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Sunday, July 25, 2021

DeFi’s Case Has Already Been Made By Robinhood

Vlad Tenev, the CEO of Robinhood proposed several changes in a blogpost that would bring the concept of DeFi, or blockchain technology to the forefront. Interestingly, the proposal was for a few changes in the regulations that govern cryptocurrency. The changes would allow different trade securities to start settling almost immediately. This further implies that money will be changing hands within minutes rather than bringing in the equation of days. And while Vlad Tenev doesn’t exactly mention DeFi- this is what the technology is. 

Vlad Tenev Believes DeFi Might Just Be The Solution To Increasing Market Activity

The proposal from the CEO of Robinhood comes after the company stopped its users from purchasing important and popular stocks such as AMC and GameStop. This came even after traders using Reddit decided to increase the trading volume- leading to increasing prices. In quite a heartfelt note, the CEO mentioned that he was equally as sad as the users of Robinhood. Tenev wrote further that there was absolutely no reason as to why one of the most efficient financial systems ever couldn’t settle easily in real-time. 

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The CEO of Robinhood has already found fault within several clearinghouse security systems. To the uninformed, a clearinghouse is nothing but an intermediary working on introducing sellers and buyers to each other. They also end up finalizing trades and collecting payments. Currently, the system is supervised by the SEC along with the Depository Trust and Clearing Corporation- a private enterprise. They require a settlement period of a couple of days. 

Tenev complains that a DeFi is absolutely necessary for such a circumstance because most of the investors are left hanging. They have to wait for quite some time to get their trades cleared off- after which the interim settlement might take even more days to settle. He also mentioned that while the requirements posted by the clearinghouse is simply a measure to mitigate risk, there are risks to it. A DeFi would be much better suited than the current program- for market activity last week did make it clear to all that such a long cycle of settlement might just have consequences unaccounted for.

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