Vlad Tenev Asked Regulators to Green-Light Tokenized Stocks. Robinhood Just Added About $12 Billion in Market Value.

Robinhood (NASDAQ:HOOD) CEO Vlad Tenev called on U.S. regulators Tuesday to set a framework for tokenized stocks (blockchain-based versions of ordinary shares). In a post on X, he argued that the financial system is in the early stages of a global "tokenization supercycle," and that America risks watching it happen from overseas.

The next day, the administration pressed Congress to pass the Clarity Act, the stalled bill that would settle how digital assets are regulated, at a White House meeting with crypto executives. And Bitcoin, up about 24% since Monday in its best week since 2023, was lifting brokerages with crypto exposure at the same time.

Robinhood shares were up about 14% on Friday as of this writing, adding around $12 billion in market value. But what exactly did Friday's buyers pay for?

Image source: Getty Images.

Tenev's pitch

Tenev's case is that tokenization fixes how the market settles and moves shares. Trades could clear in real time instead of the next business day, shrinking the collateral demands that build up between a trade and its settlement.

Those demands are the same pressure that forced Robinhood to restrict buying during the 2021 GameStop frenzy, an episode Tenev pointed to directly. Tokenization could also bring around-the-clock trading and faster transfers between brokerages.

And Robinhood isn't waiting on Washington to build the product. The company already offers tokenized U.S. stocks to users in more than 120 countries, giving them economic exposure to more than 190 U.S. names, dividends included. The tokens are backed one-for-one by the underlying shares, though holders don't directly own them. What Robinhood can't do is offer any of this to Americans.

"It would be a strange outcome if the rest of the world could build the future of ownership around American assets while Americans themselves were left behind," Tenev wrote.

After all, securities laws set requirements around trading, custody, clearing, and shareholder rights, and putting a stock on a blockchain doesn't erase any of them. The Clarity Act is the vehicle meant to sort this out. It has been stuck in the Senate, facing a final voting window next month before Congress recesses ahead of the November elections.

Smaller than a day's trading

The market Tenev wants opened is tiny. All the tokenized stocks in circulation worldwide hold about $2.5 billion of value, according to data platform RWA.xyz, spread across about 1.7 million holders.

The financial services company's existing business dwarfs that. Revenue climbed 32% year over year to a record $1.31 billion in the second quarter, and it accelerated, up from $1.07 billion just one quarter before. Customers traded a record $956 billion of equities during the period, an 85% year-over-year jump.

Put another way, Robinhood's customers move more money through ordinary stocks in a single average trading day than the entire tokenized-stock market is worth. That, I'd argue, is the number this week's rally skipped past.

And the crypto corner of the business is the one that shrank. Cryptocurrency trading revenue fell 38% year over year to $100 million, even as equities revenue nearly doubled and event contracts revenue grew more than tenfold to $156 million. The second quarter set records because of everything else.

Robinhood: priced for the record pace

Of course, tokenization doesn't need to arrive for the growth stock to keep growing. The latest quarter set records on revenue, net deposits, and Gold subscribers. Net deposits reached $22 billion, average revenue per user climbed 24% year over year to $187, and total platform assets grew 32% to $369 billion. The business looks as strong as it ever has.

The valuation reflects it.

Shares trade near $108 as of this writing, at about 48 times earnings. The S&P 500 (SNPINDEX:^GSPC), for comparison, trades at about 29 times earnings. Robinhood's price already assumes the record pace continues -- and this is a stock that has traded as low as $64 and as high as $154 over the past 52 weeks.

Friday's jump paid for a next act on top of it all: an American version of a tokenized-stock market that worldwide, today, amounts to about $2.5 billion -- and a bill that still needs 60 votes in the Senate. Tenev may get his framework, and Robinhood already runs the product overseas, so it likely wouldn't be starting from zero.

But the record quarter was Robinhood's own doing, and Friday's extra $12 billion or so isn't. Some of that is Bitcoin's week. The rest probably leans on a bill that hasn't passed yet.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.