Key Takeaways:
- Robinhood plans to tokenize stocks on its Ethereum-compatible Robinhood Chain for 24/7 access.
- Galaxy Digital says this could erode NYSE’s liquidity and trading fee advantage.
- Regulatory uncertainty and volatility risks remain major hurdles to widespread adoption.
Robinhood is preparing to bring stocks onchain with its new Ethereum-compatible blockchain, a move that Galaxy Digital warns could erode the competitive edge of traditional exchanges like the New York Stock Exchange (NYSE). The planned “Robinhood Chain” aims to deliver 24/5 and eventually 24/7 trading via tokenized stock derivatives.
At the Ethereum Community Conference (EthCC), CEO Vlad Tenev revealed the initiative, built on Arbitrum Orbit. By creating token “wrappers” around real stocks held by a U.S. broker-dealer, Robinhood intends to offer users near-instant settlement and self-custody over their tokenized assets.
Galaxy Digital: Robinhood Could Disrupt Traditional Liquidity Pools
Galaxy Digital’s latest research suggests that Robinhood’s blockchain-based trading model directly undermines the NYSE and similar venues by shifting liquidity and transaction volume off traditional rails.
“This directly challenges the deep concentration of liquidity and activity that gives major TradFi exchanges (e.g., NYSE) their competitive advantage,” Galaxy wrote. If Robinhood succeeds, it could siphon off both market data revenue and trading fees — two pillars of legacy exchange income.
Robinhood Aims to Capture Full Stack Value with Sequencer Control
Robinhood’s new blockchain mirrors Coinbase’s Base architecture, where the platform retains control over the sequencer — the mechanism responsible for ordering transactions. According to Galaxy, Coinbase earns over $150,000 daily in sequencer fees. Robinhood stands to gain similar control over all onchain activity, monetizing everything from transaction processing to token usage.
Beyond speed and availability, the programmability of tokenized stocks adds further appeal. Traders could use their stocks as collateral in DeFi or even automate dividend distributions — capabilities that traditional equities lack.
Regulatory and Volatility Concerns Persist
Despite the innovation, the tokenization model is not without risks. 24/7 trading could expose retail investors to overnight volatility. Meanwhile, U.S. regulators remain silent on the matter. Robinhood is launching its tokens only for EU users for now, possibly to sidestep SEC scrutiny.
Also Read: Arbitrum (ARB) Soars 5% After Robinhood Partnership, Experts Predict Move Toward $1
The Securities Industry and Financial Markets Association (SIFMA) has already called on the SEC to block such models if they fall outside Regulation NMS — the framework governing U.S. equity markets.
Robinhood’s blockchain initiative could transform how retail traders access and use equities, but it also puts pressure on traditional financial systems to evolve. If regulators permit the model and Robinhood’s infrastructure delivers on its promises, legacy exchanges may need to embrace tokenization or risk losing relevance.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
I’m a crypto enthusiast with a background in finance. I’m fascinated by the potential of crypto to disrupt traditional financial systems. I’m always on the lookout for new and innovative projects in the space. I believe that crypto has the potential to create a more equitable and inclusive financial system.
