion into crypto yield staking and prediction markets.
- [00:47]
C
Right now everyone is talking about AI taking your job. And so if you're a trader, the only way for you to hedge against that is to buy Nvidia or AMD or one of these like AI first stock. But you also have a lot of issues that can happen there. Your edge against AI depends on so many factors that are not in your control, but you could actually buy instead contract around the future of AI, which is a lot simpler for you to understand and a lot simpler for you to control.
- [01:13]
A
And why he believes the four year Bitcoin cycle is officially dead.
- [01:18]
C
I already believe in it at this point, especially for Bitcoin, with the liquidity that there is, I think it's hard to say that it's not on a maturing asset class.
- [01:26]
A
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- [02:55]
B
I think everybody in their crypto journey, at least if they get the luxury of experiencing a bull market, has this experience where you buy a little bit of crypto and then it goes up and it accidentally becomes a disproportionate part of your portfolio and then you don't really know what to do with it. I feel like that's been the same trajectory for crypto at Robinhood, as you guys dabbled a little bit and you got your feet wet and then it became this massive part of your business.
- [03:19]
C
Yeah, I mean, I think it's true in a way. I think the really cool fact about Robin crypto was that it was launching in 2018, in the first quarter of 2018, so right in the crypto winter. So when all the competitors were actually shutting down their crypto product, Robinhood decided to double down on it. So I think that's a cool fact that I like to tell because I think it's really important in the crypto cycles to actually invest in building the tools when it's a bit more of a calm market. That way that when the market is heating up again, you're ready and you have all the products that your customer wants. So definitely happy with the way that Robin has grown in the crypto space and there is still so much to do.
- [04:07]
B
It's funny because that's what I hear from the founders of basically every platform and protocol in crypto, that they love the bear market because things slow down and they can actually build and they're not not answering for price every day.
- [04:19]
C
Yeah, that's true too. But I think for us, it's also like, we think that the way crypto will be in five, 10 years, basically replacing the financial system, it's going to be very difficult to just focus on some crypto assets or what do we list next? Or this kind of thing. So for us, we try to make sure that we have part of our brain that are focused on the day to day, like the trading of assets and feeling like that. And there's also a big part of our teams focusing on the longer term projects like tokenization and projects like that.
- [04:59]
B
Perfect segue, because that's what I was going to ask about next. That's obviously been a major focus. You and Vlad both have been very outspoken about the future of markets and how tokenization will play a role. So, I mean, maybe set the table with how you think tokenization in general is going to look and how we're going to evolve towards that, but then more specifically how Robinhood prepares for that.
- [05:21]
C
Yeah, so the TLDR is really, we think that the current traditional system for the financial assets has not really evolved since the 80s. A lot of the systems that were built to run exchanges and market makers and everything is kind of like stuck in these old ways. And so we really think that we need to evolve into a different world where everything is 24 7, everything is instant. And currently, for example, many market makers or many exchanges actually shut down at least once a day. And it's not really a problem because the market is not open 24 7. But the way that crypto is trading is 247 since the beginning. You can buy any assets on a Saturday, at any time of the day. And that's how people want to work with finance. You know, at this point in the world, like on Friday night, you can have a tweet, you can have, you know, something happening, you can have a environment crisis, you can have something happening between countries. All of it can happen on a weekend. And so the market is only opening on the next Monday. And it creates all these problems for customers. So we're really excited about this aspect, like, you know, being able to offer 24 7, being able to offer instant settlement, being able to transfer between brokerage the same hour, you know, without waiting like days like it currently is. And we think that it's going to make the customer, you know, owning their finance even more. They will be able to decide where they want their finance to be. They will be able to save on capital because they don't have to wait multiple days before trade sale and all these kind of things. So we're really excited about the vision of tokenization and how Robinhood has started to think about it is we are really good at equities. We know how to be a brokerage for millions of customers. And so we want to bring the US stocks and ETFs on chain. And so that's what we did in the eu. We have about a thousand tokenized assets, we call them stock token. And they basically give you the representation of the US stocks or etf. But that's just the beginning. I think, you know, in the future you will see tokenization for private equity, for real estate, for arts, for Basically anything that can be traded.
- [07:56]
B
So it sounds like there's two systems in play and you can only account for one of them at the moment. So you can control what you can control, which is actively tokenizing certain assets. And I assume you custody the asset behind it and you allow the trading for that. But that doesn't speak for the system itself. Going on to blockchain rails. Right. We've heard Paul Atkins, the chairman of the sec, talk about this happening. We've seen government officials all over the United States actually saying that, you know, we're going to be utilizing blockchain rails. So how do you sort of handicap that? Right, because that's going to require some legislation, regulation, a fundamental change in the plumbing of markets. And when that switches, you won't need to be tokenizing them anymore because it'll be on those rails. Right.
- [08:36]
C
And if that's the case, that's amazing. I think for us, the idea of tokenizing the assets is really to solve a problem that exists today, if tomorrow, all the exchanges and all the systems, all using the blockchain technology, and we can plug into it in a way that is open to all the participants. I think that's a great story. But the reality is that the technology is so big, it's not just about plugging to the exchanges. It's also going to be about plugging lending pool, for example, if you want to be able to lend your Tesla or Microsoft stocks, it's about being able to borrow or get a line of credit in ways that are a lot more flexible and a lot more automated. Right now, if you want to get a loan or if you want to get a mortgage using some of your assets, it's a fairly complicated process. You have a lot of people that are going to look into your accounts that are going to underwrite things. But all of this could be a lot more automated if the information was accessible and verifiable. And there is no way for you to say you have a million Tesla stocks if you only have five. And so I think that's where we need the technology to advance. And Robinhood itself, we are extremely good at connecting to multiple market makers or multiple exchanges. We've done it since the creation of the company. The only reason why we decided to move on the tokenization is because we saw that nothing was really moving. If you think about it, before Vlad started to talk about tokenization, really nothing was really happening in the US or in the eu. And so it's our way to push the industry forward. And if everybody is using it. I think it really just grows a pie for everyone. You will be able to change brokerage just in five seconds because you will be able to transfer the same way you're transferring your crypto assets. And so it just creates a lot more competition. Instead of being stuck at your current brokerage because you don't really want to do this process of transferring, you will be able to do it in five seconds. So it creates more competition. So I think it's better for the customer. At the end of the day, I.
- [10:43]
B
Think about what this means for the multi chain world and the technology as it exists now. How will we know if that's going to be on Solana or Ethereum or private blockchains or something that hasn't even been invented yet? Is it going to be on Robinhood chain? Is it going to be on SEC chain? I have no idea. Right. Or the DTCC or Citadel or something? I've got to imagine that's pretty far out.
- [11:04]
C
Yeah, I mean, I think one thing I say often is that crypto was made by engineer for engineer. And so you have this reflex to be like, okay, what is the chain behind it and what is the protocol and is it going to be proof of stake or proof of work or whatever? At the end of the day I think a lot of people don't really care about that. They want to be able to buy their Tesla stock or their Microsoft stock on Saturday at noon. They don't really care if it's happening on Solana or on Arbitrum or on Robin Chain or what have you. And so I think that's where we focus the most on the reality is that you're going to have thousands of chains. I think every single company is going to want to create some level of chain for their own systems or they are going to partner with somebody, but it's the role of the distributor, like the Robinhood for example, for us to aggregate all this chain and make it super simple and easy for your customer to just trade. And they don't necessarily need to know what's happening behind the same way that you know when you text your friend, you don't really know what is the protocol behind it. Maybe you do, but most people don't do.
- [12:09]
B
I take no insult to that.
- [12:13]
C
So you send your text, you know your friend receives it and that's it, that's all you want to do. And I think that's what we focus on the most. If you look at our tokenized assets that we launch in the eu when you Buy a share of stock tokens of Microsoft. You don't even know that crypto is behind the scene. What we did, we actually put a pill at the top saying, like, it's a token to make sure that people are aware of it. But the flow looks very much the same as the US one. And that was made on purpose because we want to remove this complexity. You don't need to focus about gas fees, about custody, private key, whatever. It's all about getting the benefits of the technology, but without having to actually worry about any of the complexity of crypto.
- [12:58]
B
Interesting. I'm thinking back to when Robinhood started offering crypto and then had the wallet, but then there was no send function and then you eventually added that. I actually, I think I, Vlad and I had the first conversation about that when it launched. Do you get those kind of, you know, criticisms anymore? Do you hear from that side of the crypto world, self custody and all of that, or is it become, I guess, mainstream and trusted enough that now you're focused on different kinds of problems? Because I remember not even exclusive to Robinhood, but that's all anyone talked about when exchanges first started bringing these things on.
- [13:37]
C
Yeah, I mean, look, I remember also when I joined Robinhood, it was, it was before the transfer functionality. So all we were being asked was to build deposit and withdrawal. And at the time there was like all this crazy story about Robinhood not holding the crypto and everything, and very glad that it's passed us. But I think, you know, at the same time it was a real criticism, like we were missing this functionality and it's a key feature for a lot of our customers. Like we see tens of millions every day being transferred on the platform back and forth. Some people use Robino to, to buy their assets and transfer to their own wallet and you know, do things on Defi and you have the, the other side of the, of the coin, I guess. And you know, we still have a lot of features that we, we haven't fully launched yet. For example, staking is live in the U.S. but not in, in five states. And so it's our role as one of the largest crypto platform in the US to keep building and making sure that what we build is what the customer wants. And I think that's one thing that we really focus on. We have this mental model that the customer needs to be at the center of everything we do. And before we launch products, for example, we will spend time with customer, we'll test how they react to the product. Do they understand what they are doing. Are they confused by one step of the flow or something like this. And based on that, we'll go back to our design team and our engineering team and we'll make change until we feel like the customers are really happy with the product. And there's still many features that people asking and I don't know if it will ever be done. I think it's a great thing to have your customers so engaged that when we see them in the streets or when they're on Twitter, they are asking us to build more things.
- [15:38]
B
It's crazy to me that in 2025 we're still having the same conversations. This is not about Robinhood, just in general in crypto, about UX and UI. I remember having these conversations in 2017, 2018, that once we abstracted away all the complexity and we weren't talking about private keys and grandma didn't need to know how to use MetaMask. Right. And we still haven't accomplished that. I think at the level that needs to be for mainstream adoption, I think stablecoins are probably the best example. Even the fact that we talk about what chain a stablecoin is on, which stablecoin it is, means that we're nowhere close, in my humble opinion. I think people, as you've said, just want to move USD. They shouldn't even know it's a crypto rail. They shouldn't know which stablecoin, they shouldn't know which chain. They should just go on some platform and send a dollar and whatever plumbing happens, it arrives.
- [16:26]
C
Yeah. And to be honest, I think the day that you stop saying it's a stablecoin, that's the day that you think there is full adoption. And I think you're completely right. I think we're far from that. But, you know, at the same time, I think it's, it's also happening. And we are just, you know, sometimes I feel like we, we need to look back and see how far we've come. At the same time, you can go in some countries in Latam or in Africa, where they will actually prefer that you send them a stable coin versus giving them cash because they cannot verify the cash. But in the US we also have a very good system in place. You can use your credit card. You go anywhere in the country, you tap your credit card and you paid. You don't even really have limits. I'm in Europe right now. I tried to tap my credit card and there was a €25 limit. And I was like, wow, that's pretty intense. But in the US it is also that, that you need to compare to when people were thinking that crypto will replace the payment system. Well, okay, but which one is it going to replace when you can go anywhere with just a credit card currently? So I think it's going to take still some time. The UX is still so much better right now than it was, I don't know, like five years ago even. But there is still a lot of complexity. You want to lend money, you have the choice between 20 different pools with different APY. There is different systems, they all have crazy names. So I think we can still do a lot more there.
- [18:03]
B
How much has the Genius act or proliferation of stablecoins affected your business? How do you think about stablecoins specifically at Robinhood knowing that they're just continuing to grow?
- [18:15]
C
Yeah, I mean it's something that we've been using in the back of our business for a very long time. So Robinhood settled with market makers and liquidity provider using Stable for example. And, and that's something that is very important for us because like I said earlier, Crypto is a 24. 7 business. And so for us it's really important to use 24.7rails. Otherwise you have a problem if you have to wait two or three days during a long weekend. And so for us using STBIL was kind of a necessity and slowly we realized that it was better for a lot of systems. So we started to use it more and more. We also have it available on the platform and it's something that, you know, for example, people can buy USDC on the platform one to one, we don't charge any fees. And we're also part of the global dollar network which is issuing usdg. And it's, it's basically a stable coin that is more fair in the sense that it redistribute all the revenue of the stable to the partners and the people contributing to the, to the stable. And so we think that it's going to be something that we are going to invest more and more. And we were waiting on the Genius act and the actual application of the Genius act to, to come into fruition before we can really move a lot of products into usdg. But I think the other aspect of it was really the impact of Genius overall on the industry. Like I think, you know, it kind of created a, a way for, for companies to start thinking about okay, a stablecoin is legitimate, we can actually use it. And so you're starting to see a lot of banks and a lot of big Institutions starting to look into it. And I think that's what really needs to happen for crypto as a whole is the more institution and big companies and others are starting to think about crypto, the bigger the pie and the bigger the interaction you can have between systems. And so I think that's really something that we need to cultivate as an industry.
- [20:19]
B
Yeah, I think you're right. I think it just gave the industry a stamp of approval and some legitimacy that maybe it was lacking before. But interestingly, now we look to the Clarity act for the next stamp of approval and legitimacy. It's like this never ending process of trying to get more and more clarity, no pun intended. A lot of people think though that if we do get the Clarity act, which seemed like a foregone conclusion before, but now obviously we're at the end of the year and haven't seen much movement, that that could be sort of the next catalyst for the industry. I don't know for price or not, but certainly for legitimacy and for builders.
- [20:51]
C
I think it will just simplify things so much. I mean, and maybe it's pretty hard for me to say that regulation are going to create simplicity, but you also have to look at the current state of things. In the US you have a very fragmented system where you have different regulators in different states, you need different licenses, you can offer different products based on the states. And so right now, even for us at Robin, we create a very complicated product where we can launch XYZ in one state but not on the other states. And so sometimes we have people asking us like, hey, why is Robinhood not doing xyz? And we're like, well, we would like to, but we can't. So I think having one federal level for the role is going to really simplify things for the businesses. Bring clarity to your point on the pond to a lot of companies on what can they do, what can they not do? How do they issue an asset, how do they use the assets, what. So I just think it's much needed at this point. It's been too long that we are having this mess in the back and forth with hard regulator or not hard regulator. And frankly, it's becoming a bit embarrassing to see that in the eu, for example, they have a framework already in place that a lot of companies currently have a license. For example, Robinhood has a MICA license. And the US is still trying to define the Clarity Act. So I think the day that it passes, it's going to be a big day for the industry. Not necessarily about the prices. But about what can people do and start building again in a way that is constructive for the industry and constructive for the country as well?
- [22:39]
B
I'm a glass half full kind of guy, but let's empty the glass halfway and say they don't pass it, right? Let's say that we get into midterms, we don't really just get it done in time and then, you know, one of the houses switches and we get utter gridlock and an anti crypto army back. I mean, it's possible, right? I mean, we, I don't think we should take this Goldilocks period for granted. Does that affect your roadmap at all? It seems like you guys have just continued to build regardless of who's in power and where. But it would suck to build something and have it become regulated out of legality in some way.
- [23:15]
C
I mean, look, we took a very conservative approach in a lot of ways for a long time, and we've been able to work with all the regulator during multiple administration. And I think that's the strength of Robinhood is, you know, we, no matter where the administration was, we build our products and we know how to work with regulators. We, we have many licenses on the brokerage side, on the crypto side, we have international licenses. We know what to do. So I think it's not going to be the end of the world for us. We are just going to continue building with the restriction. But like I said, it's going to be a bit more painful in the sense of you have the state problem where you have different products. And to your point, you may not be able to build some features that are a bit more decentralized in their core. But I absolutely wish that we find a way, even if the house flip, even if everything that you mentioned, we need to find a way to create a safe framework for crypto companies to execute on. Right now, if you look at the previous administration, all the founders were actually moving out of the U.S. yeah, they were. And that's a really sad situation, right? Like as a European, you can hear the accent. I actually moved into the US Because I was inspired by how quickly the US were moving and building on new technologies and on crypto. It was the opposite. People were flying back either to Europe or to Asia. So I think it's something that, you know, it will be really sad for the country to go back to. And so I just hope we can get all the parties to talk to each other, talk to experts in the industry. Like, we do spend a lot of time Doing outreach and, you know, if anyone wants to try to understand what is defi. What is crypto? Why do we care about crypto? You know, I think people should learn and then they can decide to pass a regulation. But sometimes I feel like sometimes people are voting on problems without necessarily knowing the. The underlying problems.
- [25:29]
B
Want to go back to tokenization for a second? I'm thinking about it. I don't think any platform in history exposed the problems with T +2 and T +1 settlement or any of that. Then Robinhood during the GameStop fiasco, right? I mean, you guys literally had people putting in billions and billions of dollars, dollars of orders and you somehow had to front the cash because the system's so slow and broken. Right? So nobody, I think, has felt the pain points probably more than your company and wants to see a more efficient market. Right? I mean, you just exposed how big of a problem this is not specific to Robinhood for any platform for the system for settlement. I mean, you shouldn't have to wait days to own something that you bought. The intermediary shouldn't have to front the cash. I mean, it's insane when you think about it.
- [26:14]
C
No, absolutely. And I think it's not just about Robin on this one, but any major liquidity provider or hedge funds or anyone holding this type of assets, they're also losing on the capital that is locked, for example, for three days between the moment where you made the trade to the moment it actually settled, and then the cash settles. And so for that time you cannot actually do anything else. So you have platform like Robinhood where we, you know, give you instant if you're eligible and everything and you're able to sell and right away buy something else. But if you're moving a lot of money or if you're doing a large investment, you're not necessarily able to do that. And so I think the instance element is going to be a key situation where it can really solve a lot of problems. So a lot of people that are against tokenization or against this argument are saying like, well, not everyone wants to have instance element because they want to have time, they want to do net trading and all these kind of things, which is a fair point. But at least you have the choice and you can decide with your counterpart or your partner what to settle and when, which give you the optionality. Right? Now, to your point, we don't even have this optionality. It's at least T plus one. And so, yeah, it was a pretty fun moment when the SEC moved from T plus 2 to T plus 1 and everyone was celebrating, which I think was a great step forward. But everyone in crypto we went from.
- [27:49]
B
Like 1750 to 1895.
- [27:51]
C
Exactly. So I think it's something that the 24, 7 aspect instance elements and the way that you can have also fractionalization by default is going to be a key element for, for, for a lot of people.
- [28:08]
B
Yeah. So outside of tokenization, seems like Robin Hood is trying to be the everything platform obviously, right? Crypto and beyond, I mean from banking services to custody to yield to literally everything. Right. You want somebody to go to that one place and be able to do the breath of financial services without ever having to leave. So you're on the crypto side, obviously. So as you're planning now beyond the tokenization side, what else is like heavily in your focus on the roadmap or what could potentially come next towards achieving that vision?
- [28:40]
C
Yeah, so, you know, advanced trading for us has been a big focus. We, we want to make sure that any type of customer can use a platform for, for a long time, you know, I think people were seeing Robinhood crypto as kind of a simple platform just to buy a little bitcoin or Ethereum and you know, move on. But since then we added a lot of assets, we added a lot of feature like staking, we changed our fee structure. So we offer our new product called Smart Exchange Routing with volume tier and so you can pay as low as 3 basis points based on your volume. And so all of these things are kind of helping us bring more and more advanced traders. But at the same time we're getting the feedback that the UI and the UX were not targeting them enough. And the mobile app was too simple. You could not see enough charts and detail on the charts. So we also built an advanced platform called Robinhood Legend, which is a pretty nice web app interface where you can see all the charts, you can create tens of indicator on all the charts and kind of create even custom ones. So basically we are trying to make sure that we have all the products for all type of customers. And the next step for us is also the international expansion. So we launched in the eu. We also acquired an exchange called bitstamp that is in different places in the world, including Singapore.
- [30:12]
B
Every crypto guy knows bitstamp, man. The good Bitcoin are the bitstamp Bitcoin, those are the good ones.
- [30:19]
C
Historically it was, I mean I lost my litecoin that I had on Mongog. So on bitstamp I didn't have any.
- [30:26]
B
Issues yeah, see, you've been around a.
- [30:28]
C
While, but yeah, actually I think bitstamp was even created before Robin, which is pretty fun. So I think for us, that's kind of the idea. The international expansion is going to be a pretty key component. For a long time we focused on the US but the type of product that we build and the scale that we're able to manage can scale to a lot of countries internationally.
- [30:54]
B
Yeah, that makes sense. I mean, am I correct in the assessment that Robinhood is trying to offer the full breadth of financial services? I don't want to take for granted that, but I know, like, I know that I think I once incorrectly said this to Vlad. I was like, you're becoming a bank. And he was like, no, we're partnering with a bank. You know, I don't know how what the vernacular is, but obviously you want to be able to provide banking services. You want to do it all.
- [31:15]
C
Yeah, I mean, look, I think there's a lot of values for having a lot of products within the same app. You can, for example, transfer right away between platform. So one of the big advantages we have is that you can sell your Microsoft share and buy Bitcoin in the same minute on your phone. And I think for a lot of the products that we are building, we're having still this customer centric mental model that I was talking about where we're really focusing about what other problems and what can we bring on the table that will really solve the problems. And we launched the credit cards, for example, that, you know, at the beginning it's not on my group, but at the beginning when we talked about launching a credit card, I was like, oh my God, another credit card. Like, what are we going to bring on the table? And actually with this 3% cashback that we get, I slowly started to only use the rarity card. And now it's the only card that I carry on my wallet, just because I don't have to focus about, oh, I'm going to restaurants, I'm going to use this card and then I'm buying a train ticket, so I'm using this card and blah, blah, blah. And then we also focused a lot on the UI and ux. So for example, you don't have the credit card number on the card, so you have to go on the app. You can create virtual cards in one tab. And it's just light years away from what we see in different banks or the different cards that I used to have. And so the idea is the same for banking. We want to Create the experience that you have if you go to a private bank, even if you don't have the type of net worth that you need to get there. And I think the team that are working on all these projects are pretty special because they're able to make you feel like you're an important customer without necessarily being one of these multimillionaires that, that exist. So I don't know if the idea is to be the app for everything everything, but I think the idea is to be the app that will solve your financial problems and really make you at the center of all of it and make sure that you get the most value for everything that you're doing with your finances.
- [33:26]
B
Sounds like crypto should be at the center of that.
- [33:28]
C
Definitely.
- [33:31]
B
Do a lot of things that nobody else can do. Right. It really is interesting. How do you guys frame then competition? I guess maybe you build kind of in a tunnel vision to some degree, right? You know, what people need and you build those things. But I think there was probably a point where people said, you know, Robinhood is only serving, you know, wide retail, but maybe not institutional clients or maybe not high net worth clients. And as you said, it was kind of basic crypto, not advanced crypto. So maybe you were kind of competing with Coinbase on one side and sort of with, you know, E Trade on the other side. But how do we take on Schwab JP Morgan?
- [34:09]
C
Yeah, I don't know if we have a strong focus on that, to be honest. I don't come up to my team on Monday morning being like, okay, this week we're going to try to extract as much customer from xyz. I think for us it's more like an output metric where, you know, if you want to know if you're doing a good job this year or this quarter, it's going to look, we are going to look at market share and we're going to see like, did people prefer to trade on one of our competing platform or did they prefer to trade on Robinhood? And that's to me, like the success metric. You know, if, if tomorrow we have a better market share than one of our competitor or we see progression, it means that we've been doing a good job and that the feature that we started to build were the one that our customer wanted or were missing. And that's why they were not using Robinhood. But I think, you know, at the end of the day, crypto is still a small, very, very small portion of the global equity market. And so I think for us it's more a question of like, how do we become number one on crypto trading? That's definitely like something that can be done with like some of the crypto features that we are working on and some of the new assets that we're listing and staking and all these things. But there's also this question of how do we use crypto for more of this financial system that we are building. And that I think is the more interesting part of the crypto adoption because the crypto market is still very small. So it should be less about how do I grab market share from Coinbase and more about how do I get Schwab and E Trades and other to also offer crypto. That way you have more people that are exposed to it. And what we see in general is that when people start playing with it, they start to be interested and then they start to actually care about it a lot more. So I think that's kind of more the thinking here.
- [36:04]
B
Right. You don't need to control the whole pie if the pie is ten times as big, basically, which I think that's a reasonable way to look at it. Especially if you truly have the thesis that this market's going to grow exponentially, as I think anyone here does.
- [36:19]
C
Exactly. And I think the aspect of how much of the financial system of tomorrow is going to use crypto rails is really interesting. How much right now of cash is being moved just using basic wire versus using stablecoin on blockchain? How much equity is being traded on tokens instead of using the classic DTC system? All these things are going to be interesting to see if the blockchain technology is already being adopted and not just used for short term investment.
- [36:53]
B
Is there any level at which you're concerned about Wall street and governments getting involved in this asset class?
- [37:00]
C
I mean, I think what's interesting is so far we've seen a lot of price realises, but when you actually go a bit deeper, it's a bit harder to actually get the facts, I guess. But I think at the end of the day we need all these people to plug into it. If you want deep liquidity, you will need at some point to have someone connected to Wall street or you will need Wall street to be connected directly. So either you pay a middleman or you can go directly on the exchange and I think it's going to be interesting. The other part that is interesting is that the crypto rails already existing and so they have to plug into something that already exists, which I think kind of limit damages that you know, the old institution can do.
- [37:51]
B
That. Makes sense. So we've seen some specific odd events in the crypto space over the past few months. You're an exchange, so maybe you have some insight or at least you can tell me what it looked like on, on your side. Obviously October 10th was this massive liquidation event.
- [38:06]
C
Yeah.
- [38:07]
B
Many will say triggered by Binance. Right. Obviously by automatic deleveraging and market makers having their basically positions closed when they weren't expecting to. And obviously, I mean from the numbers I saw as many as 1.1 million individual accounts liquidated. That's a lot of soldiers in a very small army of crypto traders in the world. Right. I assume Robinhood was largely unaffected by that. And so was that a function of leverage? Was that something to do with the way that the exchanges operated? Because I think it's fair to say that something like that is pretty devastating for certainly the trading and speculative side of the industry. I don't think it matters very much for guys buying ETFs and you know, people adopting blockchain rails. But I mean, how many crypto traders are in this world if a million of them lost their account in one day?
- [38:56]
C
Yeah, I mean, look, I think any of these incidents, I think is, is a damage to the industry. I think, you know, you've seen it with ftx, you've seen it with lending issues, you've seen it with binance in the U.S. when this happens, people start losing trust and they start to pull back and focus on another type of asset class and you know, they're like, okay, we'll come back to crypto when it's more mature. And so overall I never really get super excited when I hear about this type of news because to your point, creates damages and we're losing customers. On this specific issue, I think there is still a lot that has not been said. But to your point, it sounded like Price Oracle went wrong. The ADL started and exposed a bunch of position, but at the end of the day you also had a bunch of DEFI platform that were fairly unaffected. And us at Robinhood, we didn't really have an issue. But I think to your point, even on the ETF side it still impact people because suddenly the price moves and all the ETFs suddenly lost a lot of value just because something happened in a random exchange for a very specific product. So I just think sometimes it's one reminder for a lot of people that we need to build in a safe way and we need to make sure that we have redundancy in the systems and the, that when something goes down we're able to check on an alternate system. And overall I just hope that also kind of reduce the enthusiasm for some of these thousand x leverage platform that we've seen. That's pretty scary sometimes when you see them for coins that are not very liquidized or. And you're like, okay, that can really damage a lot of customers.
- [40:58]
B
So you're saying we're not getting 100x leverage on Robinhood anytime soon?
- [41:03]
C
Definitely not a thousand because I started 1000, but I think for us. So we launched 7x in the EU so you can see the spread is pretty wide and slowly we are going to increase it as much as it's permissible by the regulation. But I do think that some of these platforms that have very small liquidity, very small usage that are offering this crazy leverage are fairly dangerous for some traders. So you know, as always, I tell people to exert Swiss caution and trade, making sure that they can understand what's going on there.
- [41:41]
B
How much of that behavior do you, I guess right off the gambling or like get rich quick or do you think that any of it. I've been sort of kicking this theory around. Obviously you guys have launched prediction markets and that's the future. I think everybody agrees on that. But it also feels like everybody's urge to speculate on everything at this point is largely a function of their desperation in their everyday lives or inability to get ahead of inflation. All these things. I fully believe in predictive markets. I think they're great. I think people should be able to use their money however they want. I think it's just interesting that there was that much leverage from that many individuals in the system taking that large of bets. And I wonder what that tells us.
- [42:24]
C
Well, I think so on perpetuals to begin with. I think leverage is a great function to reduce your capital and reduce your cost of capital. So I think not everything is about gambling there. And for a lot of market makers and a lot of pro traders or advanced traders, it's more a way for them to actually optimize their trading. So I don't think it's necessarily a gambling kind of story there. Obviously the thousand X on small volatile assets, that's a different story.
- [43:01]
B
You mean fart coin on a thousand x leverages.
- [43:06]
C
I will not trade personally this one, but I think on prediction market, I think it's. It's such a different world that it really opens and I'm personally really excited about it. I think you can change so much the way that you're trading. For example, right now everyone is talking about AI taking your job and things like that. And so if you're a trader, the only way for you to hedge against that is to buy, I don't know, like Nvidia or AMD or one of these AI first stock. But you also have a lot of issues that can happen there, like maybe Nvidia is going to have a bad quarter or maybe AMD is going to, I don't know, have an issue or whatever. And so your edge against AI depends on so many factors that are not in your control. But you could actually buy instead a contract around AI, the future of AI, which is a lot simpler for you to understand, a lot simpler for you to control. And so I think it's really a key element that until now was available to a lot of hedge funds and very advanced traders that could do all the right position to hedge against particular events. But now it's accessible to everybody. And you've seen it during some of the big election, like the mayor election or the presidential election, the prediction markets were actually going in the right direction every time. And I think that's really an interesting point that shows that it's going to become a new ways of looking at the news, of following the actuality and what's going on in the world. So I'm particularly excited about it. But it's definitely a new world that opened to a lot of new doors.
- [44:54]
B
Yeah, you can gamble on tomorrow's weather. Definitely additive to 1000x leverage on FAR coin. I guess you can't gamble on the weather with a thousand x leverage though.
- [45:03]
C
Yeah, you can't do that. But even for that you can worry about the impact of the snow on the economy and based on that trade accordingly. So I think a lot of time we are joking about all these contracts, but you can actually find a lot of use cases that until now you could never do.
- [45:24]
B
Yeah, the great hedges. Yeah, it's an incredible way for the average person to hedge. I agree with that. I think predictive markets are incredible. I just wonder what like rampant speculation in general on everything tells us about maybe where we're at in the kind of grander environment. You know, those things usually are harbingers of bad things to come when everybody's gambling on everything. But I don't even think we're there yet. I think we're in the very, very early innings of people even figuring these things out for sure.
- [45:51]
C
And I think the interesting part is going to be the cross between all the financial instruments that you have. So for example, we already have people that are trading the ETF of Bitcoin and the underlying and they want to collect the premium. But I think with prediction market it also opens to a new type of cross trading. So I think overall it's an exciting development. My personal philosophy that we should have access to things and then we can decide with the right understanding and knowledge to not use it. Because to your point, I will not do a thousand x on Fatcoin. I don't think it's a proper investment for my profile, but I should have access to it if I wanted to. Because I don't understand why for so many things we limit what type of customer can access to what. Something that I complain quite often is the accredited investor role that basically limit who can invest in private equity. And based on some arbitrary rules that if you have a certain income or a million dollar in assets, you are able to now invest in private equity. In the EU they do something different where you have a knowledge assessment. So you will basically have a few questions.
- [47:12]
B
Like a test.
- [47:13]
C
Exactly. You say like okay, I understand that everything can go to zero, I understand what I'm doing, blah blah blah, and you have access to it. And so I think that's really important is we need to give education to people so that they understand their finance. It's so important, especially early on because you have to build for retirement and everything. And two, we need to give them access. So we are working on two. I hope we can figure out some of these rules that are limiting the customer also at some point.
- [47:44]
B
Yeah, at least it's being discussed now. I think there's a broad understanding that accredited investor rules in the United States are largely broken and we'll just see if they actually get changed. I know like with the, you know, 10ish minutes left, I want to talk about the market a bit because I know that you can watch earnings of any platform and know that you could probably just look at earnings and know how the market performed for the last three months. Right. Because either people are trading and there's high volume because they're excited or we're in a sideways or down period and nobody has money left and nothing's happening. So a, I guess where do you think we're at in this market? Do you kind of view the four year cycle as a meaningful thing or do you think, you know, we're not beholden to that anymore? But also then how does that affect, I guess Robinhood, when the market is just sideways and boring?
- [48:32]
C
I Think there's a combination. So if you had asked me 10 years ago where I thought bitcoin would be and we will be in the 90s, I will still be very happy.
- [48:43]
B
Go back two years and tell me you'd be unhappy with Bitcoin. Near $100,000 and I was probably not.
- [48:48]
C
Sold as much as I did in 2012 or 2013. But I think, you know, the interesting part here is that you see all these like issues. You know there was last weekend there was a hack on one of the largest South Korean exchange. There was also another hack on one of the defi contract. You also had the Japanese changes in their rates. So you know there's a lot of factor and I think people are just not really sure of are we done yet with all these like micro environments or micro impacts or are we still working on it? And so we definitely see that the markets are a bit hesitant and you see it with a price like it just bounce between resistance and support. But I think, you know, for us, like I was explaining earlier, like we, we focus mostly on building the tools for, for customers and so we have different segment of customers. The advanced traders are still trading because they don't really care necessarily where the price is going. It's more about doing, doing trades intraday or during a week or something like that. And then we have the, the customers that are a bit more long term that some are using the equation to buy the dip and some people are staying away because they don't know where it's going. And for us the goal is just to build the tools that they can use for all of that.
- [50:17]
B
So we're getting bitcoin to a million dollars by 2026. What's up?
- [50:23]
C
Like I said earlier, if I knew how to price bitcoin I would have not sold that much. I was, oh, I always jokes with people when they're asking me like, you know, what is the most stupid thing you bought with bitcoin? And I have one receipt for a domain name that I bought for like 80 bitcoin. And I'm like, you know, I could have done.
- [50:44]
B
Was it a good domain like McDonald's, Walmart?
- [50:48]
C
Not even. Not even. And you know, I started my career by doing payments. We were thinking that bitcoin would be the next network for payments. And so I would demo with like multiple bitcoin at a time to show people like hey, this is what you should do. And I'm sure most of his wallets have disappeared and people don't even know that it existed. So I'm definitely not the right person to give a price prediction on bitcoin.
- [51:14]
B
So not a million by 2020. We love a good price prediction though. But I'm assuming that you kind of view this as a maturing asset class and you're not that concerned with just because it's this time of year and this year that we now have to wait three years and go down 80%. I'm pretty detached from the four year cycle theory at this point.
- [51:37]
C
Yeah, I don't really believe in it at this point, especially for Bitcoin with the liquidity there is. I think the altcoin is more like where it is, in my opinion. Where.
- [51:49]
B
What a disaster, though. They never even got the upside of this cycle.
- [51:54]
C
And I think that also shows that the class is maturing a bit. But yeah, look at the situation. How many Bitcoin ETFs do we have at this point? Like 1112.
- [52:05]
B
Yeah. And they're the most successful ETF offerings in history. Right.
- [52:09]
C
So I think it's hard to say that it's not a maturing asset class. And if you think about it, you still have so many brokerage and so many platforms that you cannot access either the crypto assets or even the ETFs. So I think we still have a lot of room for crypto to become really mainstream and not just something that we talk between gigs.
- [52:32]
B
Anything I might have missed before I let you go? Anything you guys are excited about that I didn't ask about?
- [52:37]
C
No, I think that was it.
- [52:39]
B
That means we nailed it. We did a good job.
- [52:42]
C
You did a great job. And I said earlier, I love the suit.
- [52:47]
B
I'm trying to grow up with my audience. I guess it's a challenge. And just as an aside, obviously I've been very publicly using Robinhood alongside the arch public algorithms, and it's been an incredibly smooth experience, even with something that was largely experimental and outside of Robinhood's control. So it's been a great experience and it's been where I've been, just kind of slowly and methodically, dollar cost averaging. And it really is just an incredible platform.
- [53:15]
C
And we have a lot of new things coming up for the API, so hopefully soon you will be able to actually be happy with it and test even more features.
- [53:24]
B
Can't wait. Thank you so much, Johan. Appreciate it.
- [53:26]
C
Thank you. See you soon.