Written by: Deep Tide TechFlow

As the dollar stablecoin gradually gains market attention, companies inside and outside the crypto circle have begun to see US stocks as the next target.

At the end of May, the US cryptocurrency exchange Kraken announced that it would offer tokenized popular US stocks to non-US customers; on June 18, Coinbase's Chief Legal Officer Paul Grewal revealed that the company was seeking SEC approval for its launch of a 'tokenized stock' service.

Tokenization of US stocks is gradually becoming an explicit business.

Now, this business may welcome a new player --- the well-known American internet brokerage, the 'retail investors' alliance', a key force in the movement against Wall Street --- Robinhood.

Previously, two insiders from Robinhood revealed to Bloomberg that they were developing a blockchain-based platform that would allow retail investors in Europe to trade US stocks.

According to informed sources, the platform's technology selection may be Arbitrum or Solana, and the specific choice of partners is still in progress, with the agreement yet to be finalized.

This news can be interpreted in at least two ways.

First, Robinhood directly integrates Arbitrum L2 into this new platform that allows European users to trade US stocks as the foundational layer for its blockchain trading;

The second, more likely scenario is that Robinhood plans to utilize Arbitrum's Arbitrum Chains feature to develop a dedicated L2 chain based on Arbitrum's tech stack (Rollup protocol, EVM compatibility, etc.).

Regardless of which situation ultimately prevails, market sentiment has already been stirred.

This also means that for the business of US stock tokenization, Robinhood may take the initiative to create a dedicated L2, which is more conducive to on-chain settlement and specialization.

At the EthCC event in Cannes, France, on the 30th, Robinhood will announce an important declaration at 17:00 local time (23:00 Beijing time), which has led to speculation about its L2 and US stock tokenization business.

Meanwhile, A.J. Warner, the Chief Strategy Officer of Offchain Labs, the company behind Arbitrum, will also attend the meeting, providing more imagination space for simultaneous official announcements.

Recently, the price of ARB has been slightly dull, but within 24 hours, it once surged over 20%, ranking high on the cryptocurrency gainers list.

More suggestively, Robinhood's European X account commented 'Stay tuned' under a discussion thread about the meeting agenda, which, combined with Bloomberg's report on providing US stock trading in the European region, increases the likelihood of an official announcement regarding this function.

Everything has traces to follow

Robinhood's idea for US stock tokenization is not a sudden inspiration.

In January this year, CEO Vlad Tenev criticized the current regulations in the US, claiming that the US has yet to provide a clear framework and rules for registering security-type tokens, hindering the promotion of tokenized products.

In a podcast in March, Tenev directly stated, 'Right now, if you're overseas, it's very difficult to invest in an American company.'

This also touches on the pain points of many investors who focus on US stock trends but are physically not in the US; they urgently need a smoother method to trade US stocks.

At the same time, Tenev indicated that he was considering tokenizing securities and noted that this would be part of a broader push to integrate digital assets into the financial system.

Looking now, there are signs that the groundwork is being laid.

Currently, Robinhood's customers in the EU can only trade cryptocurrencies, and the company obtained a brokerage license in Lithuania last month, allowing it to provide stock trading and other investment services in the EU.

Moreover, Robinhood signed an agreement last June to acquire the cryptocurrency exchange Bitstamp, and after the transaction is completed, Robinhood will be able to use Bitstamp's MiFID multilateral trading facility (MiFID) license to provide crypto-related derivatives.

With the license obtained and regulatory compliance achieved, the next step is to consider which chain to choose for implementation.

Why might it be Arbitrum?

From a technical perspective, Arbitrum is a fully EVM-compatible L2 solution, meaning Robinhood can seamlessly migrate its existing Ethereum smart contracts and development tools without significantly altering its tech stack.

The compatibility with EVM can be said to be the key for large fintech companies like Robinhood to rapidly go on-chain; if they can leverage Ethereum's extensive developer community and existing infrastructure, who would set it aside?

Furthermore, Arbitrum's Optimistic Rollup technology has achieved a balance between transaction confirmation time and cost; in contrast, ZK Rollup incurs higher costs and relatively slower transaction confirmation times; Robinhood, as a platform that needs to handle large-scale user transactions, is more likely to prioritize Arbitrum's mature technology and lower development threshold.

On the other hand, from a business perspective, this choice also avoids Coinbase.

Base is an L2 launched by Coinbase, which uses the OP tech stack, but since Robinhood competes with Coinbase in its main business, it is unlikely to run the US stock tokenization business directly on Base.

Arbitrum offers options for custom L2 chains (Arbitrum Chains), allowing Robinhood to distinguish itself from Base.

One piece of information you may have overlooked is that Robinhood and Arbitrum actually have cooperative experience.

As early as the 2024 ETHDenver, Robinhood announced its cooperation with Arbitrum to simplify users' access to Arbitrum through the Robinhood Wallet.

This indicates that both parties already have a foundation for technical integration and strategic alliance, and Robinhood may choose to continue this cooperation to leverage Arbitrum's existing technical support and brand effect to further expand its business.

Imitating Base, distinguishing from Base

Although the news about Robinhood building its own L2 with Arbitrum has not been officially confirmed, it has already sparked widespread discussion in the crypto community.

The sharpest voice among them believes that this approach is a simple imitation of Base.

Base, launched by Coinbase, adopts an open strategy, inviting external developers to build DApps, thereby expanding the ecosystem and attracting users and assets. The success of Base is partly attributed to this open ecosystem (for instance, projects like Aerodrome and Uniswap have migrated or built on it).

If Robinhood also builds an L2 based on Arbitrum, open to external developers to expand the ecosystem and run more real asset on-chain use cases, despite the different tech stacks, this would already be highly similar to Base's business strategy.

In terms of perception, the key to creating this 'imitation' impression is the lag.

Don't forget that Coinbase launched Base at the end of 2023, while Robinhood only announced its Arbitrum L2 plan now. This time difference makes Robinhood's actions appear to be a 'follow-up' reaction to Base's success rather than an original strategy.

In traditional business fields, fintech companies tend to replicate verified models, which is indeed a safer strategy; but imitating Base means that Robinhood will compete directly with Coinbase, which has established a first-mover advantage through Base. For Robinhood to overtake, it needs to invest more resources and effort.

The well-known data platform Token Terminal also pointed Robinhood in a 'clear direction', which is to amplify its advantages as an internet brokerage and take a 'closed ecosystem' route contrary to Base:

Do not invite external application developers to join its L2, instead migrate all of Robinhood's existing financial products (such as trading or investment tools), assets, and users onto the chain, allowing users to operate directly on the chain rather than relying on traditional centralized systems.

This idea is more Crypto Native, combining Robinhood's existing customer base with pure on-chain practices, but a more aggressive approach also means greater resistance, and Robinhood may not necessarily follow this path.

If we step out of Robinhood to observe the entire Ethereum ecosystem, some voices believe that this may exacerbate the fragmentation of Ethereum L2.

Ethereum L1 has lost a lot of initiative in the current ecosystem filled with L2s; whether the performance is good is secondary, more importantly, it is completely marginalized and pipelined. Creating a dedicated L2 is easy, but revitalizing Ethereum's former glory is difficult.

Ultimately, how Robinhood will choose remains to be seen, and we may get the answer after today's ETHcc.