Robinhood’s Crypto Head Johann Kerbrat on Why Public Blockchains Will Win

Johann Kerbrat, head of crypto at Robinhood, discusses the company's upcoming Ethereum Layer 2 launch on Arbitrum, which includes a testnet aimed at enhancing on-chain financial services and tokenization. The testnet will support 24/7 trading, seamless bridging, and self-custody, focusing on developing financial-grade decentralized products. Robinhood encourages blockchain developers to engage with the testnet, providing feedback for a successful mainnet launch.

The Robinhood Layer 2 will serve as infrastructure for DeFi developers and extend Robinhood's products on-chain. Initial development will be led by Robinhood, with plans to replace existing infrastructure with blockchain solutions. The company is set to launch decentralized tokenized asset platforms, lending platforms, and perpetual future exchanges, alongside previously announced stock tokens. Collaborations with Alchemy, Layer Zero, and others will facilitate the public testnet, inviting developers to build on the chain.

Kerbrat reflects on the decision to create a proprietary Layer 2 rather than deploying on existing chains, emphasizing the benefits of Ethereum's established security and decentralization. This choice allows Robinhood to focus on product development and compliance, essential for replacing traditional finance systems. The initial use case for the Robinhood Layer 2 is tokenized stocks, which offer transparency, self-custody, 24/7 trading, and instant settlement. The stock token product launched in June has expanded from 200 to 2000 assets, with plans to extend tokenization to private stocks, real estate, and other real-world assets.

Demand for tokenized stocks in Europe has been strong, prompting efforts to broaden offerings, including a new product that allows users to buy spot crypto, stock tokens, and perpetuals in one app. Future plans include tokenizing all public stocks and exploring private equity due to observed demand. Robinhood aims to enhance its tokenization engine to include commodities and real estate while ensuring that its tokenized stocks provide access to a variety of assets through derivatives.

Regulatory clarity, such as discussions around the ID Act, could accelerate tokenization in the U.S. Robinhood's product structure offers dividends and corporate action results, maintaining rights associated with underlying stocks. While market fragmentation is a concern, having multiple options can benefit customers, and Robinhood aims to connect users to the best prices available through its interface.

The conversation highlights the convergence of crypto and fintech apps into a "mega finance" model, with Robinhood leading this trend by consolidating multiple assets on one platform. This requires extensive regulatory expertise and licenses, as customer needs shift towards integrated financial solutions. User experience is a priority for Robinhood, particularly in making blockchain technology accessible to mainstream audiences. The company is committed to abstracting technical complexities, ensuring that users can engage with crypto without being burdened by issues like gas fees.

While Robinhood is not planning to launch its own stablecoin, it aims to improve existing stablecoins through a consortium approach. The company is also exploring blockchain for operational improvements, transitioning to 24/7 settlement to minimize complexity and risk. Looking ahead, there is potential for the financial system to migrate on-chain, driven by customer demand for transparency and globalization. Financial institutions must adapt to blockchain technology to remain relevant, although the transition may be gradual.

Speaker 1 emphasizes the critical role of transparency in blockchain technology, arguing that without visibility, it merely becomes a sophisticated database. They highlight the importance of customization, allowing users to select privacy features while maintaining control over their financial visibility. Speaker 2 acknowledges that while crypto has always represented a small portion of Robinhood's diversified business, the company has over ten revenue-generating lines that provide flexibility based on market conditions.

Regarding the timeline for the mainnet launch, Speaker 2 indicates it will follow the public testnet, driven by user feedback. They also discuss the current availability of tokenized stocks in Europe, with plans for expansion to the US pending regulatory discussions. Upcoming product launches in the US include expanded coin listings and the Robinhood Legend desktop interface, featuring advanced trading tools and a new fee structure for high-volume traders.

The integration of prediction markets is highlighted as a rapidly growing segment, allowing customers to invest in specific events and hedge against future outcomes. During bear markets, the company focuses on product development, with customers using market pullbacks to buy and rebalance their portfolios. To enhance customer engagement, Robinhood aims to provide intuitive tools and educational resources, including the newly launched Cortex Digest, an AI system that summarizes asset and portfolio information. The conversation concludes with excitement about Robinhood's future plans and the upcoming mainnet launch.