Interview: Robinhood's 7% Earn Product w/ Johann Kerbrat

Sy Taylor  0:00  

Welcome to Tokenized, the show focused on stable coins and the institutional adoption of tokenized real world assets. My name's Simon Taiyo, I'm your host, author of Fintech Brain Food, and head of market dev over at Tempo. And joining me today is Johan Cabrat, who is SVP and general manager of crypto and international at Robinhood. How you doing, sir,

Johann Kerbrat  0:20  

pretty good. How are you?

Sy Taylor  0:22  

I'm really well. We are in a stunning venue for Robin Hood International here in London today. What brings you to town?

Johann Kerbrat  0:29  

Well, you know, today we have a pretty exciting show. It's called The World is Flat, and we're going to talk about about more than 12 different products that we're announcing today. So really excited, and it's going to start in a few hours.

Sy Taylor  0:40  

One of the things that's always impressed me as an observer of Robinhood is your feature velocity, and the feature velocity, the amount of times you're doing these events seems like they're happening more often, and so first up, let's talk about the Robinhood chain public mainnet, which I understand is now launched across the globe.

Johann Kerbrat  1:02  

That's right, it's live in the next few hours. Obviously, it's a mainnet, so it's been like running for a little bit, but we're really excited, you know. We launched a test net in February in partnership with Off Chain. We've seen about 200 million transactions on this test net, and so for now, you know, for a long time, people were just able to interact with just fake transaction or fake assets on the on the test net. So now that we're able to go in the main net, people will be actually able to start developing on it. Our app, Rabinoon, will be able to use it as well as a wallet, and so we'll have a lot of new features that our customer can start using,

Sy Taylor  1:41  

and what are those new features? There's one line in this that really caught my attention, is there's out of the box DeFi primitives. So, there's the Robinhood chain, and that Robinhood chain does some things that I imagine other chains don't do, and one of those was that thing.

Johann Kerbrat  1:55  

Yeah, I think for us, what was really important is that at the beginning of the chain launch, we will be able to transact on it, so we have two partners. One is called Arcus. It's a platform by the team that was behind the YDX before, and the other one is Lighter. They are both launching an exchange for Spot and Perps on the on the chain, and we'll have a wallet that is integrating also with the chain directly. So we wanted to make sure that from the get-go, people will be able to interact with it. The second thing that we were really excited about was everything around AI. When we launched the chain, it was at the same time that AI really became mainstream, that everyone started to use it, create agents around it, and so we wanted to make sure that the chain will be ready for this. So we already have partners, again, preview Uniswap, that launch their skills on the chain, and so if you want to create an agent and you want to interact with some of this protocol, you can do it very easily, create your own wallets through preview very easily as well, and you can start playing with this idea of agents that are transacting for you or creating new interaction for you,

Sy Taylor  3:01  

so I know you have that in the core platform as a feature, but actually bringing it to the chain itself,

Johann Kerbrat  3:06  

that's right, and that's really the idea for us, is to make sure that no matter what platform you're using, you're able to access some of these core functionalities like AI,

Sy Taylor  3:17  

and so what does this mean for a Robinhood customer, what can they do on this chain when it goes live? What are going to be the interactions they're doing?

Johann Kerbrat  3:26  

Yeah, so for the main Robin Hood customer in the US, they will be able to start earning yields through our platform. We can talk about that in a bit more detail, and we're also launching at the same time a new version of our wallet, the Robin wallet that interacts directly with a, with a chain, so we will have a perpetual product that is connected with lighter, where you will be able to, you know, transact from commodities to stocks to actual crypto on perps, and the leverage can go from 20 to 50x depending on what contract you're using, and we are going to reuse the same simple UI and UX that made Robinhood famous. So it's made in a way that you know it's easy to use, you don't have to do complicated things. You can create a new long position on a contract just by moving the slider here and there, and we think that's very important, because a lot of time people don't want to interact with DeFi protocol, because it's too complicated, so we made that very simple,

Sy Taylor  4:28  

that simplicity of getting into perps as well, given everything we saw with Hyper Liquid, and the amount of momentum in the serious trader community, there's a famous picture I think from a trader on Wall Street with Hyper Liquid on top of Bloomberg. What are you hearing from your own customers about perps in particular, and how are you thinking about how they access that?

Johann Kerbrat  4:52  

Yeah, we think you know when we talk to our customer that perps is one of the most important assets for them, especially for. The more advanced traders, and so a lot of time, what they were kind of complaining about was the complexity around it. To open a position, you had to fill a lot of fields, and it was complicated to maintain with the time. So that's really where we focus our UI and UX. We also launched perps in the EU on our centralized platform, and that's something that we're opening more and more today. We're going to announce that we will launch contracts for commodities and also for ETF, which I think was something that our customer, where we're really excited.

Sy Taylor  5:35  

And let's zoom into this chain for Europeans, because I know you launched it in Cannes originally. Now you're back in London. I mean, post Brexit, we're still part of the continent, not again, not too

Johann Kerbrat  5:44  

far, we're

Sy Taylor  5:44  

not far away. So, what is it you see the chains doing for the European and UK user base specifically?

Johann Kerbrat  5:52  

Yeah, we don't have a very specific product that is just for UK and European customer, but one thing that we are excited about is our new stock tokens that are going to be available on the chain directly. You will be able to use them outside of our centralized platform, so you'll be able to transfer them into your non-custodial DeFi wallet. You will be able to use them as collateral. You will be able to send them to anyone who's eligible, and so that wallet with the stock token experience is going to be available in 120 plus countries, and so we think that's a big improvement from from last year. For example, the token are still back one to one, so that's something that we want to make sure, and also if something happened to Robinhood, you know you still have your position secured, so everything should be good there.

Sy Taylor  6:41  

There's a lot in that, and I want to unpack them, but you said something really interesting, which is, if you want to use those securities as collateral, it's hard for a consumer to do that today. Like securities lending at the retail level, or even the prosumer level, is almost impossible for many people, but in DeFi, sort of taking collateral and using it against something to borrow against and to make further trades is entirely possible. So, are you seeing demand again from your early adopter user base for that specific use case? And what does that look like?

Johann Kerbrat  7:14  

Yeah, a lot of focus somewhere don't want to just keep their position in cash. Sometimes on another platform, if you want to be able to access to margin or other things, you, you can only use specific type of assets if you want the highest margin possible, or you can only use cash with stock tokens. You can actually keep your position in what you have the most interested. Let's say you want to, you know, a wide ETF, or let's say you want, you have a large position on a specific stock, and you can still use that as collateral for what you want to do on maybe perps or maybe something else, maybe we just want to borrow to be able to purchase a home or something like that. So I think for us that was really the important point is we want to make it accessible to our customer and we want to let them do what they want to do, no matter of their net worth. I think this type of thing, where you were able to borrow against your stocks, is actually a lot easier when you have a very high net worth. Yes, when you're a smaller portfolio holder, that it's difficult, and banks don't want to let you do that, or they don't really want to spend the time on it. And because of DeFi and everything being automated through smart contracts, you can actually do a lot more of these things very easily, so that that's the reason why we wanted to make it available.

Sy Taylor  8:28  

It kind of goes to the core of the Robinhood mission of like democratizing access to some extent, and it's something that I've wanted for many, many years with stocks and various private company shares. I don't know if you saw, but there was a couple of issues around the recent SpaceX IPO, where there were some other companies who had sort of sold tokenized equities, some sort of token that represented a claim on the pre-IPO SpaceX, but they were unable to fulfill it, and what does somebody actually hold when they hold one of the stock tokens that you've built, and how do you give them confidence that that is actually going to be redeemable for stock, especially if it's pre-IPO or something like that?

Johann Kerbrat  9:12  

Yeah, so right now we haven't launched stock tokens for pre-IPO, but we have a product called IPO Access in the US, where before an IPO you can actually put a claim on how much you want to buy of the IPO at the opening, and you know, for SpaceX we had one of the largest retail allocations, because Robin Hood has become such a big brokerage in the space in the US that we're able to get this larger allocation, and I think we're seeing more and more of these companies going public, thinking about retail now, and not just the high net worth retail, but also the platform like Robinhood. So, I think that's a big change that we've seen in the past few years that is really positive for the stock tokens for us. What is really important is that when you buy. Stock tokens, we have at the same time the amount in the equity that we're buying, so for us it's a condition we cannot issue another token until we have that, so either secured through an SPV, like we did last year when we did our private stock tokens for OpenAI and SpaceX, or when it's a public company we buy at the same time, and only when we have the confirmation on the brokerage side, we're able to issue the token for us. We think you know trust is the most important part, especially in crypto. There are so many things that happened in the past, if you think about, you know, the FTX and other days, and so for us it's really important to make sure that we have that, so that you know if tomorrow Robinhood goes bankrupt, which you know, very unlikely, but if something happens, the customer can still redeem their position. The still

Sy Taylor  10:48  

under custody, there's still a bankruptcy, remote sort of set of set of conditions, and in some ways being Robin Hood and the brokerage and sort of clearing and all of the infrastructure you've had to build sort of gives you an interesting leg up in a lot of those things, whereas I observe a lot of companies are now trying to do tokenized equities, tokenized stocks, and they were before a crypto exchange, or they were something else, and now they're having to go to a third party to potentially get access to those to those stocks. So you mentioned at the outset earlier on as well, that you were really excited by the Earn product, so excite me. What is the Earn product?

Johann Kerbrat  11:26  

Yeah, so we are launching Robinhood Earn, which means that in the main application of Robbie Node, so not the self-custody wallet, or not on the chain only, but through the main application of Robbie Node, you will be able to create a smart wallet that is your self-custody wallet, interact directly with a chain, and we partnered with a protocol named Morpho, which is one of the leading protocols for yield to create vaults for our customers. You will be able, in the flow, in a few tabs, to buy USDG, which is the stable coin we're participating with and landed directly on the on those vaults, and one of the things that we saw at the beginning was that when competitor launched similar products, they will have an AO rate, and as soon as you know a few hours pass, the AO rate change. So for us, what was really important was to make sure that we had a more stable and predictable rate. So we are going to launch approximately at 7% API, and you know things will will change with time, but at least that's our launch rate. The second part that we're already excited about is we wanted to bring some safety value to our customers. We always thought that there was a bit of this like conflict between going on DeFi and getting higher yield, but also taking more risk. So we partnered with Lloyd of London and Realm to create an insurance package to insure against some of the smart contract issues, or if there is a primer on the vault or the chain, and so that we are really, really excited about it's going to be one of the largest insurance programs for crypto product like this, as far as we know, so we are really excited by it, and the fact that we are starting to see this connection between the 27 million funded account on Robinhood and our Robinhood chain, which is like a crypto product, that's really the exciting part, you know. That's why I joined Robinhood initially, was to connect so all these millions of customers into the blockchain world,

Sy Taylor  13:27  

and so by embedding this capability directly in the core Robinhood app, rather than just in the Robinhood wallet, that's a way to kind of achieve that.

Johann Kerbrat  13:34  

Right, we are going to have the ability for 27 million customers to actually start to interact with with a crypto product, which I think is really exciting,

Sy Taylor  13:44  

but in order to do that, you wanted to create the safety around it, because the, you know, where does the yield come from? You know, what do you actually own is something we've seen too often before with Terra Luna and famous other blow ups, so definitely hear the insurance, but what does, where does the yield come from on about 7%

Johann Kerbrat  14:02  

Yeah, so on this product we are partnering, like I said, with Morpho. We're also partnering with a curator named Steakhouse. We're also partnering with other partners like Athena and others, and the goal is to create these pools where you're going to have swaps on the spot, also on perps, you will start to see USDG being more and more used, and so market maker, liquidity provider, and other partners that need this USDG will pay the yield, and I think you know slowly we are going to see the pool increasing in terms of size. USDG is still a pretty new stable coin, and for us it's also exciting because USDG is one of his first stable coins that is actually passing the name to either partner like us or to customers, and it's a bit different from, you know, the other stablecoin out there that are just keeping it for themselves or keeping for a couple of partners only

Sy Taylor  14:58  

under the hood. Once that's that yields being generated, is that all happening on the Robinhood chain too?

Johann Kerbrat  15:05  

That's right.

Sy Taylor  15:05  

Okay, so you've got like USDG, Robinhood chain, Morpho Steakhouse curators, but that's there in the core application.

Johann Kerbrat  15:15  

That's right.

Sy Taylor  15:15  

And how will you be introducing users to this? It's like a new way of generating yield, most of your customers probably not familiar with it, you know, the pro streamers and the pro trader segment, probably more so the crypto users, but, but how are you thinking about introducing that as part of the overall hierarchy of the the application?

Johann Kerbrat  15:35  

Yeah, it will actually be in the in the main investing tab, so the first tab of the of the application, and like everything we do at Robinhood, we put a lot of educational content and screen within the app, so before you can even start, you know, interacting with the product, you will see multiple M and K kind of like teaching the customer what is going on behind the behind the hood, and obviously, you know, we think a lot of customers are going to start it a little bit and see how it goes, and then they will start engaging with it more.

Sy Taylor  16:08  

Is there a world in which other folks are building on the Robinhood chain and they build something really interesting for their user base and that starts to show up inside the Robinhood app? Is that an ambition for you in some way, shape.

Johann Kerbrat  16:21  

Absolutely, we want people to be able to develop on the chain, so that's why it's permissionless. We want to make sure that we can support multiple types of developers, that's why we have multiple ones building like exchanges or decentralized exchanges. But if at some point we see something that is very exciting, we want to make sure that it's visible to also our customers, so either on the Robin app or on the wallet, we think that giving this interaction with simple UX, simple UI, and thinking about the distribution that we have makes the chain a pretty advantageous one to build on. And is there a world in which

Sy Taylor  16:55  

the wallet and the core app start to merge, or is that still too tricky?

Johann Kerbrat  17:00  

I think for us, we see the wallet as also a way to expand places where revenue can be. We are available in the US, in the UK, in the EU, now in Canada, starting today, but we're still not in hundreds of countries, and so for us, that's where the wallet can be useful, and that's where you will see that the stock token experience, the perpetual experience, and the crypto spot is really well made to make sure that our customer can access a Robinhood-like experience, even though they are not in the US.

Sy Taylor  17:32  

What have you learned since launching the Robinhood wallet, since the testnet of the chain? What are the things that have surprised you in that journey,

Johann Kerbrat  17:42  

you know, we had almost 200 million transactions in a few months, so that was a bit surprising for us, because it's not the first chain that has launched, to be, to be honest. So we were excited to see how many people wanted to interact with it. I think the other thing that we've been thinking about is how quickly things can move on the blockchain, you know it's 24/7 it's real time, so we have, we had to change a bit how we monitor things internally, but overall we're excited about this.

Sy Taylor  18:08  

Yeah, no, the monitoring 24/7 I'm assuming you've got people that sleep at some point,

Sy Taylor  18:14  

and but and you've had to build new systems and tools, I guess

Johann Kerbrat  18:17  

we have on call systems and editing system, if something is out of the order, we also have a team that are international, so you know there's always something that is kind of not sleeping, but it's always kind of the interesting part with crypto compared to the traditional brokerage that only you know take a break on the weekend or you know at night,

Sy Taylor  18:37  

yeah, then crypto traders like the markets themselves seem to never sleep, that's for sure. So, we're in the UK, the FCA and the Bank of England just published their stablecoin rules. I'm interested in your perspective on Europe and the UK from your global vantage point. How are you thinking about the digital asset market here? How are you thinking about the user base here? Are they underserved, overserved? Is regulation helpful? What are your thoughts?

Johann Kerbrat  19:05  

Yeah, you know, I think the regulation in Europe, in general, have been pretty advanced. If you think about the EU, they had the MICA framework that started last year, and you know, it was pretty advanced compared to even the US, where we are still waiting on the Clarity Act. I think there are some issues around the stablecoin bill, even the one that passed in the UK, where that prevention to pass yield to customers is, according to me, a bit of a way to penalize the customers if they want to hold stablecoin instead of holding just hard digital currencies, and for us we think it's a bit of a wrong way of thinking about it, you know. Customers want to use stablecoin because it's more practical, it's easy to send, you can send it 24/7 on weekends, you know, you don't have to wait for the banks to reopen or anything like that, but right now they are at a disadvantage if they all. Stable, they are not going to get any yield on it, but if they hold euro or pound, they are able to get some yield. So, I think that needs to evolve a bit, and we need to change that thinking. So, on the other side, in the US, we are thinking about changing that rule if the customer is transacting at least with a stable coin and doing things with it, so I think that's what is important, because I don't think we should penalize retail customers that are utilizing the technology. It's a bit of a anti climatic in my opinion, but other than that, you know, we're excited to be in the UK for a long time. We have all brokerage services, we have options, we also offer ISAs with a 2% deposit match, so that's something that we really like to do. And we are going to launch crypto soon, also within the main UK app, so that you can have all in one app kind of system with all your assets in one place. You don't have to transfer between accounts and this kind of thing.

Sy Taylor  21:00  

I'm excited for that. I was a free trade user for a long time. As a bright, we don't have a product like Robinhood, and we sorely need one. And talk to me about where sort of agentic and AI is kind of coming into this picture. I know you said you designed the chain a little bit, Fallout, and for the traders. Where did you think that AI and crypto are intersecting the most in your daily life. Is it mostly on that trading side at the moment? Are there other places it could be for portfolio rebalancing and other things? Yeah, so we launch the MCP tool for main US product, and we are going to bring that into the UK in the future, but customer can already interact with the MCP and basically watch what's going on in the market, see if they want to rebalance position. We also have an agent called Cortex that is going to give you digest about what's going on in the market for your portfolio or for a specific crypto or equity, and you can also

Johann Kerbrat  22:00  

interact with it, and when you interact with the agent, it will help you know, for example, your tax slot decision, like these kind of things. We're going to show that today at the event, so you should watch it and see for yourself. But I think what's really interesting is this idea that for a long time retail customers were at a disadvantage compared to institution, you know, institution can have a room full of analysts, they can have Bloomberg terminals that are very expensive, they can have, you know, smart models that are doing a lot of things, and the retail is just like kind of in the back trying to follow things, and you know how quickly Bitcoin is moving, and all the news that you can see on an asset like Bitcoin, and it's 24/7 so you know some people have to sleep, but your agent can actually do all of that for you. So we wanted to make sure that we were giving the capabilities for the customers to build the agent of their choice and be able to interact with their Robinhood account still with safety mechanism, so it's a separate account within Robinhood, so you can, you know, found it with as many or as little cash as you want. You can remove the access at any point. You can have limits, so it's made in a way that it empowers you to actually build on top of AI and to interact with the markets.

Sy Taylor  23:15  

And what have you seen people doing with that in its early days in the US? And what do you think the use cases are going to evolve towards?

Johann Kerbrat  23:22  

Yeah, we launched it a few weeks ago, and we already saw 70,000 accounts created around this product, so we see some excitement, and there is a bit of everything. We have people that are just monitoring, you have people rebalancing, you have people putting triggers based on what the market does or what the news are doing before launching an order, but I think what's interesting for our side is to see, like, how many people are excited to engage with that product. You know, when the AI agents were starting a few years ago, a lot of people were thinking it will be just for a very specific class of engineers that are very tuned into all the AI world, but actually, with the development in the past few months, you see actually almost everybody is starting to interact with agents more and more.

Sy Taylor  24:08  

Definitely talking to a production team and a presenter here who can't help but vibe code is it's just a better way of getting things done, but having a regulated institution put controls in places is really, really helpful, but giving me that sort of flexibility to interact via what is essentially a new channel of MCP, and have my agent do so. I'm really interested in how you think the market is going to perceive these new announcements in the UK, and what you will look for to know that you've been successful with the earned product with the chain, you know, what do you, what do you think those metrics are, or those anecdotes are a couple months down the line, where you go, yep, that was a good launch, or you know, that's not kind of where we wanted it to be.

Johann Kerbrat  24:52  

Yeah, we have all kind of metrics, you know, we are fairly sophisticated companies, and we try to match. Um, all expectation with different metrics, different experiments, so that's why if you and I, we open the app at the same time, we may have different UX and UI because of that, but I think for us, what really matters is customer feedback. So we spend a lot of time talking to customer these events are made for our customer, like we will have 150 plus UK retail customer coming here, and the goal for us is to talk to them and understand, like, what does it like, what does it not like, what does it not understand, what's missing that will make them more excited to use Robinhood, and based on that, we adapt a product, and I think that's really what we love to do. At no point we feel like the revenue, the app is done, you know, it's never done, it's never the end of all the feature we want to build.

Sy Taylor  25:48  

A couple years ago, crypto was all the hype, now it's AI is all the hype. What keeps you going through these sort of like hype cycles to stay, stay in the game on this conversation to continue to have conviction, and what sort of support do you have internally to do that? Because I can't imagine how many companies had a crypto initiative in 21 that killed it thereafter, but you sort of seem to have stayed the course.

Johann Kerbrat  26:14  

Yeah, you know, I think a lot of that is for the main reason is that our funders were always really a believer into the idea of democratizing finance and making sure that every financial asset is available to customers. If you think about it, we launched crypto in Robinhood in 2018 which was like the absolute bear market, where everybody was thinking that, you know, Bitcoin was over, and what we do during this cycle is that if there's a down cycle, we actually focus on building, and when the market comes back, we have all these tools that are ready to be used by our customers, and if you think about, you know, the past year and a half, we've been really focusing on our administrator. We launched a lot of new features around pricing, for example, today we're just announcing maker orders, where you know you can bring liquidity to the exchange and pay as low as 0% fees at all, and that's the kind of thing that we need to keep doing, and making sure that when we talk to our customers, we also understand where the trends are going, so you know the AI trend started like a year ago, when we're starting to talk to our customer and seeing that they wanted to get more information for what's going on online, and instead of looking at all the sources or going on X to know what's going on, they want to have digests, and so that's when we are incorporating it in the app, so you know, slowly by talking to customers, you just know what's going to happen soon.

Sy Taylor  27:34  

It's a crazy idea, talk to customers and build what they ask for. I'm really, really glad that we got to do this interview today here in London, and you're about to go and speak to a bunch of folks, and kind of have that conversation, but for the 150 or so that are here, I'm sure they'll get to talk to you, but if somebody's watching or listening and they want to get something from Robin Hood, they've always wanted something, a crypto feature, how do they get hold of you, and what should they be doing?

Johann Kerbrat  28:02  

You know, they can reach out to us on X or any social. We monitor it, and we look at it, and we make sure that when there is feedback, we take it into account. We also have a customer support that is 24/7 so you can also talk to them, and we always get the feedback from our customer agent,

Sy Taylor  28:18  

which I think is a unique thing about companies of your scale and vintage, which is in the UK, in particular, if you've worked with brokerages before, that's not always true, that when you message somebody, you get a reply, or that it's taken into the product team. So, I think that promise of you will be heard, and we seek that feedback, and we drive our product around it, is it's something that the British here, in particular, in the European area, where they need to see it.

Johann Kerbrat  28:42  

Well, you know, just don't hesitate, send us feedback. Heck,

Sy Taylor  28:45  

yeah. All right, Yuan, I want to thank you so much for coming on to Tokenized, and we'll make sure that people are liking and subscribing to Tokenized, so you get more interviews like this in the near future. And I'm excited for your event. Let's do this. All right. Thank you very much.