Balaji S. Srinivasan Predicts Fintech and Crypto will Converge as Robinhood CEO Says we Must Update Financial Infrastructure

Balaji S. Srinivasan, a prominent angel investor and entrepreneur, says that Fintech is “the frontend,” while crypto is like “the backend.” Balaji, the former CTO at leading digital asset exchange Coinbase, points out that Fintech and blockchain/crypto technologies have been “built mostly in parallel over the last decade.”

 

He predicts that these paradigm-changing technology stacks are “about to link up.”

Balaji’s comments have come after Vlad Tenev, the Co-founder at popular stock trading app Robinhood, noted that last week, the Fintech firm witnessed the impact the 2-day trade settlement period has on investors and “ultimately the entire American financial system.”

Tenev pointed out that clearinghouse deposit requirements “skyrocketed overnight.”

He also mentioned:

“People were unable to buy some securities they wanted. Investors were angry and concerned, an unintended byproduct of the antiquated settlement process. The 2-day period to settle trades exposes investors and the industry to unnecessary risk and is ripe for change.” 

Tenev added:

“Investors are left waiting for their trades to clear, and the clearing brokers have their proprietary cash locked up, until the settlement is final days after the trade. The clearinghouse deposit requirements are designed to mitigate risk, but last week’s wild market activity showed that these requirements, coupled with an unnecessarily long settlement cycle, can have unintended consequences that introduce new risks.”

He continued:

“There is no reason why the greatest financial system the world has ever seen cannot settle trades in real time. Doing so would greatly mitigate the risk that such processing poses.”

Tenev further noted that we need to ‘”meet this moment with a vision for the future and a focus on the people we serve.” He suggested that we should all “come together to deploy our intellectual capital and engineering resources to move to real-time settlement of U.S. equities.”

Tenev acknowledges that accomplishing this “won’t be without its well-documented challenges, but it is the right thing to do.” He claims that technology is “the answer, not the oft-cited impediment.” He has called on everyone to “join together to move forward to real-time settlement.”

As reported recently, Robinhood has raised $3.4 billion in capital from Ribbit Capital, CONIQ Capital, Andreessen Horowitz, Sequoia, Index Ventures, and NEA. The additional funding is a solid sign of commitment by investors as Robinhood struggles in light of heightened volatility of shares like Gamestop driven by Reddit traders determined to clobber short sellers. One billion in funding was first revealed last week.

Jason Warnick, CFO of Robinhood, said the funding round will help the platform scale with the incredible growth and demand they have experienced. Warnick was not specific as to how the money will be utilized but one would expect it will help shore up its books for capital requirements – at least for the time being.

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