Robinhood CEO Spoke Out Against Issuers’ Right to Block Shares’ Tokenization
- Robinhood CEO said companies should not block the tokenization of their shares.
- Tenev named three principles that define the right to tokenize shares.
- At the same time, he insists that Robinhood Stock Tokens are separate financial instruments, backed by the underlying shares on a 1:1 basis.
Robinhood CEO Vlad Tenev said that public companies should not automatically have the right to block the tokenization of their shares if the relevant product does not change the issuer’s rights and obligations.
The conflict around Robinhood’s tokenized shares escalated after AMC Entertainment CEO Adam Aron criticized the platform over Stock Tokens linked to his company’s shares and those of more than 190 other issuers. He said such tokens are not registered under US securities laws, and that AMC has no involvement in their launch and does not approve of the practice.
Against this backdrop, a memecoin called MEME appeared on the Robinhood Chain network, tied to tokenized AMC: its FDV jumped 206,400% in a day. It was after this criticism that Tenev explained Robinhood’s position on whether issuers should have the right to block the creation of financial instruments linked to their shares.
According to Tenev, the issue of issuer consent becomes especially important as share tokenization spreads. He noted that after the launch of Robinhood Stock Tokens a little over two months ago, the company saw strong demand for instruments that give investors outside the US access to US stocks and ETFs onchain.
“Everyone should be able to access high-quality financial assets, wherever they live. At Robinhood, we’ve been working to make that vision real at global scale, starting with US stocks,” Tenev wrote.
What Position Robinhood Takes
Tenev linked the issue of issuer consent to three principles:
- Investor rights: shares of public companies are property that can be freely transferred. In Tenev’s view, holders of such assets should generally decide for themselves how to store and use them;
- Issuer authority: the company controls the rights associated with the securities it issues, but not all financial products that other market participants create on their basis
- Technological neutrality: the need for issuer consent should depend on the rights and obligations a product creates, not on whether it uses blockchain
Therefore, according to the Robinhood CEO, if a product changes the rights associated with the underlying shares, replaces the company’s official shareholder register, or creates new obligations for the issuer or its transfer agent, the company should be involved in the process.
At the same time, if a product is a separate financial instrument that holds freely transferable shares or references them without changing rights, obligations, or the official shareholder register, issuer consent, in Tenev’s view, should not be mandatory.
“A company should control the rights attached to its shares—not every lawful use of those shares once they’re in investors’ hands. Going onchain shouldn’t give the issuer a veto it never had offchain. And issuers certainly shouldn’t block an entirely new group of investors simply because they don’t understand the technology yet,” Tenev said.
Stock Tokens Use a Separate Financial Instrument
The Robinhood CEO explained that there are several ways to tokenize shares: an issuer can move its own shares onchain, an intermediary can tokenize ownership of the underlying shares, and a third-party company can issue a separate instrument backed by or linked to such shares.
Robinhood chose the third model. Stock Tokens are separately issued instruments backed by the underlying shares at a 1:1 ratio. They provide economic exposure to the shares, but do not change companies’ capitalization, their rights, or the official shareholder register.
According to Tenev, this structure should allow Robinhood to scale the product across different jurisdictions and work with thousands of stocks and ETFs without having to bring each company into the launch of a separate tokenized product.
Previously, lawyers expressed a similar position in a conversation with Incrypted, commenting on the rights of issuers and investors in the context of stock tokenization. More details in the article:
The discussion comes amid the rapid expansion of the tokenized assets segment. In particular, the memecoin launchpad pump.fun introduced the Custom Pairs feature, which allows users to create tokens on the Solana network pegged to tokenized stocks, major cryptocurrencies, metals, and other assets.
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Source: Incrypted