Robinhood equity token now live on Swarm
Tokenised equity is all-around fascinating, especially for cryptocurrency enthusiasts and lawyers.
Robinhood equity tokens are now live on Swarm.
What does that mean?
It means people can now purchase shares of the Robinhood trading platform itself, in the form of cryptocurrency-like digital tokens (Robinhood Equity Tokens, RHET). The equity part is nothing new since it's more or less just like shares. The novel element is the tokenisation.
"Secondary equities transactions and refinancing of legal entities which hold private company equity are not new in the United States," said Philipp Pieper, CEO of Swarm Fund. "What's new here is the tokenisation of these assets, and the doors opened by this innovation.
"One of the key innovations of tokenisation is that token owners can participate in the value creation of the very network they are part of. Swarm is bringing this paradigm shift to companies that are key players within this movement, but have yet to permit the network to participate."
Robinhood is a trading platform for both cryptocurrency and traditional assets, so RHET specifically is broadly similar, in some ways, to cryptocurrency tokens like Binance Coin (BNB) and KuCoin Shares (KCS) which entitle users to certain benefits on these exchange platforms – respectively, discounted fees and dividends from total trade volumes.
The key difference is that equity tokens like RHET can, in a way, represent a formal, legal share in a company rather than just being a kind of coupon guaranteed only by the platform itself.
Although in this case, it might technically be more accurate to describe RHET as a semi-official share of an official share of a company. Someone else is holding the equity itself, while the tokens represent a stake in that equity. Same difference?
Whether this is technically the same as buying and selling equity itself is a legally
grey fascinating area that many lawyers are probably going to have a lot of fun with in the future.
The fun has already started, with Coinbase previously sending Swarm a cease-and-desist notice for offering tokenised Coinbase equity, while Swarm remains confident that it was all obtained legally and through registered brokers.
The broad order of operations for RHET is as follows:
- RHET tokens are being pre-sold. Those who buy RHET are reserving a share of Robinhood equity down the line.
- Once the RHET fundraising goal is reached, Swarm will use those funds to purchase Robinhood equity through already-established channels. In this case, it will be through relationships with former employees and other equity holders.
- Ownership of that purchased equity will be determined by RHET holdings.
- RHET tokens are now functionally Robinhood equity itself.
It's worth noting that Swarm equity tokens are built to SRC20 standards. This is a particular set of standards for tokenised real-world assets, where token data includes information such as function, legal rights, location, transfer restrictions and everything else needed to formally describe ownership and entitlements.
The SRC20 standard itself has not been legally enshrined, but cryptocurrencies can be subject to existing securities laws, so equity tokens are arguably just as legally bound as "traditional" shares.
It's not entirely clear whether Robinhood as a company approves of its equity being tokenised and bought and sold or if it gave permission for it to be – or whether it even matters one way or another.
Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and ADA.