Robinhood has officially launched its new suite of cryptocurrency and tokenized products for European clients, including over 200 tokenized U.S. stocks and Exchange Traded Funds (ETFs). The move, announced on June 30, allows European users to gain exposure to U.S. equities with zero commission fees from Robinhood, though a 0.1% currency exchange fee applies for all USD-denominated transactions. The company's shares surged to an all-time high following the announcement.
Most notably, Robinhood introduced tokenized access to shares of private companies like OpenAI and SpaceX, initially offering a €5 token bonus to eligible new users. These private company tokens are supported by Robinhood's equity stakes in Special Purpose Vehicles (SPVs) that own portions of these companies. However, OpenAI quickly distanced itself from the offering, stating, "these 'OpenAI tokens' are not OpenAI equity," and that they did not partner with or endorse the initiative.
The public stock tokens function as derivatives agreements, with their value pegged to the underlying stock's performance. Robinhood hedges these positions by purchasing the actual shares. Issued on the Arbitrum blockchain, these tokens are currently non-transferable and cash-settled, meaning users can only buy and sell them back to Robinhood and cannot redeem them for the underlying shares. Trading is available 24 hours a day, five days a week, with plans for future 24/7 access.
While the tokenization aims to democratize access to private markets and offer an alternative to traditional IPOs, criticisms have emerged. Beyond the foreign exchange fees, token holders lack voting rights and cannot access dividends until they close their position. The product also carries a high-risk classification (7 out of 7) and is not covered by typical investor compensation schemes, increasing the investor's reliance on Robinhood and the underlying blockchain.
For private company tokens, investors face information asymmetry, as Robinhood, acting as the sole counterparty, possesses more information than token buyers. These tokens are illiquid, only redeemable if the private company goes public or Robinhood sells its stake. Regulatory bodies are also taking notice; the Bank of Lithuania, Robinhood's lead EU regulator, is seeking clarification on the structure of the OpenAI and SpaceX tokens. This regulatory uncertainty highlights potential challenges regarding how such products align with existing securities laws.