How Robinhood is using the SEC's New Innovation Exemption | Johann Kerbrat

David (0:03)

Bankless Nation, I am once again joined by Johann from Robinhood. Johann, good to see you, my man.

Johann Kerbrat (0:08)

Good to see you. How have you been?

David (0:09)

Good. It is a fantastic time to be in crypto. It's a fantastic time to have one foot in crypto and one foot in TradFi, which is why I wanted to bring you back onto the show today. Also, Robinhood and Robinhood Chain definitely seems to be the center of attention in the crypto industry.

First question, Johann, as we get started, how busy are you these days?

Johann Kerbrat (0:29)

It's been busy, but I think it's good to be busy when you're in crypto. It means that the market is up or that there's things going on and that people are excited to build, so it's been a lot of fun, to be honest.

David (0:40)

Today, we are recording the morning of the innovation exemption out of the SEC. This is on the backs of the failure of the Clarity Act to proceed forward. And then the next day, we get this innovation exemption from the SEC about the tokenized stock movement happening on chain. How does the innovation exemption impact you guys, what you guys are doing at Robinhood? Is this for you? Is this for what you guys are building or is this for somebody else?

Johann Kerbrat (1:08)

Well, two things. One is pretty sad that the Clarity Act was kind of killed a few days ago. I think we still need to have this federal level regulation so that things are not constantly changing and so that more and more institution can feel confident about building in crypto for the long term. Obviously, super excited about the innovation exemption. I think it really means that tokenization is also ready for the US, not just something that we should keep doing overseas. So for us, it means that we can bring a lot of the product that we've been building for a long time on shore.

And that's really where we're going to see companies like Robinhood being able to have their traditional offering and also crypto and merging things together. So really excited overall. There's still a lot of details to kind of understand from the exemption, but so far, it seems like it's fairly open to really create this tokenization world that we've been talking about for so long now. So I'm pretty happy about the tech so far.

David (2:17)

So the Robinhood tokenized stock product is not like a one-to-one representation of inequity. There's some lossiness because it is a debt security, it's not actually the stock. And as I understand it with the innovation exemption from the SEC, they're trying to make a lane, a pathway guidance for people to make actual tokenized securities that have a very high fidelity relationship. And what that includes is permissioning and KYC for the ability to trade, which is not exactly what the Robinhood tokenized stock product is. And so if Robinhood does lean in to the innovation exemption, is it going... you guys are going to have to build a new set of products that do comply with this innovation exemption in addition to the pre-existing Robinhood chain stock tokens? Is that the path forward that you guys see?

Or how does this proceed?

Johann Kerbrat (3:18)

Yeah, I think it's a little too early for us to shake the cure plan there, but I think it's right that we want to adapt to the regulation of whatever country or products I like to. And a lot of the reason why we built our own chain and our own stock tokens and our own wallet is to actually be able to control this type of compliance requirements that we have, depending on the region. And unfortunately, you know, we don't have a regulation framework for the entire world. So every country has different compliance. And so we have to adapt to that.

To your point on the stock token, so it is a representation one to one. So every time someone buys a stock token, we mint the token, and at the same time, we buy the stock. So, you know, on that front, there is no concern to have when there's a lot of tokens being minted. It means that we are buying a lot of the stock of whatever company that people are acquiring the tokens of.

That being said, I think what the exemption is talking about is a little different from the dead security token that we created, and we are going to see how we can adapt exactly to support that use case. But I think for us, what's important is making sure that people will be able to get the right token at the right place. We already have this issue currently on stock tokens, where you have many issuers, you have the X stocks, you have the under stocks, and et cetera, et cetera.