Robinhood is About to Revolutionize Crypto!

Transcript

in another sense crypto is just like technology moving forward and it's it's part of a long running Trend that has gone back uh multiple decades at this point and is kind of accelerating with AI of software sort of like systematically reassembling the foundations of like all parts of society welcome to bankless where we explore the frontier of Internet money and internet Finance this is Ryan Chan Adams I'm here with David Hoff and we're here to help you become more bankless we have Vlad tenoff on the podcast today he's uh the co-founder of Robin Hood which is one of the most successful fintech companies I think in living memory they've got 25 million different

users lots of accounts and what's interesting about Robinhood is there a trafi company that's really increasingly invested in crypto they're kind of bridging Both Worlds and then in June they announced the acquisition of the bitstamp crypto exchange that hasn't happened yet but once that happens that would make them a fully Ed crypto exchange David and I felt it was important to know their plans like what is Vlad doing in crypto what's his outlook on the space so a few things we talk about the importance of crypto to Robin Hood's future the defi mullet thesis for trafi adoption tokenization the bit stamp acquisition Robin Hood's layer 2 plans the SEC Wells notice that they received payment for order flow and me the regulatory environment in the US

whether or not retail is actually here maybe the Cy cycle is Institution lead crypto assets versus equities and the current cycle that we're in I think in the crypto space we're used to everything developing so fast uh because the the development Cycles in crypto are just blazing fast every The Meta changes so fast Robin Hood of course it's a try company doesn't move as fast as many of like our our crypto networks our crypto protocols but it's also worthwhile to remember and we discussed this in the episode Robin Hood moves blazingly fast compared to their like even more Legacy counterparts their peers compared to their peers yeah uh and so like Robin Hood offering crypto assets inside of the Robin Hood app making a Robin Hood

wallet uh they're already like doing laps around any particular like you know Trad F comp patriarch the the part where we talk about how like Robin Hood was has the privilege of being like born into a server rather than a Mainframe allows them to like do things that like you know a typical Bank wouldn't be able to do I kind of thought that was pretty interesting uh and so it's just like worth keeping an eye on on Robin Hood like what are they going to do with this Biffy new exchange that they they just bought uh Vlad says the word tokenization a good number of times in in this podcast and so seeing seeing what he's up to and seeing where his aspirations lie as Robin Hood progresses into the future I think is pretty important uh he definitely talks about like you know every single product line

that Robin Hood has to offer in this episode so if you listen to this you'll be no stranger to everything that Robin Hood as a business can offer you uh but then you also get a an insight as to where Robin Hood might be going going next in the crypto world all right guys let's get right to the conversation with Vlad from Robin Hood but before we do we want to thank the sponsors that made this episode possible including our preferred crypto exchange the one we recommend you use right now that is Kraken go create an account if you want a crypto trading experience backed by worldclass security and awardwinning support teams then head over to Kraken one of the longest standing and most secure crypto Platforms in the world Kraken is on a journey to build a more accessible inclusive and fair Financial system making it simple and secure for

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that the acquisition of bitstamp that you guys recently did also a Wells notice from the SEC congrats on that by the way it's a badge of honor in the crypto space so lots of things to get into Vlad welcome back to bankless thank you yeah it's I'm glad to be here with you guys again all right so uh the last time you were on was about two years ago you guys were just rolling out a wallet um you've been in crypto but like dipping more of a toe in the water in crypto and I got to say going to this into that conversation is a little bit different than I feel going to this conversation so going into that conversation it felt like uh Robin Hood was coming a bit from the trafi sector coming as an outsider into crypto in this conversation Robin Hood has spent

another two years in the space you've gone through the bare Market uh you have your own Wells notice from the SEC which many of our esteemed uh crypto companies have joining the ranks of Kraken and coinbase and metamask and and Unis swap so you've kind of proven yourselves I I would say you get like a badge of honor you're earning your stripes really um I don't know if I'd go that far or no we're still we're still a a small upstart in the space well well congrat on what you've done and your commitment to crypto it's just not just a fair weather friend seems like you guys are are here to stay and I I want to start with this question so at the highest level um what how important is crypto to Robin Hood right now yeah I think I

think that's a a deep question um I think that maybe the interesting perspective that I have is uh we have a large crypto business right we we report on our revenues and our trading volumes and and you can see with the data that we've been gaining market share over the past uh over the past multiple years and uh especially in in retail you know we don't have as broad of a institutional offering and a B2B offering we've been very focused on retail direct to Consumer crypto trading and the market Shar is looking good I mean we're right up there with coinbase and uh you know

the customers love using Robin Hood to to trade crypto we also have a uh big trafi business and we can see both of these businesses simultaneously and uh one of the things that we're seeing is how efficient it is to operate a crypto business and a lot of the things that require centralized Legacy counterparties in trafi are being done uh just in in software so for example transfer agency clearing and settlement you mentioned Unis swap Market making um uh stock lending I mean these are things that entire businesses

and centralized organizations are set up to do that uh can can just be done in software and that does two things one it lowers the cost of serving customers and operating the business by roughly uh an order of magnitude and that's because the more counterparties you have those counterparties need to be supported and there's fees and complexity and folks that manage all these relationships on the trafi side when it's software it's it's much simpler so so we can see the power of it in terms of operating the business much more efficiently providing the same basic types of services but the second thing is from a customer

standpoint there's actual functionality that having the software Foundation provide allows in crypto that is very very hard to get in in trafi so for example one of the things that we've been a Pioneer in is uh 24-hour market which is the ability to trade us equities around the clock and we were the first to do that for individual name stocks now we offer uh over a thousand over a thousand single name stocks on 24-hour market wow which starts trading um Sunday evening uh 5 5:00 p.m. PST 800 PM Eastern and basically runs till uh till Friday evening and one of the things we've been

thinking about is why not 247 like why can't we just do it on Saturdays and Sundays and what about holidays like it would be amazing to be able to uh access the capital markets on Christmas for example and the reason is that uh the centralized Clearing Houses aren't open during weekends so they they have to have people coming in to actually manually facilitate this activity and on crypto rail since it's in software you get 247 uh basically for free and you get fractionalization for free which in traditional markets is extremely complex to manage so it's not just the

efficiency but it's also this New Foundation uh where software is providing a lot of these Services um allows for product experiences to be delivered much more simply so so I think that's the real advantage and so I think almost like the importance of crypto might be the wrong question because like when a lot of people think about crypto maybe what you're referring to is like things like mem coin trading and crypto assets and things like that um uh but but I think that in another sense crypto is just like uh technology moving forward and it's it's part of a long running Trend that has gone back uh mult decades at this point and is kind of

accelerating with AI of software sort of like systematically reassembling the foundations of like all parts of society and and I think financial services including the way that uh currencies are managed have kind of been a lagered in the space but but this is just like technology further subsuming that and turning physical processes into software uh more more aggressively V the Robin Hood perspective I I think is pretty interesting because I think you guys operate in four different quadrants that I think we're not very used to in the crypto space because you guys are both on the retail and institutional side and you're both in the crypto and trafi side

uh and then there's like institutional crypto there's institutional trafi there's retail crypto retail trafi uh and you're in all of them you're you got perspectives over all of them and I'm wondering like as the Robin Hood consumer base what are they looking for out of a crypto product um the crypto listeners that are listening to this product are going to be like the crypto natives these are the people who are going to be like we self- custody we touch the chain uh but the Robin Hood crypto consumer base is different than probably different than um what might be the typical listener of the podcast what are the consumer preferences of your base of customers and what are they looking for both out of crypto products both out of the institutional side of things and the retail side of things

yeah I think that it breaks down into different types of products and services depending on your segment so for example um you've got active Traders and the way we actually kind of think about our business is all the things we do for active Traders all things that we do to be the primary financial institution across the board for the next generation of customers and that's Millennials but also gen z uh and Beyond and then all the things that we do to take the things in both of those buckets and expand them internationally and expand them to other customers uh for example institutions and small businesses and I think crypto fits into all three of those buckets so

crypto active Traders are looking for low costs uh particularly as the trading volumes increase they want to have the uh easiest and lowest cost experience they want Advanced tooling like awesome charting and access to data feeds that are real time and they also care about coin selection because they would prefer to not uh disperse their trading activity across uh a large number of trading platforms because generally if you're particularly if you're doing sophisticated things or cross margining having like the capital all in one place is is ideal so that's the active Trader

front the more um Buy and Hold investors uh care about uh care about security and safety and being with a platform that they know is going to be around for a really long time they care a little bit less about the active Trader things but they they want to make sure like Regulatory Compliance is tight and they've experienced a lot of these breaches and a lot of companies uh that have offered things like high yields and great rates just disappearing overnight um and so that's a big concern for them um and uh within that segment I guess within both segments you have this idea of self- custody and not a lot of people actually uh utilize self- custody but uh

they do like to know that it's there if they need it over time would you say Robin Hood is going at the Arc of Robin Hood is it becoming more crypto uh or is are you just like equally optimizing on both yeah I think that uh I I like to think of our business as uh sort of three arcs one is all the things that we're doing for active Traders and I'd say that you know crypto in that bucket is an asset class it's also uh uh it's also like a fundamental technology that might uh facilitate the global expansion of it but for example like crypto spot trading is incredibly important also crypto derivatives are important and

these are sort of like an amalgamation of crypto as an asset class with uh typical traditional features like Futures have been around for a very very long time and crypto derivatives uh I think to a customer standpoint feel more like a trafi product than a than a crypto product in many ways um on the uh non-custodial side um we view crypto as an accelerant to making all of our products uh International and being available across uh all sorts of all sorts of different markets and jurisdictions and I also think like over time you'll see the trafi and crypto worlds continue to merge and uh you'll

see tokenization become a bigger deal and that'll start in uh overseas markets first um I think that the US will actually be a lagered here uh to embrace tokenization I think you'll see it in Europe and other markets uh internationally but I I think eventually it will come to the US as well and I think predominantly that's uh for all the efficiency reasons and the fact that you can offer 24 hours and fractionalization more easily um I think you can also look at the success of dollar stable coins which are driving the The Lion Share of transaction volume on chain right now I I saw an article a

couple weeks ago that um you guys probably saw it as well usdt on Tron is now uh exceeding Visa in in Daily volume and I think the reason for that is if you look overseas um people really want dollars I think there was this there there's this Narrative of Bitcoin being the greatest store of value for uh people in countries where currencies are hyper inflating and they want to kind of flee the local currency and and they want a store value but it appears that people want dollars and kind of counterintuitively uh crypto has become a mechanism for people to get their hands on dollars in these markets and and that's kind of driving a lot of this

activity that that you're seeing so you should assume that you the same holds true of us companies people would love I mean sophisticated individuals overseas who have money are um turning to the US markets they want us equities they want us assets and you can uh enable people to have that on a much bigger scale I think that's what tokenization enables and you'll see it overseas first um it'll lag in the US for a couple of reasons number one we already have it decently well in the US like maybe it's not 247 but with Robin Hood it's 245 so pretty good uh it's pretty easy to open

a Robin Hood account so even though it's maybe not decentralized most people don't really care and they just want access and we can we do a pretty good job of that and then we also have like this entrenched industry of all of the Clearing Houses all the counterparties all the market makers and they're happy with how things are going by and large they don't want major changes and there's going to be like friction to make major changes to to the system over here so I think that that's why things will be slower in the US and it's kind of one analogy I give is like the US sort of like pioneered a lot of advances in transportation and now it feels like

we're behind like High-Speed Rail has taken off in China and a lot of markets and is not really here in the US and Global Payments is another example cell phone usage where it kind of the Technologies was created in the US but adopted overseas um tokenization I think is going to be the same and a big part of it is the US is already like good enough so the incen to go to the technological Frontier of these Technologies is is much much lower over here yeah I think that's right it's kind of like you know Clayton Clayton christensen's innovators dilemma where that like the US has already has all the Clearing Houses and all of the the the banking infrastructure Etc so it doesn't really feel the burning need to kind of upgrade and so other jurisdictions

merging markets Etc kind of like leapfrog us I the the the broad stroke of what I hear you saying Vlad kind of aligns with a thesis that bank list has held that David and I have long held and and uh I think it's actually starting to come to fruition we've called this before like the the defi mullet thesis or the crypto uh mullet thesis and it goes like basically you've got uh fintech in the front and then crypto in the back and the idea behind this is that um fintech companies in particular companies like Robin Hood are uniquely positioned uh to basically swap out your banking infrastructure over when I say banking infrastructure I'm talking about the Clearing Houses the settlement the like old style of of tokenization the stuff that that doesn't that takes off

Banker holidays and that doesn't work the weekends and all of that Legacy stuff the the main frames of the world the back end of finance and over time just kind of like swap it out for the new crypto stuff the beauty is you don't have to do it overnight you can kind of like do it as you're as you're doing it right now so first you have assets that are crypto assets listed that are settled on chain and then what do you do you break into a non-custodial wallet and so you start you doing that then maybe you acquire a crypto exchange which you have and then you get into more crypto native type use cases and over time you're kind of like hot swapping the financial backend from the old Legacy system to this this new system and I don't think that Robin Hood's obviously the only uh entity

that's going to discover this and and go through this transformation though you're positioned well and you may be one of the first to kind of uh see this but high level do you think that's effectively what's going on here is we are uh software is eating the world world you know the Chris Dixon line and now software it's finance's turn you know it's all done in paper and faxes and Legacy mainframes and now we're making Pro programmatic blockchains and fintech is just going to basically hot swap the the back end of its Financial system that's going to happen over the next 10 years how close is that align to what you're saying what you're seeing I think that's pretty close I mean with the with the caveat that um incumbents are going to be slow uh I mean a lot of the incumbents have still not made the

transition to to servers right they're on main frame so you have to you have to go from Main frames to servers and then of course there's like uh the on-prem to Cloud uh transition that Robin Hood didn't have to go through because we we were sort of like formed at uh at the point where Cloud became kind of good enough there was still a little bit of friction actually like there was a lot of pressure for Robin Hood to be on because the market makers and counterparties didn't really trust Amazon to provide reliable Services even though in hindsight we know Amazon services are much more reliable than you managing your own on-prem infrastructure

um and so we we were kind of the first Cloud native uh brokerage platform that got to scale um and then you have ai and crypto which are the new uh platform shifts that that can change the technology as well so I think a lot of the incumbents are looking at looking for Cobalt and Fortran developers and and that's big problem um and yeah I think the the question will be are they gonna jump and adopt crypto well you kind of have to uh either discard all of the old stuff or like really quickly go through all the shifts because you're not going to be able to run a blockchain node on a Mainframe uh on premise um unless someone's figured out something

that I haven't seen yet but um I think that's a real problem for incumbents and I think it's further exacerbated with AI when now you're thinking about okay like how am I going to train models and augment or replace a lot of the internal processes that I have which will which further accelerate some of these trends that you guys have been mentioning all right so let's talk about what you're doing now let's talk about um some some of the recent things that we've seen coming out of Robin Hood and we'll start maybe with the the bitstamp uh acquisition so um Robin Hood is set to acquire bitstamp this is a press release that uh I'm reading for for folks that don't know bitstamp is an exchange an OG crypto exchange actually started in 2011

when fun fact when I created one of my first crypto uh Exchange accounts I was going through this was like one of the accounts that I have a legacy uh you know um account on all the way back from 2014 and me too actually yeah okay so bit stamp I mean I like I remember them back back from way back then and especially in Europe it has a pretty strong reputation so what's the strategy here why' you guys do it I think that you know as we were thinking about our long-term plan we knew that we would have a Robin Hood exchange at some point uh I think that needs to exist and the question was really do we build it ourselves or do we see an opportunity to accelerate that and of course an

exchange has the underlying technology but also the licenses the institu relationships uh retail relationships uh less important for us because we already have those and that's an area where where we feel like we're differentiated and we have a strength um and then uh you know when we came across uh bitstamp we saw a big opportunity because they have a long reputation they have a lot of lure Global footprint great institutional relationships and we saw an opportunity to accelerate the build out of what would otherwise be our own exchange by at least 18 to 24 months and that got us very excited um and you know

it's also important to get some street cred with the the community you know now now we can say that we're one of the OG uh we the oldest running uh crypto business that continuously operates I mean of course assuming the the uh acquisition closes as we expected to and everything but uh yeah I look forward to being able to say that yeah we we've been we've been running our exchange since 2011 nobody else in the time old as old as Mount gox where I also had an account uh I feel like uh my cond that seems like it's wrapping up long storied history of getting Japanese letters in my email the Robin Hood exchange feels incredibly disruptive uh at least in in

the crypto space we're not totally uh foreign to new exchanges cropping up like it's still young space new exchanges coming coming uh up all the time uh bamp of course not new but just like the idea of like Robin Hood being an exchange a crypto exchange uh I think would would be interesting for us what would be even more disruptive if that also you took the bit stamp technology and started to apply that back towards uh the equity space because I mean exchanges are exchanges no matter what assets are traded on them is that part of the intent well when you look into uh tokenization which we we talked a little bit about and that that's space that Robin is very interested in and I think uh as well positioned to be a leader in um one of the things that you look at

with with with tokenization is where you going to trade them um right and of course they have to be listed on uh reliable exchanges um and the more assets that uh that we have um you know the more important it becomes to uh to have the underlying exchange technology as well so for sure I think it it enables a lot of things for us not just in in traditional crypto assets some of our listeners might be asking this question when we say you know um Robin is expanding into kind of the crypto exchange territory they might say hey wait a wait a second Vlad you guys already traded crypto assets weren't you already a crypto exchange so what

distinction are we making here when you say like bitstamp is a crypto exchange versus all of the assets that um the crypto assets that Robin Hood has traded prior to this bit stamp uh news yeah I guess it it depends on your definition of an exchange I mean some people call exchanges uh things that convert from dollars to cryptos or cryptos and other cryptos and I think to by that definition uh you could call I mean with the Robin Hood app now you can put in dollars and convert it into crypto and with the non-custodial wallet you can also swap between between cryptos directly um but what bitstamp provides and what I mean when say exchange is the

core matching engine technology of matching buyers and sellers so that we currently don't provide and when you uh place a transaction through your Robin Hood app we're not matching buyers and sellers together we're uh we we're actually just uh acting as an agent and transmitting your order to the market where where they're being matched okay I say so this idea about tokenization tokenization has been a word in crypto ever since that I've been in crypto and it does feel like the engine is finally starting to turn over in the last year or so especially with the introduction of black Rock's uh bidle fund uh but there's many efforts that are are also like meaningfully um

growing underway you kind of think that your position uh with the acquisition of bit stamp might just be able to just completely LeapFrog all of your legacy competitors in terms of being the location to being the dominant liquidity uh Marketplace for tokenized assets when never the crypto industry can figure out how to tokenize more assets is that that's your position well I think when I look at tokenization I think stable coins are actually a a you know pretty basic form of of tokenization so I I don't think I think we're already there I I don't think there's like much that needs to be done um you know assets are being tokenized uh uh stable coins which are kind of Ain to tokenize treasuries

or dollars or money market funds uh are gaining adoption and you're going to see that market evolve and you'll see more and more assets uh being tokenized and in a world where more assets are tokenized uh you're going to have a couple of different participants one is kind of the traditional exchanges um and non-traditional so you know Unis Swap and and other decentralized uh exchanges and the liquidity pools uh will will have a part to play there you will also have custodians so uh the traditional assets that are being tokenized um are going to have to be stored somewhere and

the the custodians there will have to have uh the ability to deal with trafi regulations and uh trafy rails and you're going to you're going to have to work with the conventional system and and so like you're also going to want to minimize the number of counterparties because um if if you can kind of like do everything in one place the user experience is better the underlying economics are better uh and users will will have to pay less and so um I think the natural the natural sort of like contenders in the space are those that have the ability to custody traditional assets and have core competency there

but also have uh the the crypto rails and easy access to um to both sides and and I do think Robin Hood is well positioned in that space how about with bit stamp are you guys positioned to do some like um some more of the staking uh type Services you know that that's been blocked in various ways in in the US and maybe from a capability perspective you haven't had that before but what are you thinking of getting into with respect to staking or even institutional lending things like this yeah th those are big institutional businesses as you pointed out you know the SEC has taken the position that staking is a secure in the US so that's why we offer staking in the EU but unfortunately we're not

able to offer it in the US so you do offer in the EU right now staking through Robin Hood or is that through bitstamp or through Robin Hood okay uh yeah you can stake on our Robin Hood EU uh uh custodial app uh I think we just rolled out Solana staking a couple of weeks ago yeah I mean staking um yeah from a technology standpoint is is pretty straightforward I mean like most of that is just node management and you know it's it's also fairly easy for a customer to stake themselves if they wanted to use our non-custodial wallet um so yeah I I I would be surprised if like centralized staking was was a

really big thing 10 years from now um but you know customers also like a a clean user experience and so the some of these like decentralized products do suffer from usability problems so I I think that that's what I'm I'd like to think the decentralized version and kind of self- custody will win out but it it remains to be seen let's talk about um the decentralized version of the self- custody winning out and what you what you're seeing there and what you're looking at so you guys have had a self cust custodial wallet for a while what we call a bankless wallet because again it's your keys in your crypto when you have your own custody self- custody right uh so What's um what's the plan for this and I think from the the the

crypto side of things uh I guess I will say um we had hoped that non-custodial wallets would take off more than they currently have is a statement that I'll make and I think a lot of Bank list listeners hearing this uh will agree with this and we've been play like transaction fees are difficult seed phrases are difficult the ux behind this stuff is is hard currently right now we a few steps before smart contract wallets which feel a bit more like um the best user experiences we've seen in trafi so the builders have had to build things in order to start to catch up to what we already have access to and you know an app like Robin Hood you know the custodial version or an app like venmo but we're getting there we're getting

close what's your outlook on uh self- custody wallets and what are you doing with the Robin Hood wallet I think that you're going to see um more integration of uh self- custody components into products that are traditionally considered custodial uh and vice versa so I I don't think you're going to have too many Pure Play self- custody only solutions that um that like survive uh in in the marketplace for very long um I think that this is going to be a component it'll it'll be componentized and featurization products that started off non-custodial

in nature adopting more and more custodial and trafi elements uh and vice versa so for example even via metamask like a big sort of development in the past couple of years is them investing a lot in their on and off ramp Technologies and connecting with traditional uh money rail so that you can get your US dollars really easily and buy with one tap and and with minimal fees and actually Robin Hood connect is is a big player there we we process a lot of uh a lot of metamasks on ramp volume and wait really so what is that what's Robin Hood connect Robin Hood connect uh you can think of it it's an on-ramp uh uh the lowest cost on-ramp in the markets that we operate typically

uh and you know we partner with metamask we partner with Unis Swap and some of some of the other uh defi wallets and um uh simply put the goal is to offer you the simplest and lowest cost way to take your dollars from your bank account or or debit card and convert them into your crypto of choice uh fully non-custodial in nature um and the way we were able to do that is we we had to the the big problems in the space are fraud money reversals uh the cost of accessing uh the cost of like operating the money rails and because we uh built a big business serving consumers with our

crypto business we were able to kind of break it apart and offer that as a service to to businesses I didn't know you guys were doing that you basically just took this capability they already have and decoupled it and offered it as a service and now you get a like Fiat on-ramp type service you can provide crypto wallets yeah absolutely and in in the wallets that we serve uh yeah we we tend to like quickly uh for those that optimize by cost we we typically quickly tend to rise to the the top um because we offer low cost because we had to solve all these problems for ourselves but um anyway my original point the D5 products are becoming centralized because they want they figured out that customers really have dollars and they they want to make it as easy as possible

to get into crypto and then uh I think over time you're starting to see some of the centralized products integrate non-custodial wallet functionality uh as well and I think the the early form of that was through Robin Hood wallets like in our custodial app we offered the ability to uh withdraw and deposit on live blockchains and we've been continuing to invest in that making it faster finding ways to make uh the fees lower and so uh I I wouldn't be surprised for the distinction to sort of like disappear at the product level over time like the self- custodial wallets will end up looking more like

centralized platforms and vice Versa and will end up taking the best functionality of of both uh into one product experience and of course the the the sort of like unpredictable part is how regulations are going to evolve in this space but I I think uh there might be zigs and zags but over the long run these will be the same products one of the products uh or announcements that you guys have um announced relatively recently is a partnership with arbitrum which is where I think uh probably Robin Hood has its biggest onchain footprint if you will I think the way that this works is that the Robin Hood wallet if you make a swap it swaps on on arbitrum uh and then both Robin Hood and arbitrum

have agreed to just kill the fee that's associated with that and that's pretty cool uh I'm guessing that this partnership expands at least that's my intuition that's my gut feeling I'm wondering where this whole thing might might go from here yeah we we like the arbitrum guys uh and they've been great Partners um so we we'd like to do more there uh we also have been working with uh pretty much all the blockchains and a lot of people are uh building interesting things and our our philosophy tends to be um yeah we we want to partner with as many people as possible and bring the best of what they have to offer to to our customers so

generally I think Robinhood is like adverse to working with one partner um you know because not everyone can do everything and can serve customers in in a number of ways so you know we've partnered with polygon folks in the past we've worked with all the chains and uh we just want to pick whoever uh can help us deliver the best customer experience and the best reliability and so Vlad I I don't know if you can uh confirm or deny any any rumors but I'd like to hear kind of what you think about it so we've had many crypto exchanges that have expanded into developing their own chain or at least supporting their own chain so you have binance of course and they have the uh the B&B chain now that's kind of Affiliated and that's been a long

standing chain a layer one as we would call it you'd have a coin base who's gone in the layer 2 Direction kind of like partnering with uh optimism for that and kind of rolling their own functionality into that it seems to be a strong base for support does Robin Hood have any chain type aspirations you know the first step is noncustodial wallet maybe the second step is an entire non-custodial chain what do you think of this I think that Robin Hood's core uh competency is these areas where uh traditional finance and crypto kind of merge and meet uh because we've got such a big presence and knowledge of both and I I think that makes us quite unique and

that's why we've been focusing on those interface points so uh on and off ramps are kind of a great example of that tokenization is another great example and I think um the way that we would think about creating our own chain or uh you know other protocols or uh bitstamp the exchanges can can it kind of help us accelerate that can we can we can we accelerate our vision of being the best uh interface and really onramp in the general sense between crypto and the the traditional world because I I think that's something that we can do better than better than no one else and it

takes a Vantage of our scale and our capabilities and all of the work that we've done to get like extremely deep in trafi and you know the whether we're building our own chain or offering like specific crypto native products is is really more secondary way to enable that Vision new projects are coming online to the mantle layer 2 every single week why is this happening maybe it's because mantle has been on the frontier of layer 2 design architecture since it first started building mantle da Ed by technology from Igan da maybe it's because users are coming onto the mantle layer 2 to capture some of the highest yields available in Defi and to automatically receive the points and tokens being acred by the $3 billion mantle treasury in the mantle reward

station maybe it's because the mantle team is one of the most helpful teams to build with giving you grants liquidity support and Venture Partners to help bootstrap your mantle application maybe it's all of these reasons all put together so if you're a Dev and you want to build on one of the best foundations in crypto or you're a user looking to claim some ownership on mantle defi apps click the link in the show notes so getting started with mantle the obal collective is up and running and is maybe one of the most important collectives that you've never heard of obal is bringing distributed validators or DVS to the ethereum staking stack distributed validators allow multiple parties of people running multiple nodes to create a single virtual ethereum validator together this makes participating in ethereum consensus more accessible more affordable and more inclusive it is a strict Improvement to

the ethereum staking Tech St with collaboration from Lio ethery layer and 50 other entities and thousands of individuals the Obel Collective is working to scale and decentralize ethereum using DVS and now you can get involved introducing the obal contributions program visit ob.org banlist to stake on DVS either through a partner staking protocol or at home earn access to Future governance and ownership in obal while contributing to retroactive funding for projects that are actively decentralizing ethereum this is your opportunity to secure inclusion in one of the most important projects working to scale ethereum's foundation for future growth visit ob.org banlist to get started that's ob.org banlist launching a token don't

let complex legal and tax issues slow you down toku provides specialized support to optimize your launch and ensure that you as a founder and your team and your investors get the most tax efficient outcomes the toku team understands the crypto space inside and out and will ensure your token launch is fully compliant while maximizing tax efficiency toku can connect you with the best attorneys if you need them to make sure that you have the best advice and toku can help optimize your taxes so you pay the least possible amount of taxes while still maintaining legal compliance with tok's guidance you can concentrate on building your company while toku handles the logistics token launches don't have to be complicated talk to toku today to get a free initial token valuation what about um the world of payments uh both in the trafi space uh but also maybe also in the crypto space

I know you guys just came out with a spiffy new credit card uh so you're getting into the world of of credit cards uh what about payments are you guys trying to like penetrate into that market as well yeah um I I think that we'll want to make it easy for customers to pay each other um and to spend at Merchants credit card being uh a great example of how we can do that uh the economics are powerful right if if you can give people 3% rewards on on every swipe that's a strong value proposition and that's resonated really well with uh with early users of the credit card and the demand for that is uh is growing very very fast so the the bet that we made was that we could

probably take our customer acquisition and incentive cost to zero with this product by just making it so good and it seems like that's playing out uh in terms of crypto payments I think that in the US you have the problem of credit cards being very difficult to compete with and in this one it's not it's not just that they're good enough they're actually like significantly better like it's it's going to be hard to offer anything that competes with 3% rewards in crypto in a sustainable way over the long run um so I think you'd have to look overseas uh as a way to do that and and I think overseas the the picture is a

little bit better and you can look at remittances and crossborder and also intrac country payments in areas that don't have developed banking systems and I think Robin Hood will be a player there to some degree we are with non-custodial but um we're also like branching out and expanding the core Robin Hood products and services in global markets and and so I think uh you should expect payments to to be a part of that I do want to ask about that 3% business model because 3% 3% is like it's pretty gu it's pretty good that's pretty high uh I actually do have like the Robin Hood credit card and uh as we were prepping for this yeah right yeah I was jealous I was like where' you get that 3% pretty generous that's awesome

have you been uh yeah I've been using it yeah so I just like uh pressed I I didn't actually realize like how the points work cuz like whenever I like swipe the card they like oh points I'm like oh funny points more points in my life uh but then I realized that like there's a little tab where you can actually like dis disperse it like you actually get it in cash to your Robin Hood account and the only thing that I use my Robin Hood account for the one thing is to buy coinbase stock uh and so it just turned into coinbase stock so it's actually for it's like 3% cash back but for me it's actually 3% just like free coinbase stock is that kind of the business model like you can offer like like I think the Apple card does 2% other cards like do

2% 2% has been like the industry standard that extra 1% is just because like the likelihood of the consumer to like keep it back inside of the Robin Hood ecosystem is sufficiently high is that is that where the margins come from uh yeah and maybe I'll ask you like has the card uh my guess is it's like top of wallet or near top of wallet for you right okay so I I'm a big Apple card user so there's three things in my Apple my Apple wallet which is my credit card which is the Robin Hood my ID and then a business card so yes it's it's one of the three things but I actually use Apple pay like 99% of the time anyways but Apple pay with your Robin Hood card with my Robin Hood card that's right yeah yeah because Apple pay I think gets

you 3% cash back on Apple purchases on Apple products which I'm not I'm not buying an Apple product every single day yeah I mean that that's also what we're seeing it's becoming top of wallet rapidly for everyone that adopts it and there there's a lot of noise on social media about the roll out going slowly um but it's just because people want the card so much the digital experience is so good they like the physical card the family features and the virtual cards work well also and of course the rewards uh and we've rolled out 50,000 of them which is basically on par if you look at kind of what other successful credit card businesses have done in their first year were like right there so um yeah

the the roll out is progressing uh and in terms of the business model um one of the things that uh that you can do is look at public companies that offer credit card businesses you know cap capital one's probably the best example there and you can see that the revenue comes from Two basic things one is The Interchange which is revenue from each swipe and the rewards are are contra revenue on that item the bigger piece is actually net interest um so that that's the interest generated from holding balances for customers that are revolving and um a cost to that piece is uh well cost of funds is is netted out

it's Contra Revenue but uh the loan loss Provisions are another part of there and if you look at uh what they can do which means total revenues uh generated by the a typical car business divided by transaction volume you get to Something in the 5 to 6% range um and of course uh there's headcount there's marketing expense and th those are actually the largest costs which as a technology company we believe that we can lower significantly beyond what the incumbents are doing so that that's the that's the belief um 5% and 6% are a lot higher than three so we'll have some margin to

play with but uh there's a lot of details and a lot of learning that that we have to do we have to look at borrowing activity spending activity uh make sure that the underwriting is really really good but the benefit that we have is people love this product and um we've got some of the best people in the world that want to come help us work on it too so I I think that uh I think it'll be really good and early reviews from customers is are just exceptionally high so it has a five-star rating with thousands of reviews on the App Store um maybe you've seen the app itself but it's like extremely easy to use and uh it's a very nice experience um I've got my kids and my

whole family is on the card um which they really love they love going to the toy store and paying for for their toys with their own credit card um so I I think I think this thing is going to be really really good like uh it's not evenly distributed yet but um I think it has the poti to change the credit card business than the credit card industry this kind of gets to like three things that I like that I appreciate that Robin Hood is in the space like you like the first thing is you have you have like 25 million uh customers something like this like a lot of customers and you're offering services that uh typical crypto exchanges don't really offer right so you sort of get the the the person who just wants a credit card but then maybe

suddenly they're crypto curious and then Robin Hood has an on-ramp to kind of convert them to crypto I got to save Vlad for uh an organization like Bank list for a media company that's all about the evangelism and propagation of of crypto we love tapping into new markets right and like get them hooked on it uh early so so that's nice the other thing I think that that's nice is I I feel like if Robin Hood is investing in it you guys seem to take a very pragmatic approach right in terms of like Hey we're not going to do something there there's not a big place for crypto to fit in our in our credit card uh you know product set so we don't do it and the places where you do invest like it's very pragmatic and you're seeing uh some places where crypto from an

infrastructure perspective can really benefit your business and improve the existing traditional Finance system so it just like feels you like real to me and then that the third thing which is maybe our our next discussion is you are now part of the squad that is resisting uh the SEC um unfortunately or or fortunately I I suppose so in May Robin Hood joined the ranks of organizations uh this went public I'm not sure how much you can actually say about this but that received a good old nasty gram from Gary gendler's SEC a Wells notice and uh this is very familiar to people who've been in crypto I mentioned a few other organizations that have them it's almost become Vlad like a badge of honor of like you get one of these it means

you're like you're you're doing things in crypto basically and so I I want to start by you talking about that and and kind of the reaction and and what you're doing uh but first of all getting that letter getting this reaction from the SEC what was your first reaction to uh to seeing this and had you been in conversation with them or did this just come out of the blue yeah we uh talk to the SEC all the time across uh all of our businesses you know we have several regulated broker dealers uh a clearing firm uh and and of course the crypto business so we've been in conversations for a while a lot of that was disclosed uh in our orderly filings for example

that you know they were investigating certain aspects of the crypto business including whether any of the coins we list uh they believe are securities and uh we we've been we'd also been engaging proactively with the SEC uh you guys probably remember in in a bunch of interviews Gary Gensler uh came out and said we open to crypto firms if you want to do anything interesting you know come in and talk to us office and register we just want to have uh yeah so you know we're like we took that seriously and we went in and we attempted to register and of course uh we did a lot of work we spent a lot

of our resources coming up with what we believe was a pretty good mechanism to register which which was uh it's a little bit technical but it's called a special purpose broker dealer so we we came up with this construct special purpose broker dealer you can trade crypto assets and uh essentially these conversations and we we probably had like 16 of them um 16 yeah yeah we we were we were going in there uh 16 times um and then at at some point it kind of became clear that it wasn't really going anywhere um and I I don't know what was going on behind the scenes but eventually we just get an email and uh and they were like well we don't want to

talk with you guys about this anymore wow there was that yikes Wells is not a lwuit but it's the um I guess the intent of a lawsuit that's what it is yeah well yeah and I mean that's that's another thing like it used to be that 90% of the time when you would get a Wells notice litigation would would follow but now you kind of have these Wells notices that have been hanging around for a while and just kind of sitting there which which is a new thing I mean um and and I think to some degree like the seriousness of a Well's notice is almost being lost by by this well we that we

introduce it as congratulations not oh no I'm sorry yeah but anyway yeah we went in in good faith uh I do want the US I think longterm the us is going to have to embrace this technology because it's legitimately useful and we don't want to send it overseas we we believe customers should in this country have the freedom to choose what they want to do with their money and access these Technologies if they want to and we think it'll be good for the country uh so I think eventually we'll get there and I think that um we'll have to play a big part in pushing for that to happen sooner and and accelerating that so it's it's a it's it would be a shame if I think it would be like Contra the

mission of the US to go the route of China India and just like ban cryptocurrency uh uh overall I I don't think we want to be in that direction and that's one form of stable equilibrium the other part is to like integrate it and embrace it and set clear rules for how companies can adopt it we're not getting that either and we're kind of in this unstable place in between right now and uh yeah we're going to push for it to be resolved and hopefully it is resolved glad do you have a take on what's motivating this what do you think like why why is this going on why are we getting Wells notices in crypto I mean the the crypto industry's perspective is that um it's been unfairly uh targeted that we have

some members of sort of the administrative uh State and other like areas in the political apparatus that are kind of like saying crypto is bad and just going after it in a targeted way do you have any takes on this yeah I I think that the administrative state is uh I mean the administrative state is pushing back because the US is a leader in financial services I mean we've set the standard uh worldwide in many cases and so a lot of big companies and organizations have a lot to lose from a Changing of the Guard here um I mean even you look at stable coins stable coin adoption which surprisingly um you know it like the that's like the mo

there's there's stable coin bills that are in pretty Advanced stages they're making their way through Congress um and that hasn't been kind of like in the direct line of fire of of regulators um but you know if you can create a stable coin easily then that's something that's kind of scary to the to the banks right I mean they they've spent all of this time and invested all of this resource in building up regulatory infrastructure and they have to comply with all these onerous reserve requirements and cap capit requirements they can't grow very fast because their growth is limited by the OCC and so you know from their perspective they're looking at a stable

coin issuer and they're like oh well these guys can hold treasuries and issue stable coins too and they don't have to deal with any of this that seems a little bit unfair uh to them right um and so you can understand why they would fight it um and and that the fact that like the industry is so powerful and advanced here um just just sort of like explains why there's more friction you just use the term fight it and I feel like that's been kind of a shift that we've seen over the past two years and something that that D David and I have uh devoted a lot of time to on bank that's just kind of like covering it because um crypto has felt like it's had to Pivot into like just survive mode fight mode kind of resist mode and like through through two forms one is uh

resisting these types of things from the administrative state so if you get a Wells notice if you get brought into a court case rather than kind of like settle it's just like organizations like uh Unis Swap and coinbase and Kraken doing things like pushing back and like countersuing in some cases right it's just like it's time for that or else where does it stop so taking to the courts and I'm curious what what uh Robin Hood's intent is so if this Wells notice turns into something are you guys going to um like take this this to the courts and then second to that is also um the question of getting involved kind of politically so we've seen a lot of this from uh crypto organizations you stand with crypto other organizations that are just saying hey this is now a political thing if we want to change the

administrative State we have it goes back to kind of like politics and legislator and who are politicians are getting involved in that process a bit more than we have been we crypto let SPF do it for a while that was a really bad idea so now better organizations are kind of stepping in what what is Robin Hood doing to kind of uh resist and and join the fight here yeah I mean I think the whole SP SPF thing was a big step backwards uh yeah because somehow like Washington embraced uh s SPF and we sent the wrong guy to Washington that's for sure big big uh egg on the face of of a lot of people who wish that those photos would just disappear unfortunately um look our Our intention is to we we don't really want to be in

litigation and we're in a lot of it right uh uh We've we've had the unfortunate experience of being in a being in an IND industry and innovating not just with crypto but you know traditional assets as well um and disrupting and sometimes uh it's necessary to go all the way uh to to conclusion and be able to see something through in order to resolve something but Our intention isn't to litigate uh for litigation sake but uh we we have to stand up for for what we believe is right and defend our business and that's really what we're doing here you know

we're defending ourselves defending our industry and we believe we're we're in the right because we're actually a highly regulated and compliant uh participant in the space unlike some of the others where you know there is a legitimate point to make that they knowingly are uh skirting regulation and and taking a ton of of risk and playing fast and loose um but we've been pretty conservative with coin listings we've been uh you know taking uh heed at uh what the position of the Regulators are so I I think like the fact that the the idea of litigating against Robin Hood is

like almost comical to me uh relative to all of the activity that's happening in the industry as a result of the wells notice have you guys changed anything is there anything well was there anything that was impacted or did they just like not give you enough information to be able to like actually change any sort of business lines or products that you offer no we haven't changed anything I mean uh We've responded to the Wells notice uh and you know we don't really have a an update to share there I think the good thing is we just have a lot of a lot of stuff to build in the US and so we actually feel pretty good about the the crypto business regardless of uh which Administration is in power whether it's

Democrats or Republicans um because you know even if there's some uh lack of regulatory Clarity for some amount of time I think eventually it'll get resolved and in the meantime we can focus on improving the customer experience bringing down pricing adding more active trading tools um so the the team in the US as well as internationally has just been cranking super hard on making the experience better so the the road map will be full and maybe some things will shift here and there depending on what the regulat environment is over the next year but we we've got plenty to do so Vlad here's kind of a nerdy question I was uh I was just thinking about as we're getting to

this conversation which is uh basically the Robin Hood business model and how it kind of like relates to um the crypto business model and the blockchain business model of course Robin Hood has um zero commission trades and sort of a a revenue stream on payment for order flow and one thing that David and I say when we try to explain what um blockchains are how they generate fees is blockchains sell blocks and they they sell it in two forms either in a transaction fee which is interesting or The Ordering of a transaction basically order flow right and they can adopt uh both of these mechanisms uh some are skewed towards like one some are skewed towards the other if you think about Robin Hood uh it's mainly skewed towards the payment for orderflow uh business model and in crypto like there's tons of

debates about this like orderflow is it good is it bad is it Arbitrage some some kinds are are toxic some are not call it me is another uh term for it internal and I I guess um sometimes it's celebrated right sometimes it's oh it's a revenue driver for this particular uh blockchain that's what gives the token some sort of upside value other times it's kind of castigated as this is predatory to uh users and you've been in kind of like the payment for orderflow business for a while so like what what are the goods and what are the bads that that come of it do you have any advice for us how how does it how does it go wrong when it goes wrong and like what's been your general experience that's relevant to crypto well a couple of things one is Robin Hood actually has

eight businesses now that generate 100 million plus in annual revenue uh so it's probably more Diversified than uh you might think based on kind of the the headlines um and more than half the the revenues uh are actually net interest based uh and this shifts up and down but net interest exceeded uh trans action based Revenue at some point last year and we we were able to make more revenue from interest than transactions there's also stock lending um there is uh uh in instant withdrawals spread on gold deposits and of course like interchange

on the credit card is is uh has been increasing payment for order flow I wouldn't compare to me I I think me is like this like weird thing that uh would not be allowed in traditional Financial oh really interesting get into that more yeah um yeah I mean payment for order flow uh does exist in crypto as well um uh I mean it's not called payment for order flow but it's basically uh revenues generated by routing through market makers and to some degree like uh it's closer to spread than anything else it's like whenever there's a spread between the bid and the offer of an

asset uh that's a profit pool that's split between the End customer uh the broker and the market maker or the exchange and uh one way to think about payment for order flow is it's the component that's going to the broker the fee is the component that's getting going to The Exchange and uh in traditional financial markets we call the part that's going to the customer price Improvement so price Improvement plus payment for order plus exchange fee uh or risk uh equals equals the spread Me by which you mean reordering transactions uh in the order by which they go to Miners and are

processed by miners yeah basically the the value of that the value of being able to kind of slip your order or or order the transactions and in some way whatever the economic value of that is that that would be the me portion of like um ordering a block right and this is where see uh you know ethereum make uh generate Revenue like this um layer twos generate Revenue through through block uh ordering also salana so the interesting thing about this is of course like this is why me is such an intense area of focus uh particularly in in crypto and uh for blockchains is because in crypto obviously because these networks are decentralized we're trying to solve me type problems at the protocol level rather than rely on kind

of like um the legality of a nation state otherwise you start to lose the the whole decentralization aspect and why me has been such a thorny problem and why people the etherum foundation and other you know other researchers really are are honing in on it so I guess that's TBD whether we um solve it or not in crypto at uh very the various blockchain level I mean I think that um yeah one one interesting thing there is uh yeah I don't think Meb has a real analog but um there is a rule called reg nms in traditional uh financial markets and the Securities markets uh it's called Rule National Market System and

basically uh what it does is it governs uh the prices that assets are executed at uh in a multi- exchange multi-market center setting so you know back in the day and uh there were multiple exchanges right you'd have exchanges in Chicago Boston New York and they'd all be trading the same things and then all these off exchange venues and dark pools started uh started being created where you can have like uh order flow that doesn't even make it to the exchange and then the question is like what governs what price orders in the dark pool get executed at is it just like the best

efforts of the administrator of the dark pool um and maybe in some cases if the people that are putting their orders in there aren't sophisticated they could get taken advantage of right so that that was the the principle so reg nms made it so that any orders that are executed off exchange um and there's a few caveats but the basic idea is off exchange orders have to be executed at the best price across all of the exchanges or better and so all this infrastructure like the Consolidated tape was created to create a Benchmark and uh if you're if you're trading off exchange um you have to you have to sort of like improve upon the best listed price see if we can solve this without

uh regulation but it's still still still an issue for crypto um Vlad I want to ask you about kind of the the cycle that you're seeing right now obviously we've had a weird week with respect to like different macro events it's definitely been up and down this week um some have said this is going to be an Institutional lead cycle at least for for crypto and I'm I'm wondering what you kind of see of course we have the ethereum ETF institutional flows uh seem very strong I've seen some of the earnings reports uh for coinbase for instance and it's kind of institution Le what's your take on this is retail here yet at least like in crypto I'm sure they haven't left uh with respect to equities it's a lot different this time around than it was in 2021 last bull

cycle that we saw where we had stimulus checks it was you know very retail Le Is this different yeah I I think I think it it mirrors that of equities somewhat in the sense that if prices are going up you have a lot of casual investors that re-engage with the asset class and you saw that happening uh in the first quarter of this year you know prices went up uh lots and lots of people came back and started trading crypto uh a lot of those folks that have kind of like gone away and in 2022 and 23 and you saw that in Robin Hood's monthly active users for example a lot of crypto people

came back crypto volumes and revenues went up quite a bit then you see this contingent of active Traders and they they tend to trade more sophisticated products in crypto it's like crypto Futures and Perpetual swaps outside of the US that's tends to be a little bit more resilient but there's an analog to active Traders for our traditional us uh assets like uh options they they tend to you know make money they they they have strategies that can operate in every environment even even the ones where it's going sideways or going down so so those tend to be resilient um and then you know you have the institutional flows which seems to be mainly uh

Bitcoin and ethereum ETFs were kind of the the big thing there and Bitcoin ETFs have have uh amassed a lot of volume very very quick quickly very fast growing ethereum ETFs a little bit less so but you know we're we're we're keeping our eyes open to that I think so far in July and August um we've we've been seeing just very large volumes 20% higher than what we've seen in June across the board um and August so far has been tremendous customers are buying the dip the first week of August we saw over a billion in net deposits with uh about half a billion just in in this

Monday alone so retail seems to seems to be buying the dip here um across pretty much all asset classes that's cool it took some courage to to buy the dip particularly this week Vlad this is been a pleasure maybe as we close things out so David and I have the uh the pleasure of the years is to to host many of the crypto exchange leaders very CEOs and and Founders some of which by the way are in jail right now actually uh others are are still with us fighting the fight uh wow and uh we asked them kind of this question of just like why are you here and what does the end game look like for your particular exchange let me ask you like Vlad what is Robin Hood here in crypto to do and

what does the end game look like say five years from now where does Robin Hood want to be with respect to crypto I think that uh five to 10 years from now we want to facilitate uh anyone anywhere in the world to uh buy and sell and hold any financial asset and perform any financial transaction and we think that Robin Hood can provide great service be the best place for our customers to do that and I think crypto is going to be a a huge part of that not just as an asset but more so as a fundamental technology shift well best of luck to you at on that endeavor Vlad certainly propagating

crypto is with the bankless mission so um appreciate all the work that you're doing there it's been a pleasure thanks guys always happy to be here got to let you know of course bankless listener uh none of this has been Financial advice you know crypto is risky you could lose what you put in but we are headed west this is the frontier it's not for everyone but we're glad you're with us on the bankless journey thanks a lot [Music] [Music]