Simply put
- Johann Kerbrat from Robinhood suggests that changing investor certification rules could boost the growth of tokenization in the U.S.
- As it stands, current regulations keep 90% of U.S. investors from investing in early-stage companies within the chain.
- This year, Kerbrat formally advised the SEC to include a knowledge base and self-certification aspects in the accreditation process.
To make the most of tokenization, Johann Kerbrat, Senior Vice President and General Manager at Robinhood Crypto, believes it’s essential to overhaul investor accreditation requirements. This change would allow everyday investors a bit more freedom.
During a recent chat with Decryption, Kerbrat mentioned that blockchain could eventually aid startup founders in raising funds transparently, which would help them maintain control. However, he pointed out that, currently, U.S. regulations exclude 90% of Americans, especially if they earn less than $200,000 a year.
Usually, as startups evolve from passion projects into publicly listed companies, they rely on venture capitalists and private equity firms to gather funding. When entering stock exchanges, investment banks play a critical role, including managing the significant bank fees associated with the process, as Kerbrat noted.
According to him, as intermediaries offer their services on the path to an initial public offering, founders risk losing control due to shared dilution and other challenges. He also mentioned that platforms like Nasdaq have their own replacement fees.
“These processes create intermediaries that can overpower the company without adding value for customers or employees,” he said. “We need a new way to raise money, one that moves beyond just launching new coins to introducing new products for startups through tokenization.”
Kerbrat believes that Robinhood can help startup founders bypass these intermediaries by leveraging its “huge retail platforms” alongside its connections with market makers.
Rather than judging based on factors like how much an investor earns, he argued that “checkpoints should focus on education” and whether investors understand the risks involved in early-stage investments.
In April, Kerbrat submitted a letter to the SEC suggesting that the certification process should involve knowledge-based testing and self-certification elements.
“To promote the growth of tokenization, a fresh regulatory perspective is vital, and we need a federal-level framework to ensure market consistency,” the letter stated.
Tokenization can apply to various assets, whether they’re stocks, bonds, or even real estate, represented by a token on a blockchain. Recently, the Crypto Exchange Kraken announced it would allow European users to trade U.S.-listed stocks.
Supporters of tokenization, like BlackRock’s CEO Larry Fink, recognize the potential for profitability alongside democratizing the market. He has noted that tokenization can facilitate more efficient market operations and quicker settlements.
I think while there are many benefits, several obstacles remain. Kerbrat emphasized that outdated regulations hinder technological advancements in tokenization.
