Tokenization has gained increasing traction in the financial services industry in recent years, but Vlad Tenev, CEO of Robinhood, believes this is just the tip of the iceberg.
Speaking at a crypto conference in Singapore, Tenev described tokenization as a “freight train” that will “eat the entire financial system.” He highlighted several forces driving this momentum, including the growing adoption of digital assets technologies in mainstream finance and greater regulatory clarity across many regions.
Tenev predicted that most major markets will establish some form of tokenization framework within the next five years, even if widespread adoption takes considerably longer.
“This is definitely where we’re headed,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “The CEO of Nasdaq recently shared similar comments. Live pilots already exist through Depository Trust & Clearing Corporation (DTCC), and they’ve been processing more than 100,000 equity transactions per day in parallel to the traditional system. Tokenized cash rails are gaining traction—stablecoins, tokenized deposits, etc.—but it’s not going to happen tomorrow.”
From an Innovation to the Norm
Although most real-world assets—from art to property deeds—can be tokenized, one of the most compelling applications is the tokenization of stocks and bonds. According to Tenev, tokenization has the potential to simplify trading so significantly that tokenized stocks could become the standard for trading U.S. stocks outside the United States.
These remarks come shortly after Robinhood’s launch of over 200 tokenized U.S. stocks to customers in the European Union. Interestingly, the shift toward tokenization followed the company’s decision to cease its crypto trading, once one of its core services.
The Ground Floor
Volatility is often associated with crypto and was one of the reasons the Robinhood moved on from crypto trading. With tokenization, however, Tenev believes he can bring Robinhood in on the ground floor of an emerging financial services innovation.
There has been significant institutional investment in tokenization over the past few years. Companies like Franklin Templeton and BlackRock have tokenized money market funds, reaching staggering valuations. BlackRock currently manages the largest tokenized private fund, with assets under management of roughly $2.5 billion.
Many of the largest financial institutions have either developed their own tokenization platforms or partnered with tech firms to build them. For example, JPMorgan Chase recently rebranded its blockchain-based platform—one of the first bank-owned blockchains—and broadened its focus to include more tokenization initiatives.
Both Chase and Citi have identified tokenized deposits as a key innovation in financial services. Citi even noted that while it had considered launching a stablecoin, it has been more active in tokenized deposits. The rationale is clear: tokenized deposits can provide real-time settlement and low fees similar to stablecoins, but within the safeguards of a regulated banking environment.
“I think tokenized deposits will be a big focus for financial institutions because private lending has grown immensely, just in the last year,” Hugentobler told PaymentsJournal. “More banks are putting assets like HELOCs and personal loans on chain, and it is much faster and more transparent for banks and consumers. It’s a trend that’s going to continue—companies are going to continue to put funds and assets on-chain.”
Developing the Standards
While tokenization does appear to be gaining momentum, Tenev noted that the U.S. will likely be among the last major economies to fully adopt it, given its already well-established financial infrastructure.
That said, several other considerations must be addressed before tokenization can become a mainstream part of everyday financial operations.
“Instant settlement will likely introduce greater liquidity needs, so infrastructure providers and other players will need to develop solutions,” Hugentobler said. “They also need to develop a framework or standards for tokenized assets in which the rights of owning any given asset are linked or bound to the asset—otherwise you’re just trading a wrapper (like with bitcoin).”
“There are compliance frameworks that need to be built out, liquidity challenges for weekends, and interoperability solutions that all need to take place,” he said. “But, this is all coming down the pipe. So the institutions that are taking action today to partner or build out solutions are going to see first-mover advantages. FIs need to think out of the box and have a forward-thinking mindset to survive and thrive.”
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