This Is The Biggest Unlock For Tokenized Equities Yet

Transcript

But what we can now do uh allow people to do with our dshares is way more unlocked than it used to be. >> Welcome back to the rollup, guys. Hit the like button, hit the subscribe. It's the easiest way to support our channel. We interview some of the best minds in finance every single day. Enjoy today's show. >> And we're back here at Avalanche Summit Day 2. We're here with Gabe, the founder and CEO of Dinari SEC tokenization exemption day. What a day. What a time to be alive. Gabe, how you doing? >> Doing all right. >> Good. Good. Good. Andy's euphoric cuz Zcash is pushing 1,500. Uh it feels like we're being validated by the market because we've been just preaching ever since things were so apathetic and it felt like just nothing could really take us up or down. We've just been

continuously day in and day out talking with people that are just building the future of finance such as yourself. Uh and today, not only is the market validating us, but also the regulatory bodies. And I'm sure you must feel vindicated as well because this tokenization exemption feels as if it was written specifically for dinari. And so maybe you could just give us the reaction both your personal reaction and then how dinari is reacting to this exemption how people should be thinking about this. >> Yeah, I you you said it. I couldn't have written it better myself. Um I think the surprises to me cuz we knew it was going to be KYC um because their consumer protection is really important, right?

So, it wasn't going to be this permissionless thing. Um, and we knew that it was going to support venues trading uh tokenized stocks, which was great. I think for me the surprise was like they just cut out synthetics altogether. >> Yeah. >> Um, and and really validated this idea of like, yeah, just because it's tokenized doesn't mean that the consumers get less, right? They have to get the same uh rights and exposure as if you're actually owning the stock. But for as long as your tokenized stock is that is stock >> right >> now it can be traded on uh DeFi venues that are also compliant. Um and like that's a huge breakthrough. Um you know we're already launched in the US but what we can now do uh allow people to do

with our dshares is way more unlocked than it used to be. >> Yeah. Incredible. I love it. And and so, you know, one of the things that we're we're continuing to hear is that the SEC and the CFTC, but in this case, the SEC, is looking for feedback. Like really what this is, this tokenization exemption is a proposal. >> It's like a pilot almost. >> It's like a pilot proposal that they're putting out there. And now we're in this comment period. And the SEC in particular is looking for commentary on this proposal. And my understanding is that both on the depth and scope of this proposal, they're looking for feedback.

You know, it's a temporary proposal and it's somewhat limited. And so, like you said, limited to permission, right? Not full permissionless open access. And so, as we think through the comment period and what this ultimately looks like when it goes into effect, you know, they can't do too much and make it too broad or so infinite because, you know, then they get sued by different states and different legislators. And so what should they be emphasizing from your perspective as an industry leader building tokenized assets? What should the SEC take into account during this commentary period to really tighten this exemption and make this as strong a guidance as it should be?

>> Yeah. So I think the main thing to keep in mind for the regulators is how do we bring all these like onchain features to stock trading without violating the protections that already exist for the end user. Okay, >> that's the that's the needle that they have to thread and I think that's what they're using this 5year period to really try to figure out of like what's going to be allowed and what's not going to be allowed so that we can have all these uh benefits to onchaining stocks without destroying the capital markets. >> Okay.

>> Um so like you know case in point AMMs which is part of this innovation exemption right they're allowed to handle tokenized stocks. >> Well what's the b uh benefit of AMMs compared to clubs? Well, uh, one very straightforward, uh, uh, thing that we can test now is tickerto ticker swaps, right? Uh, Apple directly to Nvidia doesn't happen today. Um, is that a net benefit for the end user and how is that a taxable event, right? If you do a direct swap ticker to ticker as opposed to uh, settling in cash as an intermediary. These are the types of questions that really need to be uh answered for the benefit of the end user um without you know uh

completely upending the capital markets. >> Yeah, I love it. Um when it comes to thinking about the permission nature that was in that language, what does that mean to you? >> Well, look, they did away with bearer bonds and things like that for a reason. Um, I was actually very comforted to see that because they're not really bringing back this concept of bearer, you know, stock or something along those lines. That's rife with fraud. Fraud is bad for all of us. >> Just straight up, right? We enjoy the uh deepest liquidity and the big uh the most trusted capital markets in the US because there were these rules that were put into place against AML and you know, all these kinds of things. And so um to me this is them taking the right step of

like it's not going to be a free-for-all guys but we are going to test this uh innovation that we call blockchain and see how it can upgrade the capital markets and that's a great thing. Yeah, I I love it. >> And and you guys have tokenized so much, right? The entire S&P 500 plus assets, the index itself as well. And so I think dinari has the widest breath. The aperture is pretty much like no one even comes close to the aperture that you currently have on tokenized equities and stocks in the US.

Now I think what we're going to start to see more of is yes swaps direct tickerto ticker swaps through AMMs that is now possible >> but also like additional modalities of interacting with these tokenized assets. I mean just 30 minutes ago, maybe an hour ago, the CFTC put out guidance itself that and I I don't want to get this wrong, but I mean basically that a lot of >> passive derivative products are going to be allowed to be like kind of like in a testing ground almost >> and you don't need to register as a broker in order to facilitate that type of transaction. And so I mean how do you see as someone who's focused on the tokenization of these assets? How do you see the different forms of utility?

Meaning really my question here is like will dinari facilitate per US equities. >> Yeah. So the short answer is yes. Um and what what all of these innovation exemptions now allow are really interesting things like asset settled per um you can now buy Nvidia stock on chain. You can atomically borrow against that uh on a or something like that and then put it into pers. That's insane. >> All of that's possible now.

>> Yeah. >> In the US, that's crazy. We would not have thought that would have been even a remote possibility a year ago. >> So, help me understand um this transfer agent modernization dynamic for your company, right? Because Tinaria has a broker dealer license. Y >> um you have a transfer agent. Uh you are FINRA registered. Um but other companies are not. >> Yeah. and they do not have the broker dealer. They're not FIN registered, but they may have a transfer agent. Which means if this modernization rumor comes true such that transfer agent companies can be issuers of tokenized securities, the aperture for your competition

drastically increases. However, why am I wrong? And what can dinari do to facilitate those companies that have a transfer agent but may not have what you guys have on the infra side to be able to be collaborative rather than competitive? >> Yeah, I look it's always been uh collaborative uh because you have the national market system which dinari can work within uh with our of our licenses and then you have the transfer agents that are minting new asset classes outside of NMS, right? Those things can coexist. Now, today's innovation exemption is interesting.

>> Yeah. >> Because one of the things that it explicitly said was you don't need issuer buyin, which is one of the things that the transfer agent guys talk a lot about of like you need to, you know, work with the issuers. The SEC said you don't have to. >> Now, the issuers can basically have a veto power, you know, type of a thing. Um, but barring that, like you can essentially uh work without the issuer uh buying directly. Now, the issuers being bought in enables uh the permissionless um uh trading potentially, >> okay, um of those asset classes. That's something that's not going to happen within the national market system, but it might happen outside of the national market system. Um but the problem is is uh the the issuer sponsored ones, they

have an issue of scale. They have to go issuer by issuer by issuer by issuer. and those, you know, maybe they have these cool features like permissionlessness or something like that. I'm willing to bet that 99% of people engaging with the capital markets don't care about that. The 1% that do care will uh can work with the issue sponsored uh models, but then everything else still falls under broker dealers anyway. Um and so like those things are not mutually exclusive at all. I guess to summarize like is it fair to say that dinari's dshares are the core product for your company and for your brand. However, the infrastructure that you guys have from a regulatory perspective as well as technology perspective is scalable to other issuers if they're interested in

launching tokenized assets as well. >> Yeah, we work with uh all sorts of issuers. We work uh uh we we mint and uh uh tokenize things without the issuer. Um we can do both. >> Got it. Okay. So just close that loop that that transfer agent issue if that comes true. you see that as a net positive due to the potential expansion of tokenized asset issuers in relation to the you know possible clientele for your company versus competitive in terms of the other issuers outpacing what you guys are doing. Would you say that's accurate?

>> Yeah, the transfer agency doesn't supersede what we have done with the broker dealer stuff. >> Okay. Um but I believe in a world where everything should get tokenized and so the more permissive uh the tokenization at the transfer agent level >> the better. >> Okay. So building on that, so so tokenization at the transfer agent level widens the aperture whereas restricting it to only the issuers means that the transfer agents have a limited power.

>> As we unpack and un deregulate some of the national market system that you're talking about, giving transfer agents more power allows tokenization to happen more quickly. >> That's the hope. >> Okay. That's the hope. And so, you know, how how deep do we think this goes? Like, you know, I is it possible the transfer agents get this power to deregulate and then ultimately tokenize? And then when it comes to, you know, all right, now that these things are tokenized, the possibilities that we have available to us to do things with these assets on chain, >> what is the regulation? Where do we stand right now? At what layer is that part regulated? Are we looking for modernizing and deregulating rules at the transfer agent layer or is it the

reduction of these broker dealer regulations that ultimately okay you know we've gotten these things tokenized now it's time for them to flourish so we don't want to force some of the technology providers to register as broker dealers that's what is going to allow for higher monetary velocity of tokenized assets to allow them to flourish all across the onchain economy >> yeah so this is where the innovation exemption today comes in >> cuz they're trying to find that bar, the SEC, right? Because on one hand, it sounds cool for people to have direct access to these assets without broker dealers. On the other hand, there are things like SIPC insurance, which is like the FDIC for brokers, right? Where if somebody steals your shares, are you

insured? >> Right. >> Right. Um and that's built in if you go through a broker dealer. And so like these protections exist and have been built up over the years to protect the consumer. Uh the SEC is not going to do away with all of that overnight. >> Um and so they're going to try to find that balance of, you know, freedom of access with protections. >> Yeah, >> makes sense. Uh Gabe, last thing for you from us. I know it's been a quick segment today. Um given there's a bit of speculation here on what's possible with this transfer agent modernization.

It's obviously going to happen in some capacity. We don't know what, but we do know what's in front of us. Based on the information that you've received in the last 48 hours, clarity failing, this exemption, this CFTC ruling, just give us a sense of like what changes in your thesis or in your plans or in your strategy. >> Yeah, this is the wonderful thing of you uh you know, you're right when this happens. Nothing >> nothing changes about our plans. Um because our conviction has always been upgrade the capital markets without uh taking away rights for the end user. If you can thread that needle, what the SEC

has shown is they're backing that strategy 100%. Right? And so I I I think you know this is a little bit of vindication of like we've been harping on this um of like you can't take away rights and there is a way to tokenize without taking away those rights while bringing all the modernization uh forward. Um so that's what we're going to continue to do. >> Incredible. Thank you so much. Dinar has been excited. We're excited. >> We we absolutely are and Dinard has been a fantastic partner. I love that. Thank you so much.

>> And uh we're excited to build out this segment together. >> Yes. Thanks guys. Shoes getting off.