As every investor knows, fees and commissions have a material impact on profits. The fewer steps you make to purchase the selected asset, the lower your costs will be.
The rising popularity and adoption of crypto around the world triggered demand for purchases of traditional assets via cryptocurrencies.
For example, you have some crypto and want to buy a traditional asset. To do this, you must perform several transactions. First, you must sell your crypto to get fiat outside of crypto services, and use this fiat to buy the asset you selected. After you have sold the asset, you must transfer your fiat to a crypto service and buy crypto.
As a result, you make two crypto-fiat exchanges, as well as several transfers between traditional and crypto services, which increases your costs and leads to loss of time.
The solution to this problem is obvious: crypto clients should have the opportunity to buy traditional assets without leaving the crypto universe. To make this happen, traditional assets should be tokenized, which means that crypto services must issue tokens that represent rights to these assets. The next step implies working with regulators to make crypto purchases of those tokens possible.
That’s exactly what the well-known broker Robinhood has been thinking about lately. Bloomberg has recently reported that Robinhood has provided European clients with access to tokenized U.S. equities and has started talks with EU regulators. At this point, Robinhood clients will have to use fiat to buy those tokens, but it’s just the first step in the creation of a global tokenized marketplace.
Interestingly, Robinhood plans to issue tokens for equities of private companies like OpenAI and SpaceX. OpenAI’s Sam Altman has already criticized the idea, but nothing can stop progress — there’s demand for OpenAI tokens, which means that supply of such tokens will ultimately emerge.
In the future, Robinhood plans to bring tokenized trading to U.S. and UK customers. The broker started in Europe due to high demand for U.S. equities.
New York and London are major financial centers, so U.S. and UK citizens have plenty of financial options to choose from. In Europe, the choice is limited and spread across various markets, which are located in different countries. European clients often ignore their home markets and focus on U.S. exchanges and/or crypto.
The transfer of assets to blockchain cuts costs and also serves the key problem of traditional financial markets, which is named clearing.
In traditional markets, the settlement time differs from the actual transaction time. In Europe, exchanges operate at T+2, which means that transactions are settled two days after they were made.
The delayed nature of settlements creates multiple problems for clients. Thus, the transfer to blockchain is not a question of “if”, but “when”. Once Robinhood launches its tokenized service in the U.S. and gains traction, clients will put pressure on exchanges to transfer equities to blockchain. Ultimately, this will significantly improve access to traditional assets to crypto users and boost demand for crypto as well.