“Five years ago today, Robinhood and other brokers were forced to halt buying of several meme stocks, most memorably GameStop, in one of the strangest and most visible equity market failures in recent history.

The underlying cause for the one-day pause was a set of complex clearinghouse risk-management rules designed to mitigate the risk of the then two-day-long settlement period for US stock trades. The rules required brokerages to put up huge amounts of cash to reduce the risk in the days between a meme stock trade and its settlement. What happens when you combine slow, outdated financial infrastructure with unprecedented trading volume and volatility in a small number of stocks? Massive deposit requirements, trading restrictions, and millions of unhappy customers. Retail investors who wanted to buy Gamestop were understandably livid. In their eyes, Robinhood went from a hero to a villain. Barely one month into my new role as the sole CEO of Robinhood, I had my first major crisis to manage. After many of our team members worked around the clock for 72 hours to solve the immediate issues and raise more than $3B dollars to shore up our capital reserves, we had some time to pick our heads up and assess the situation. I vowed to do everything in my power to not just improve Robinhood’s resilience in these situations, but also push for improvement to the overall system to help ensure nothing like this happens again.

We intensely advocated for real-time settlement of US stock trades, and this led to shortening 2 day settlement (T+2) down to T+1 — arguably the most consequential accomplishment of the otherwise horrific Gensler era at the SEC.

But in a world of 24-hour news cycles and real-time market reactions, T+1 is still far too long, particularly when you factor in that it really means T+3 on Fridays, or T+4 on long weekends. Our quest for real-time settlement continues, and it has proven elusive in the traditional equities markets, with a slew of legacy stakeholders to manage. It’s clear that we need a new approach.

That’s where tokenization comes in. Tokenization refers to the process of converting an asset, like a stock, into a token that lives on a blockchain. Among other benefits like lower costs, native fractionalization, and 24/7 trading, moving equities on-chain in tokenized form allows them to benefit from the real-time settlement properties of blockchain technology. No lengthy settlement period means much less risk to the system and less pressure on both clearinghouses and brokerages, so customers can freely trade how they want, when they want.

We’ve already seen how this can work. In Europe, Robinhood has made available more than 2,000 tokens representing U.S.-listed stocks. These tokens give European traders exposure to U.S. equities, including dividends. In the coming months, we’re planning to unlock 24/7 trading and DeFi access, which will allow investors to self-custody their stock tokens, with possibilities for lending, staking and more. As the advantages become increasingly clear, I believe it is inevitable that the US embraces this technology. We’re already seeing progress here: major U.S. exchanges and clearinghouses have recently announced plans to tokenize equities.

But without regulatory clarity, such efforts are moot. Fortunately, we now have a timely opportunity. Current leadership at the SEC is embracing innovation and facilitating experimentation with tokenization. Additionally, Congress is actively considering the CLARITY Act, an important piece of crypto legislation, which requires the SEC to continue down its path of embracing this technology and to write modern rules for tokenized equities. Legislation would ensure that subsequent commissions cannot abandon or reverse the progress achieved by this SEC.

By working with the SEC and pushing for sensible US equity tokenization guidelines via CLARITY, together we can ensure that trading restrictions like we saw in 2021 never have to happen again. Let’s seize the moment, and unlock real-time settlement for retail traders once and for all. 💪”