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- [00:00]
A
I think if I talk about it enough, eventually it'll happen.
- [00:03]
B
It's called manifesting.
- [00:05]
A
One of the innovations is that the advisory fee as a percentage actually goes down as your assets go up. But the other reality is Millennials and Gen Z are going to inherit over 100 trillion in the great wealth transfer over the next few decades. This is going to be the largest transfer of assets in human history.
- [00:26]
B
I was already convinced that Robinhood was going to be the financial powerhouse of the future. And then I sat down with their CEO in person, Vlad Tenev at Bitcoin Las Vegas. And now I'm really convinced that Robinhood will be bigger than Charles Schwab, Morgan Stanley and Goldman Sachs combined. Wait until you hear about all the things they're building and have planned for the future and how deeply crypto and blockchain rails will be integrated. You cannot miss this conversation. If you're interested in just how important the future of crypto will be, let's do.
- [01:14]
A
So.
- [01:15]
B
Robinhood seems to be taking over the world. Every time I turn on the news or open my feed, you have some other huge announcement that seems to get lost among all the other huge announcements. So you've obviously become more than just an exchange. It seems you're now offering the full breadth of financial services. I've continued to say it looks like you're gonna be the Schwab of the future. So maybe talk about the strategic decisions that Robinhood has been making and the plans for expansion. Cause it really feels like you're offering everything.
- [01:46]
A
Yeah, the path from a pretty early point was to go beyond trading and to really be the place where our customers can buy, sell, or hold any financial asset or conduct any financial transaction through Robinhood. If I think about how we got there, I think we got there in a few steps. I think our first market was active trading. And the sort of like near term priority is to win the active trader market. So I like to think of that as almost our Tesla Roadster. So active trader market is pretty niche. You know, not everyone trades actively, but there's a relatively small and growing group of premium customers that trade a lot. And they push us to be at the frontier of technology and innovation in financial services. So I think that's been going well. I mean, we've been just roaring on the active trader front. We have a new desktop platform called Legend. We've been adding more crypto capabilities. We're doing prediction markets. We added futures. And you can think of this, for the business as fuel to help us pursue our other arcs. Which are longer term. And the second one is how do we be the place where we get full wallet share of our customers? So from, you know, your deposit into your bank account to all of your spending with the, with the card to your retirement and long term investments, we want to basically be the financial home for all of our customers. And then also we see an opportunity over the long run. And this is sort of our 10 year arc to go from US primary to global and from retail only to business and institutional. So it's a lot. But I think the challenge is like, how do we do these things in the right order so that we don't get indigestion from trying to consume too much and how can we do a really good job and pick the right opportunities at the right times?
- [03:57]
B
But that is truly the full suite of financial services. You're a bank now, right?
- [04:02]
A
We are offering banking products.
- [04:04]
B
Banking products.
- [04:05]
A
Not formally a bank, but we partner with a lot of great banks.
- [04:08]
B
Partnering with banks, Custodian.
- [04:11]
A
Yes.
- [04:12]
B
So it really is everything. How do you consider then each step as you just talked about, obviously you've dominated the trading market. I think everybody knows that. You mentioned all these other things that you're doing. But as you start to compete, or maybe even more appropriately, as your 25 year olds and 30 year olds become 40 and 50 year olds, how do you make sure that you're offering the product that they want so they stick with you forever?
- [04:37]
A
Yeah, I think that many different ways, your friend Rob Baldwin being one of them. Right. I think that there's a big emphasis on multi generational offerings right now. Our customer base, predominantly millennials and Gen Z. I think there's two things. One is we don't want to just get stuck with what worked for Millennials and become sort of like a company whose customers eventually age out and the company becomes irrelevant. I think you see that as the downside scenario for the legacy brokers. They were kind of like generationally stuck. But the other reality is Millennials and Gen Z are going to inherit over 100 trillion in the great wealth transfer over the next few decades. This is going to be the largest transfer of assets in human history. Nobody's really thinking about how to capture that by building a great experience, not just for your customers, but their parents and their children. Can we actually make an experience that gets better the more family members you have using Robinhood? I don't think anyone's actually building products with that goal in mind. I think we're relatively early. But when you see trade, pmr get integrated and some of the new products that we're designing come to market. I think it'll crystallize how much better financial services can be with the entire family in mind.
- [06:09]
B
Yeah, that makes perfect sense. And we're here at the Bitcoin conference, and your speech was largely about tokenization. So clearly that's a huge focus and something that you believe will be fundamental in the future for Robinhood. So how do you see tokenization playing out and how do you see incorporating it into Robinhood?
- [06:28]
A
I think if I talk about it enough, eventually it'll happen.
- [06:31]
B
It's called manifesting.
- [06:32]
A
Yeah, it's pretty amazing how that works. No, you've been hearing a lot about tokenization from me, also from some of our competitors. And I think that this year will be the first year where it'll just turn into real products that customers can use. And I think there's two benefits, really. One is in much like stablecoin is making it easier for people outside the US to to get exposure to US Dollars, tokenized securities will make it easier for people outside the US to get access to US Securities. Over the past few years, stablecoin transaction volumes have just skyrocketed overseas. And a lot of it is driven by people from developing countries whose currencies are losing value rapidly. So these types of folks used to hoard American Express travelers checks, right? They would just take their local currency, figure out whatever way they could to put it into dollars or dollar proxies. And so stablecoin has just kind of subsumed that hundreds of millions of people around the world have crypto wallets. They can already access exchanges. So when stablecoins actually made headway there, they were adopted very rapidly. So I think it's going to be huge for people outside the U.S. i think it's going to be great for companies to have access to this new, increasingly global pool of capital, and great for entrepreneurs. If we can make it easier for people to raise primary capital through crypto, it could unlock a ton of innovation in this country. So I think it's an important thing to pursue. I think it'll also do a lot to silence the skeptics. A lot of people think crypto is just bitcoin and memes, and those are powerful things. But I think it's also going to be incredibly powerful to unlock the technology and have it power more and more of traditional financial services. I think crypto securities are actually this big opportunity. I mean, multiple trillions, that's just in plain sight.
- [08:48]
B
So what does that look like for the end user on Robinhood, we start tokenizing US stocks. Tokenize Tesla, tokenize Amazon. Are they traded the same way that they would trade equities on the platform already? Is it a different platform? Does it completely replace trading the actual equities as they are now, or will everything be tokenized?
- [09:08]
A
Yeah, I mean, I don't want to get into too much detail before we announce any products, but I think the best products hide the complexities of the underlying technology until the point where you need them. So I think what tokenized products are going to look like is it's going to feel like trading stocks on Robinhood or crypto. Probably crypto is the more apt comparison. But you'll have the ability to self custody over time. And one thing that's very painful right now with a traditional brokerage account is if your broker has an issue, like if there's an outage or some kind of technology issue, you're stuck. And also if you want to move your assets to another broker, it's very painful. It takes multiple days, usually have to talk to someone on the phone and so you're kind of stuck again. And I run into lots of people. I mean, I had someone come up to me earlier and they were like, I've tried moving my assets to Robinhood and I just keep getting thwarted by paperwork and hassles and I gave up because it's so painful. But moving Bitcoin from one wallet to the other, fairly easy, even if it's a little expensive and time consuming. It's nothing like ACAD transfers between brokerage accounts. And I think in the future you could unlock the full potential of defi and self custody and you could actually be not reliant on a broker at all. Like your assets could be yours and you could plug them into defi protocols like you do with crypto tokens and just go from one brokerage app to the other seamlessly without actually moving assets at all. And I think that's pretty powerful.
- [11:02]
B
Will it be 24 7, 365?
- [11:05]
A
Yeah, I think that's. I mean blockchains all run 24 7, 365, so that's huge. Right now Robinhood equities in the US is 245 and it's almost there. But yeah, weekends and holidays are tough. It requires the DTCC to be open on holidays and weekends. So that's kind of the, the final frontier. But we saw how hard it is even to get to 24,5 in traditional equities. Yeah, the crypto Technology takes care of a lot of the heavy lifting for you.
- [11:43]
B
But is this a situation where the incumbents like the DTCC incorporate the technology or do they get replaced or do they fight like hell to make sure that there's not 24, 7, 365 markets?
- [11:56]
A
Yeah, it's unclear how it plays out with the incumbents. I mean, I know that they've been exploring and doing various pilots with blockchain technology for many, many years. But yeah, it's unclear. I think that they'll have some role obviously. But yeah, all of this is sort of hypothetical because we don't have real product in customers hands, but I think that'll come.
- [12:21]
B
So one of your recent pieces of news was the acquisition of WonderFi in Canada, which crypto people. We all looked at that and said Robinhood's leading with crypto into Canada. Right. Crypto first tip of the spear. Is that reflective of how you'll approach entering new markets generally? Was that just a good deal to do in that case? How do you enter new regulatory arenas, new countries and decide what products you're going to lead with, what you can even allow those customers to do?
- [12:56]
A
We've done both. So in the uk, we're live with brokerage, but not crypto yet, even though we obviously came into an agreement to acquire bitstamp. So once that closes, bitstamp has crypto in the uk, so we'll offer that through the family of companies. In the eu we have crypto, so we want crypto first there. Singapore. We've announced that Singapore is going to be our APAC headquarters. So we're going to serve a large part of Asia from there and then we'll continue to expand. So I think it just depends on what's going on in each market. And right now those teams can run independently. So if the crypto team decides that going, going into a jurisdiction makes sense, you know, they have the autonomy to do that and brokerage is very much the same way. And then we'll, we'll have to figure out how to reconcile at some point. Like we probably wouldn't be offering. Yeah, you know, tokenized stocks and traditional stocks simultaneously in a region. But yeah, we're, we're still, we're still not doing that yet.
- [14:09]
B
So yeah, our acquisitions generally the least friction, the easiest way to go into a new market like that, where they've already gotten all of the licenses and where everything's already in place. So you don't have to basically reinvent the wheel when you go there.
- [14:23]
A
Well, actually, thus far We've only gone organically international, tbd. I think we're employing both. But yeah, it's still very early for us as an acquirer. You know, Bitstamp hasn't closed yet. WonderFi obviously was recently announced. So we're very optimistic. I mean, we like the teams and they have established businesses, but I'd say generally we are a build first company. Like we prefer to have one unified platform that we expand and we kind of acquire things that are spokes rather than the hub. But if we see a great team and a great product that could work well with what we have, then we've been active with acquisitions as well.
- [15:13]
B
Case by case basis. Exactly. Every territory is completely different.
- [15:18]
A
Yeah. I think the things that we really look at for acquisition are is it a great team that matches our DNA? Can it accelerate what we're doing by 18, 24 months? Plus if we find the combination of those two things, we get very, very excited.
- [15:34]
B
Yeah. And so as you enter all of these, let me just frame it this way right now. What percentage of your business would you say is crypto? I mean, I'm assuming, you know, and have you seen that generally rise and which customers are the most interested in your crypto services?
- [15:52]
A
Yeah, I mean, a significant portion of our business is crypto, definitely double digit percent and in quarters like Q4 and to some extent Q1, it's a larger percentage. If the crypto market is really moving, active traders tend to come in and do a lot of crypto trading. And that's reflected in the crypto transaction revenues going up by 100% year over year. But the business is diversifying and crypto revenue itself would also diversify over time. I think we see it going from more transaction based to interest on crypto as the service expands. So I think within crypto it'll start looking like the broader Robinhood business, which used to be almost entirely transaction, but over time has gotten to like 50, 50 transaction, net interest and subscription.
- [16:55]
B
So transitioning from purely trading to that full breadth of financial services. But on crypto on Robinhood.
- [17:02]
A
Yeah, yeah. And you know, we still have a large traditional business as well. So I think that over time I think crypto technology will just subsume more and more, but I think that might take some time. So I think there will be multiple systems and multiple standards for at least the next five to ten years.
- [17:26]
B
Are we at a point where the crypto that you hold, crypto adjacent stocks, all of your normal stocks are in a single portfolio that you can take loans against and basically Treat as one holistic portfolio. Can that be done on Robinhood yet?
- [17:43]
A
To some extent, yes. I think crypto, spot, crypto and equities and also futures, where you can get exposure to crypto as well through crypto futures. Yeah, I think the interoperability is still not completely seamless. And part of that is regulatory. There's not yet a clean way to take leverage against your spot crypto and use it on brokerage. But I think over time that'll become easier. And you could do that with the Bitcoin ETFs. We have options on crypto ETFs as well. So we just want to give customers all of the choices they want to manage their crypto at this point.
- [18:30]
B
What are the most exciting products to you that you're launching or that you have? What's coming next?
- [18:36]
A
Well, we just had our Gold event in San Francisco, and there we announced some pretty awesome things. So Robinhood Strategies, which is our digital advice offering, basically this is as close to a invest button as it gets. You just put money in and our system will automatically manage your money at very low cost. And in fact, one of the innovations is that the advisory fee as a percentage actually goes down as your assets go up. So above $100,000, you don't pay any incremental advisor fee. For every additional dollar managed, it caps out at 250amonth. So I think it's a service that's going to get better and more compelling the more money you have with it, which is very exciting for us. Most financial services get worse the more money you have, gets more expensive, you pay more for the same service. But we wanted to kind of invert that. Robinhood Cortex, which is our AI, our first suite of AI products, which helps customers with very, very specific trading needs that they have. That's exciting. And then of course, Robinhood Banking, which is a premium, almost private banking service, but available to all of our Gold members. So as those rollout, I think those are going to surprise a lot of people. And then we also have our crypto event in France in June where we're going to unveil some new products.
- [20:09]
B
I know we're about to wrap and we're running out of time. What's the timeline, do you think, for the tokenization process that you discussed?
- [20:17]
A
I think that tokenization. I think it's time that you're going to start seeing some real products. And I don't mean just Robinhood, but I think we've been doing a lot of talking about tokenization as an industry and now it's time to get some products into customers hands.
- [20:35]
B
Well, I can't wait to see what you guys do next, man. Thank you so much.
- [20:38]
A
Thanks.
- [20:39]
B
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