Securitize Just Went Public — Are We Still Tokenizing the World?

Securitize has gone public, raised $400 million and tokenized its own equity, but Carlos Domingo says the real race is only beginning. He joins David to explain how Securitize makes money, why investor demand remains tokenization’s biggest bottleneck and what separates an actual onchain share from a synthetic stock wrapper. --- 📣SPOTIFY PREMIUM RSS FEED | USE CODE: SPOTIFY24 https://bankless.cc/spotify-premium --- BANKLESS SPONSOR TOOLS: 🔮POLYMARKET | #1 PREDICTION MARKET https://bankless.cc/polymarket-podcast 📊BITGET | TOKENIZED STOCKS 2.0 https://bankless.cc/bitget-stocks 🎯THE DEFI REPORT | ONCHAIN INSIGHTS https://thedefireport.io/bankless 👑BANKLESS PREMIUM | AD-FREE & BONUS EPISODES https://bankless.cc/spotify-premium --- TIMESTAMPS 0:00 Going Public 4:50 Demand Bottleneck 10:19 Real vs Synthetic 17:31 Liquidity Wins 23:43 First Movers 29:24 Trading SECZ 39:47 Spot and Perps 43:01 The $1T Goal --- RESOURCES Carlos Domingo https://x.com/carlosdomingo Securitize https://securitize.io/ --- Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures

• 0:02Speaker 00

  Bankless Nation, Securitize just completed its SPAC with Cantor Equity Partners on July 1st, raising $400 million at a $1.25 billion pre-money valuation and began trading on the New York Stock Exchange under ticker SECZ on July 2nd. Carlos, got you back on the podcast. Welcome back. We've had you on the podcast a number of times. Now it feels like you have crossed a particular line, both a finish line and yet again at another beginning line. Congratulations and welcome back on.

• 0:33Speaker 01

  Thank you. Thank you. Thanks for having me again.

• 0:35Speaker 00

  Is the world tokenized yet?

• 0:38Speaker 01

  It's not the world tokenized yet. We're really far away from tokenizing the world. We are at the very earliest stages of tokenizing. As you know, the assets on chain that are really like, you know, on chain, it's like around $30, $35 billion. So, I mean, if you think about the amount of assets that could be tokenized and in the hundreds of trillions of dollars, we're still very far away from tokenizing the world, but you know, things take time, right?

• 1:02Speaker 00

  Carlos, last time we had you on the show, we drilled down into what a transfer agent is and a lot of the technicals around Securitize. I want to just like kind of hash that over one more time because I want to know Securitize, the business, a little bit more in this episode. Now that Securitize is publicly traded on the New York Stock Exchange, talk about like what Securitize is, what's the nature of the business and how do you guys make money?

• 1:24Speaker 01

  So first and foremost, we are a transfer agent. Now it's very popular to be a transfer agent or to have a transfer agent, but it was not in 2019 when we registered our transfer agent. But a transfer agent is basically an SEC-registered entity that can actually take securities from an issuer. An issuer could be an asset manager like BlackRock or could be a public treasury company like us that has securities for a particular instrument. And then the transfer agent is the entity that basically keeps the record of who holds what, right? And conducts corporate actions, when there's splits, dividends, et cetera. And then the main difference of our transfer agent versus a traditional transfer agent is that as the underlying ledger technology, where you record the ownership and all the changes of, you know, whatever happens with the securities, we use, you know, a public

• 2:07Speaker 01

  blockchain. And that's the, and that's the process of tokenization where you issue a token, which is basically an entry on a ledger, which is a blockchain that represents this underlying security. Besides that, we are also a broker dealer and that makes a big difference because we can not only tokenize things and put things on chain, but we can actually trade them. And when we launched our own equity on chain, we actually launched, you know, trading of it. So this is another important thing because tokenization, for the sake of putting things on chain, doesn't change anything. You need to be able to do things with it. So one of the things you want to do, you want to trade them, you want to be able to, you know, post them as collateral on DeFi, et cetera. So our whole, you know, tech stack and licenses allows you to do some more things beyond the pure tokenization.

• 2:49Speaker 01

  And in terms of how we make money, we're, we make money as a transfer agent, as a service provider. Every company that, you know, uses a transfer agent pays them fees and those fees are usually based on, you know, how many securities you manage, et cetera. And as a broker dealer, we make money with transactions. So when something moves around, you know, we take a very small fee out of it and that's the other source of monetization that we have. Also, I think I might have mentioned this on the podcast before, but we also acquired a fund admin business, which is now a part of our revenue because many of the tokenized funds that we put on chain, we also do the fund administration business for them, which is another source of revenue. And the reason we wanted to do that is because on chain,

• 3:30Speaker 01

  as you know, is 24/7 and, you know, instant issuance of securities, instant liquidity, et cetera. And somebody needs to reconcile that with the underlying, which might actually not move 24/7. And that's the role of a fund admin. So we realized when we started working with, with BlackRock, that not having that piece of the puzzle, you know, created a lot of friction for us. So we ended up owning that thing. So, so we're basically three different businesses within one, the transfer agent, tokenization platform, the broker dealer, and then the fund administration.

• 3:56Speaker 00

  Using that lens of the three different businesses, the transfer agent, that is a volume-based business? And so you just want a ton of volume being traded? And then the broker dealer, is that an AUM-based business? Talk about the ways that revenue scales, which each of these three lines of businesses?

• 4:15Speaker 01

  The transfer agent is more like either a SaaS business where you have a subscription and we have charged fees based on tiers of how much volume we manage, or it's an AUM business as well in some cases. So, so we take fees based on, on the size of a, of the asset that we manage. The broker dealer is the opposite, is more a transaction-based business. So it's depending on how many transactions we, you know, how much money we raise for a fund or how many trades we do of an on-chain equity, then, then we take transaction fees. It's not, one is recurring, the other one is reoccurring. So.

• 4:46Speaker 00

  And so there's actually kind of a healthy distribution of, of different styles of revenue from different sources. When you, when we talk about scaling Securitize, you know, more clients, more assets, what becomes the bottleneck? Or is, is that kind of the, the luxury of deploying assets on chain? Is that the technology actually scales really, really well? And adding more clients, more overhead, doesn't really actually encumber the business? What is the bottleneck? Is it just new demand?

• 5:15Speaker 01

  It's, it's actually demand. Yes. The supply side, I think today, everybody wants to tokenize everything. And I think that there is no, there's no bottleneck on, on supply and of, you know, asset managers, banks, issuers, et cetera, want to tokenize things. The, the bottleneck is in the consumption side, like who is actually buying those funds, who is actually trading them on chain, et cetera. This is still, for the most part, crypto audience. And as you know, crypto, you know, was $4 trillion, now it's down to like $2.5 trillion and that's a subset of, of that volume. I think the, the big step change, changes when, when the tokenized assets can be consumed by the traditional investors, that they don't have to actually know that something is on chain or something is tokenized to consume it. The same way I always explain this, when, you know, you

• 5:58Speaker 01

  were connecting to the internet, you're much younger than me, but so you probably don't remember. But when I started, you know, connecting to internet, I had to download TCP IP software in my computer and I had to buy a hardware modem and dial up and connect to the phone, et cetera. So there was a friction to consume, you know, internet content, but a lot of people went through it. Like today, a lot of people go through the hoops of connecting wallets and signing transactions, et cetera, with crypto. But then at some point, that became completely transparent. So I think the day that, you know, blockchains are like today, internet, when you open your phone or you open your laptop and you're connected to a blockchain and you can transact with it without friction, that's when, when everything, you know, changes completely. So.

• 6:35Speaker 00

  So you're having a conversation with a potential client and they ask you the question, what benefit does tokenizing my security, if I'm a publicly traded company, or my fund, if I'm a fund manager or something? What's your answer to why tokenization benefits them? How would you answer that question?

• 6:54Speaker 01

  It depends on the asset class. So there's no single answer because in some, like, let's say funds, this is go through one particular example. So we, as you know, because we announced it on your, on your podcast, we tokenize the, the tokenized treasury funds with, with BlackRock. And then if you look at the advantages of the tokenized version versus the non-tokenized versions, there's a ton of things that we can do that are hard to do with the non-tokenized version. We have peer-to-peer transfers, we have, you know, we do daily dividends payout by issuing more tokens that represent more shares of the fund. We're the only one of the entire BlackRock portfolio that does the, the daily dividend reinvest. And that obviously means that the fund performs better. We have on-chain liquidity, so you can liquidate your position 24/7, et cetera. So, so that, that's the pitch

• 7:38Speaker 01

  for a fund manager is basically, I can take your fund and provide more functionality around the fund that makes your investors should be actually, you know, better served by you. There's also a component of efficiency, the less reconciliation issues, you know, better management, et cetera. That's, in my opinion, less interesting than new functionality. I think innovations that give you something new versus something that improves what already exists are, are less interesting, but it's still there. Now for other things, like equities is a different story, right? So it's about, you know, how can you reach the wallets, the people that are on crypto that want to consume things from their wallet? How can you do 24/7 trading? How do you have instant settlement? How you can, you know, borrow more efficiently by posting, you know, equities that applies to funds as well on chain and leverage the

• 8:22Speaker 01

  asset by, you know, borrowing on a DeFi protocol, et cetera. So there's no one single answer, which makes it complicated to, to explain to people because you need to look at exactly what is that they're doing to, to be able to provide them with their advantages.

• 8:34Speaker 00

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• 9:19Speaker 00

  the link in the show notes. This is not investment advice.

• 9:22Speaker 02

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• 10:04Speaker 02

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• 10:09Speaker 00

  There's two worlds that I'm seeing here when it comes to tokenized, at least, at least stocks, and maybe it's, it's broader than that. But there's like the, Robinhood just announced their Robinhood tokenized stocks. We've had tokenized stocks from Ondo for, for years now. And these people are tokenizing equities, in a sense, with a different, less strategies and different backend constructions. But they're doing it independently. They're not going to the companies that they are tokenizing the equity. They're just doing it on their own for their own internal purposes, right? Like, why does Ondo want to put stocks on chain? Well, because, you know, I might buy tokenized Google via Uniswap on the Ethereum Layer 1 because that's where I have my money. And so that's just like a, providing of a

• 10:54Speaker 00

  service to like an Ethereum retail user. Or why does like Robinhood want tokenized stocks on chain? Like, so they can be in Robinhood wallet. It's not really a service being provided to the, to the equity company itself.

• 11:06Speaker 01

  Correct.

• 11:07Speaker 00

  That's what you are doing though. You are going directly to the companies issuing the equity, issuing the security and saying like, hey, we will do this natively, hooked right into the DTCC and we will do this natively. And a, a stock issued by York Equity on chain is a stock, not some sort of like third-party representation of it. How do you think about these two worlds? And what benefits does your world of the actual true high fidelity tokenization of the asset? What benefits do you have versus some of these like third party models like Ondo or Robinhood?

• 11:40Speaker 01

  So I own Robinhood and not the same, so I don't want to mix them in the same bucket. But just generically, you know, when you're buying one of these derivatives or price trackers, there's like, you know, 10 different ways of doing it, people, et cetera. First, you're not buying the real thing, you're buying a synthetic or a derivative. So you're taking counterparty risk with the company. You know, tokenization was meant to reduce intermediaries, not to increase the number of intermediaries, which is exactly what's happening here. You're also fragmenting liquidity because none of them are fungible. Like there's like five different versions of tokenized coin or tokenized circle, and all of them are different and they're not, you know, tradable against each other. Sometimes you don't get the same rights, you don't get, you know, access to dividends.

• 12:23Speaker 01

  There was one, I believe it was Ondo token that had a split, but they didn't manage the split on chain, so it was split on the markets. And the other token was trading at five times different price because it didn't get the split. So you're not part of the cap table, et cetera. So what we do is we give you a token that is the same share that exists in markets. It's issued through the transfer agent. So you're in the books and records of the transfer agent. You show up as a holder, you get access to all the dividends, the corporate actions, vote, governance, whatever, you're not taking any counterparty risk. And you're also not fragmenting liquidity because these tokens, you know, when they trade on chain, they actually follow the same, you know, pricing rules that things that trade, let's say, on the New York Stock Exchange and NASDAQ. And this is very important because in the US, from a regulatory perspective,

• 13:08Speaker 01

  you can't just like trade a stock at a different price that it trades in somewhere else, right? There's something called RegMS securities that forces, you know, pricing to be consistent. So people always know that when they're selling or buying, they're getting the best price available. And what you're doing in these platforms, you don't know what you're getting. There's also all sorts of regulatory issues with those derivatives. Because in some cases, they're permissionless tokens, they're not issued in the US, so US investors are blocked, but then they flow back here. They can allow for things like, you know, sanctioned wallets to hold the derivatives of US securities. They will bypass, you know, restrictions for buyers. I think Tom Farley from Bullies the other day published that, you know, he's the CEO of Bullies and the day before the earnings announcements, when he knows whether the stock is going to go up or down,

• 13:52Speaker 01

  he can go and buy one of these synthetics, which is completely illegal for him to do it. But there's no controls over these things. So I do not believe that those things have a lot of, obviously now, you know, crypto, right? So people will play regulatory arbitrage as long as they can. But it's not a sustainable business model. I think the durable thing is to just, you know, follow regulations and then, you know, work with the SEC to improve them. So we can do more things on chain and work with the issuers to, for them to consent for their securities to be, you know, traded somewhere else or listed somewhere else and get their permission to use their name, their Q SIP number and everything.

• 14:26Speaker 00

  Some of those things that you listed, I actually consider perks. Mainly the permissionless transferability. And not that I think this is good, but if an offshore sanctioned entity can hold on to some of these tokenized stocks, again, I don't think that's good, but I appreciate that that is possible with some of these like offshore stocks. Because for all securitized tokenized assets, it's all KYC, correct?

• 14:52Speaker 01

  So you have to be KYC to be able to hold the asset. We work with permissionless blockchains, but the asset itself is permissioned. All securities that are issued in a compliant manner are like that. Like companies like Superstate or Figured, we follow regulations. But you're right, those things are permissionless. And I think the issue is even is bigger than that. Because some of the platforms are actually distributing these assets. They're not regulated platforms, they are offshore, you know, Chinese crypto platforms, probably selling to Chinese people, connecting with a VPN, et cetera. So if people want to take regulatory risks, that's their problem. That's not how I run the company and that's not how I go here.

• 15:31Speaker 00

  Right, right, yeah. I think we're just, we'll just see a growth of two different worlds. There is the on-chain, you know, buy the books, compliant, you know, no intermediaries or intermediary minimized world that you're operating in, you know, directly piped into the DTCC, you know, tokenizing the one-to-one actual ownership. And then there's the offshore world, which has like third parties. And there's some like lossiness there, so there's some risks there. But hey, there's like permissionlessness and no KYC. And it's like the Wild West out there. Do you agree with that bifurcation?

• 16:07Speaker 01

  I agree, and that's how crypto has worked. If you, I remember when I started in crypto, you had to have KYC on Coinbase from day one. But then you could go to Binance, and I'm not trying to blame anybody here, but that was the situation. You could go to Binance and just get a username and a password and buy crypto there. And that eventually didn't last. And, you know, now every single centralized exchange has, you know, KYC and AML procedures, et cetera. So, and those worlds are converging, right? Like today, every centralized exchange in crypto trades for more or less the same, you know, regulatory regimes in different parts. You've seen now recently in Europe that MICA was imposed and some people had to close because they couldn't follow the regulations, et cetera.

• 16:49Speaker 01

  So I do see these two worlds, you know, happening temporarily. But I don't think that long term you'll see two worlds. Because the people not following regulations ultimately are going to be stopped by regulators. And people don't understand that we're two years away, that potential regime change in the US. And then suddenly you don't have a friendly SEC. And then we go back to, you know, lawsuits and things like that with the people that are not following regulations, so.

• 17:12Speaker 00

  So you think the model that you're bringing to the table, the, you know, the compliant, buy the books, you know, cross your Ts, dot your Is version of tokenizing stocks, that will eventually push out the third-party tokenization, the offshore tokenization, the less compliant or gray compliant? You think your world pushes out the other?

• 17:32Speaker 01

  I think so, because keep in mind that what is the advantage of the permissionless version? So the advantage is first, they can distribute through unlicensed exchanges. But the moment that exchanges are forced to distribute securities with regulations, then the exchanges do KYC already. So there's no reason why they couldn't just have a broker dealer where they're distributed. And then there's now every single DeFi protocol has adopted technology, some of it developed by us, to be able to post those assets as collateral. And there's also on-chain trading, just connecting your wallet with USDC, et cetera. Once your wallet has been well listed after KYC, that is the same experience there. And then once you have the real things on chain, where you're not taking any counterparty risk, I just don't see how liquidity doesn't get sucked into that asset

• 18:15Speaker 01

  instead of the, you know, fake versions, if you want, that have regulatory risk, counterparty risk, et cetera.

• 18:21Speaker 00

  Yeah, I do see the liquidity issue being pretty big. We, I, once upon a time, I thought stocks would become tokenized and issued on-chain way faster. And then they actually did. And it turns out, like, sure, you can tokenize stocks, but like bringing in liquidity and market makers and having that be like the epicenter of liquidity is actually way harder. And I would imagine that there would be more demand. You know, like you said, the biggest bottleneck right now is just the demand side for, you know, tokenizing securities or funds or whatever on-chain. And I would imagine there's just like a bunch of existing infrastructure, like the market makers and liquidity around the New York Stock Exchange and the NASDAQ, that there just doesn't exist that same level of liquidity.

• 19:04Speaker 00

  Like you can go and look at all the tokenized stocks from, you know, Ondo, Robinhood, like anywhere. And like all of them are kind of just fragmented liquidity. None of them really have any sort of like epicenter or low key of trading activity. Granted, that's how it starts, but I would imagine that bringing like native liquidity on-chain for a lot of these tokenized assets is actually one of the biggest hurdles for the tokenized real world asset ecosystem. Is my intuition correct?

• 19:32Speaker 01

  Well, so if you think about market makers, you know, market makers in many cases, they're also regulated entities. And we work with Jam to do market making for our own tokenized equity. You will not see them doing that for, let's say, Ondo or somebody else. Why? Because they're taking a regulatory risk that they don't want to take. Because they've already produced some problems in the US. And then second, because it's also difficult to hedge. Because you're basically trading a derivative. People call them tokenized stocks, but they're not stocks, they're something else. So then, you know, for a market maker, first they're taking a massive regulatory risk. And then second, they're also having problems with hedging because they are derivative instruments that they don't have other markets. So I don't see that those things becoming, you know, very liquid at any time soon.

• 20:17Speaker 01

  While when the model, as soon as it scales, and obviously it's harder to go issuer by issuer, right? So that's, there's no question about it. And the reason why those companies are doing that is because they can just do 100 companies at a time instead of having to go one by one. But as the issuers come on-chain, and you will see now that with the partnerships we have with Computers and Continental, which are two of the largest asset transfer agents, and Bullies acquiring Acquinity, I think that you will see more issuers, you know, wanting to issue their own shares on-chain. Also precisely to prevent those, you know, derivatives appearing there without their permission, so.

• 20:52Speaker 00

  One thing, I mean, I'm a permissionless Wild West apologist at the very, at the very best. Actually, like, that's just like the world that I like. And so when I see Robinhood doing their tokenized stocks, their third-party, like offshore tokenized stocks, and they've got, you know, Alphabet, how much do they have? They have $1.3 million of Alphabet, they have $1 million of Vanguard, you know, $700,000 of Micron. No, not in large amounts, but I can't imagine like securitized is going to be tokenizing like Google's stock this year. I hope you guys do land that deal. But like, I don't think that's going to be happening immediately.

• 21:33Speaker 00

  And there's like so many companies in the S and P 500 that I want to get tokenized on-chain. So like, how far away do you think we are from securitized tokenizing like Apple or Nvidia? Can we get there?

• 21:45Speaker 01

  So first, I just want to say that I believe that what Robinhood does is regulatory compliant in the jurisdictions where they are. So I don't think that Robinhood is permissionless stock and things like that. So it's a bit of a deep man ones there. So it's still a derivative, but it's legally issued. And I don't know if Google will tokenize this year, but I do believe everybody will tokenize eventually. And these things start small and go bigger. And Robinhood actually is a good example of how five years ago, I remember six years ago, they started doing retail IPOs. I don't know if you remember that Robinhood pioneered that of being able to give retail people access to an IPO. And at the beginning, the IPOs they had were not like the most sexy ones in the industry, right? But guess what? Six years

• 22:27Speaker 01

  after, they did the SpaceX. And I buy SpaceX of shares at the IPO price from Robinhood. And by the way, the people that were promoting the tokenized SpaceX IPO, they failed miserably, and none of them could actually deliver anything because obviously, you know, I don't even know what they were doing, but certainly not what Robinhood was doing. So but then now it became a norm, right? Like every single company that, you know, does an IPO, it offers a retail trend. So I think eventually, there will be the tokenized version, the tokenized trend of an IPO, and that we will not start with the most sexy companies, but it will kind of grow over time. And ultimately, every single company will do it because why would not do it? Like, there is no doubt, if you do it in a compliant way, there is no risk for you as a company.

• 23:09Speaker 01

  You extend your user base, you extend your distribution, you extend your liquidity, etc. So it will happen.

• 23:17Speaker 00

  What are the lowest hanging fruits for securitized to tokenize? So if the gold standard is like some of the company's most desirable companies, like the Nvidia's, the Apples, but we have to get, you know, from A to B, what's the lowest hanging fruit for securitized to tokenize? Like, what's the sector that is most proximate, most easy for you guys to work with today?

• 23:38Speaker 01

  I think there's two areas. One is crypto companies that already get the advantage of tokenization. So now that many of them are using the transfer agents we partner with, we're in discussions with some of them, can't mention names, but I think crypto companies will want to have their equity natively tokenized and controlled by them and provide the real thing to their users. The second thing is there is a ton of other companies that are kind of like retail centric, that they have a lot of like retail following, that, you know, maybe 50% of their cap table is retail. And for those companies, it's more interesting to increase the amount of retail participation on their stock. And those are also kind of like the low hanging fruit to go after. I don't think they're trying to go to Apple today is the right answer. These are very large conservative companies that are not

• 24:23Speaker 01

  going to be first movers in something new. If you think about Apple, they still don't even have like wallets, or they don't touch anything in crypto, right? So but why would they tokenize their stock? I don't think, I think you need to go to the companies that are tech forward, that are already doing things in the crypto space, or, you know, crypto JSON, etc. Those are the first ones that will adopt this.

• 24:44Speaker 00

  What about funds? Like, not equities, or not public traded companies, but like other vehicles? What are non-equity vehicles that are like pretty solid candidates for tokenization?

• 24:56Speaker 01

  I think funds are already in a different stage of adoption, because, you know, you got, two years ago, BlackRock tokenized a fund, and BlackRock is the largest asset manager. So we already got the apple of the funds. BlackRock, and then we got Apollo, and then we got, you know, BNY, and then another competitors have Frank Templeton tokenize, and Wisdom Tree, etc. So I think that on the fund space is much better, because you already got the quality ones doing it. So it's easier now, that discussion with the funds than with the issuers. Tokenized stocks, you said, only doing it for years. I don't think so. I think they just started like a year ago, or something like that. And on the, on Kraken, I can't remember which one was the first ones. And now there's like five different companies

• 25:40Speaker 01

  doing it, but it's very, very early days. Funds, I think we are like already in the, you know, two to three year cycle, where some of the large asset managers have already tokenized, it's a much easier conversation.

• 25:51Speaker 00

  One of the big things that you guys did when you guys SPAC'd public was you guys tokenize your own stock, tokenize your own equity, which makes sense. Obviously, you would do that. Like, that's what you do, and you're going public. It makes perfect sense. Talk about what that just, I don't know what the question is there, but I just want to talk about it. Like, talk about what that was like behind the scenes and the strategy, and then where is that ticker S E C Z trading? Did you have to talk to Coinbase and Kraken to get these listed? Talk about that experience.

• 26:20Speaker 01

  So we did two things. First, we allow shareholders to tokenize their equity. So through our, through the transfer region of our SPAC is Continental, and then securitized partnered with Continental to be their tokenization arm. So through Continental, when you were receiving your shares of securitized, the last few days before we were listed, you got a notice saying, if you want to tokenize, you can just, you know, let us know. And we offer two different chains. Avalanche and Tornado start, but we're planning on expanding. And then you could, you know, opt to receive your shares in tokenized form. And I believe there was like, can't remember how many shares, like 200,000 shares or something like that, that opted to tokenize. So now it became the largest, you know, native, not native tokenized, largest tokenized asset, including the non-native ones. I think the only other

• 27:03Speaker 01

  native one is Figure, which is around 200 million, something like that. I don't remember. I think we are like 250 million. But not only we allow them to tokenize, but we also turn on trading. We do need Insolana for the time being, because we're working with Jump, and Jump has a proper AMM technology in Insolana. And that part of the trading was actually a lot more complicated than most people think, because we are doing trading following all US regulations, which unfortunately, for, you know, for, you know, public equities are very cumbersome in terms of pricing, right? Because as I mentioned, there is something that most people don't know, but there is some rules in public markets in the US that if you, you can buy shares in multiple places, right? There's tons of like venues where traders

• 27:45Speaker 01

  can actually buy shares. But if one place they're offering you $101, and the other one is offering you $102, the broker dealer has the obligation to route the trade to the one that offers the best price. It's something called the National Best Bid and Offer, MBBO. So when you trade on chain, you're not part of the national market system. You're outside of DTCC, you're not using DTC, you're not using exchanges. So we were, we are basically trading on chain, where you basically swap USDC by tokenized SECs, SECs, and then, and then we swap it. But we have to guarantee that we're offering the best price. So that means we need to get, you know, price fits of what's the actual price trading on this MBBO. Jump also gets that. Then we match the trade, we confirm that it's within the

• 28:30Speaker 01

  range that is regulatory acceptable, and then we offer you the trade. But at least you know that you're swapping USDC by tokenized securitized, and you always get the best price. And that's, that has a degree of complexity that we had to go through, that most people don't realize, but this is why we could do it in a legal way from day one.

• 28:48Speaker 00

  That seems very complex. Are you bridging both worlds via this like apparatus? Or are you like servicing the best price based off of what's available on chain? How do you determine best price in the on-chain or crypto context, if it's completely segregated from like the trad?

• 29:07Speaker 01

  You have to fetch the price from, so this, this MBBO, this National Best Bid and Offer price, it's actually offered by a group of companies that are called SECS, Securities Information Processors. So we actually

• 29:21Speaker 00

  They're kind of like an oracle. They spit out a price.

• 29:24Speaker 01

  We act as the oracle, like we, the price of chain and feed it on chain to Jump, and then Jump gets their price from a different provider. And then we make sure that, you know, when the trade, when the swap of the USDC by the equity happens on chain, and we settle

• 29:38Speaker 00

  It happens at at least that price.

• 29:40Speaker 01

  At that price, because we also have to report every single trade to FINRA. So we'll verify that we're actually following the regulation.

• 29:48Speaker 00

  So like, Jump, being a market maker on chain, they have to offer a price, that price or higher, correct?

• 29:54Speaker 01

  Hundred percent, yeah.

• 29:55Speaker 00

  Okay.

• 29:56Speaker 01

  Now, the interesting thing is that this, this whole thing of the, this Reg NMS Securities and MBBO, etc., this is something that happened in 2005, with the idea that this will kind of consolidate markets, and everybody will trade at the same price. And it actually, the opposite happened. So now in the US markets, there's like tons of different venues that they can actually try to offer a better price, because they know they are forced to route the trade to them. So it actually has fragmented, you know, markets. And Paul Atkins, which is kind of the current chair of the SEC, he's never been a fan of this. I think he, I believe when he was in 2005, a commissioner, he descended with this approach. And then very recently, the SEC has published a note saying that they're trying to eliminate

• 30:39Speaker 01

  those rules. There are two rules called 611, 610. This is very technical regulatory. So hello with me, but basically this this rule, it basically tells you that you have to follow this this price, right? That you have to offer always offer this price. And if you think about crypto doesn't have that, right? So Coinbase and and Binance trade completely separately, but they always trade at the same price. And if this price discrepancy market makers fixes that. So so that kind of best price concept doesn't exist.

• 31:07Speaker 00

  It happens emergently. The market just does that.

• 31:09Speaker 01

  Exactly. So so they are trying to eliminate this. I really, most people, most crypto people miss this because it's something, it's a change in the national markets that is going to trickle down as an advantage for for crypto, because you'll be able to then, you know, not don't have to follow those those price feeds that it gets very tricky on chain. Because obviously, as you know, you know, there's blogs, and then you can be somebody can front run it. So there's a lot of all the typical complexity of of how things are fed on chain and how many, you know, how many seconds it takes to, you know, do a blog, etc. So so they are going to eliminate this. That's what the SEC has proposed. It's not going to be immediate. It's going to take them some time, probably a year or longer till it gets eliminated. So for the time being, we are not working with with these rules, but with the hope that this will get

• 31:53Speaker 01

  eliminated over time, and it will become simpler to trade on chain.

• 31:56Speaker 00

  Yeah, it seems like it would be a boon to your job, your and securitized and really compliant tokenized assets on chain, if they just didn't have to deal with that, because it sounds complex and hard.

• 32:07Speaker 01

  Correct. It will be much better, and it will provide, it will make it cheaper, because, by the way, to get these prices, you have to pay for it. So these are not two things. Yeah, yeah, of course. They're like, you know.

• 32:18Speaker 00

  Well, we just created an intermediary.

• 32:20Speaker 01

  The off-chain equivalent of the crypto oracles, right?

• 32:24Speaker 00

  Right, right, right. Yeah. Wow, it's off-chain chain link.

• 32:27Speaker 01

  Exactly. So so you have to pay for them. And then, you know, it makes it costly. You also have to display the price for the user. So the user knows what's the price that is going to get. And you have to guarantee that you can do this price. So maybe you can, maybe a trade can fail, because at some point in time, you've told the user, you're going to buy at, you know, 10.5, and then the price move, and there's a 10.6, and then you can't execute it, and and things like that. So it adds complexity. And this is what people didn't realize of what we built, which is very complex, but it complies with the rules. But, you know, hopefully, these things will simplify our time.

• 33:00Speaker 00

  Well, why did SECZ, the tokenized version of securitized, launch on Avalanche and Solana?

• 33:06Speaker 01

  So we wanted to be in in two chains, one and an EVM chain, and the other one and on EVM chain. We've had partnerships with both Avalanche and Solana for many years. Avalanche was the first company we worked with to tokenize the KKR fund back in the days. We also have the approval in Europe for our broker dealer on Avalanche, because Avalanche has something that, again, people don't realize, but it has deterministic settlement. And deterministic settlement, when you talk about securities, is important, because if you settle a trade and you report it to the SEC, you don't want to have to come back later and say, well, by the way, that trade ended up failing, and then I have to unwind it, and it adds unnecessary complexity. Solana, this is where the the prop AMM technology that Jam uses to to match

• 33:48Speaker 01

  the the trades and to provide this continuous price update, so they can always price at the at the price that they have to do. This is a Jam technology that that we're leveraging. We had to build some things around it to fit this this price from from national markets, but it was available there. And Solana is already doing that for crypto. And and their prop AMM actually provides a better slippage for crypto assets already with their prop AMM. So that technology was available there. And then we, since we partnered with them as a market maker, that's why it makes sense. And we've obviously done a lot of things over the years with Solana. Solana has also very fast, you know, block size, block time, which is advantageous for this, because, as I mentioned, you have to be feeding this price constantly, etc. So it just made sense to do it with those those blockchains for the time being,

• 34:33Speaker 01

  and we hope to expand in the future. So.

• 34:34Speaker 00

  When you think about tokenizing stocks on Ethereum, does the tokenizing stock on the Ethereum layer one provide any specific or unique challenges because of the way that Ethereum is built?

• 34:47Speaker 01

  I think on Ethereum, you have to deal with, you know, the block time.

• 34:50Speaker 00

  Yeah, 12 seconds. Yeah.

• 34:51Speaker 01

  And then you have to deal with MEV issues, right, that people can front run it. So so those are two things that there's some people.

• 34:57Speaker 00

  But is, why is MEV relevant if only people that are trading the stock are KYC'd? And so like, you can't have the average, like Jared from Subway, if he wanted to trade, you know, securitized stocks, he would need to KYC with you guys, right?

• 35:12Speaker 01

  Correct. But the the execution is on chain. It's all on chain. So on your KYC, the only thing that does the KYC is it whitelists wallets, so those wallets can trade on chain in a permissionless manner. So once the wallets are permission are are whitelisted, then that's it. The rest functions exactly the same as any other, you know, on-chain trading. So so there's all the companies working on on kind of similar pro-AMM technology that Jam has in Solana that works.

• 35:36Speaker 00

  So prop AMM technology is really important for you guys, because that allows you to be compliant, because it it keeps the execution compliant?

• 35:45Speaker 01

  It keeps the execution in a tight range of price. Yeah, actually, real AMMs. I just listened to a podcast this morning. We're talking about saying pro-AMMs are not AMMs. So they're not like automated market makers. There's an actual market maker behind, but they're kind of working a RFQ style pricing that, you know, they can just have a very tight spread. And tight spreads are mandatory for equities, because you have to follow these, you know, pricing rules for the national markets. So.

• 36:11Speaker 00

  Sorry, so I interrupted you. Faster block times out of Ethereum would be good for securitized. What else?

• 36:17Speaker 01

  Faster block times, and then having the right proper, we don't build the the proper event technology. We act as a broker dealer that was built by by Jam. So so we will have to have the similar kind of like tech stack built on top of Ethereum for us to be able to do that. We're now looking at, that's why I was listening to this podcast this morning, who else is doing pro-AMMs in which chains, etc. Because obviously, the plan is to to expand and to bring this to Avalanche first, and then to to other chains. But we will need that kind of tech. Yeah.

• 36:46Speaker 00

  So this is like a request for startup or a request for product from securitized, which is like, you need a prop AMM on Ethereum.

• 36:52Speaker 01

  You have a good RFQ or pro-AMM that works well, that works in Ethereum and other technologies, reach out to us. We'd love to talk to you. We want to expand trading as many spaces as possible, as I mentioned. This doesn't fragment liquidity. It actually increases liquidity. This like, going back to what you were asking people, one of the questions that issuers ask is like, oh, is this going to fragment liquidity? Or when we announced this project with with the New York Stock Exchange, you remember, we were with Michael on your podcast, and they were, one of the questions was, is this going to fragment liquidity? Or is it going to increase liquidity? And both Michael and I answered the same thing. I believe this will increase liquidity, right? Because it will increase the amount of market participants that are there from from around the world. So but then you need to have it

• 37:34Speaker 01

  in as many places as possible. You know, crypto, unfortunately, is a fragmented world with many blockchains. So the the hope is that we can bring this into multiple chains as well.

• 37:43Speaker 00

  If the SEC does away with the rule about the best price rule that we were talking about earlier, if it does away with this, do you still need the prop AMM on Ethereum? Or are there constraints relaxed?

• 37:54Speaker 01

  I mean, you still want to try to offer customers the best price possible.

• 37:58Speaker 00

  Sure.

• 37:58Speaker 01

  So and then also keep in mind that market makers are also hedging within with the national markets. So but it obviously will become less restrictive. But we're still, unfortunately, far away from this being a reality. I do believe that it will take a year or longer to do it. So.

• 38:13Speaker 00

  Hey, Bankless Nation, it's David. If you're hearing this, that's because you are listening to the free Bankless podcast feed. Did you know that there is a premium Bankless RSS feed? The premium feed has extra interviews that I do for my own personal research and just deeper questions that I want answered about the crypto industry, questions that I want to answer, so I can be more informed as an investor, both at Bankless Ventures, and also just in my own personal portfolio, too. Also, there are no ads, which means if you listen to the premium feed instead of the free feed, you'll get about 20 hours of your life back every year, because you choose to support Bankless directly. So if you're interested in getting extra content all while skipping the ads, or you just appreciate what we do here and want us to keep doing it, we'd appreciate it if you signed up for Bankless Premium. And there is a link in the show notes to get started. Cheers to a good 2026.

• 38:55Speaker 00

  One subject, one subject that people are pretty excited about are equity perps. Are you talking to any perp platforms? Or what do you think about getting securitized assets into a perp platform?

• 39:07Speaker 01

  We are talking to perp companies. I think that perps and and the spot markets are very complementary. They're two different things. That's most people, that people say, oh, why you want tokenized equities if you can trade perps? Well, perps are a different thing. You're you're trading perpetual futures, you're trading futures, essentially, you have to post collateral, you can be liquidated, etc. So it's not the same as I buy the stock and I hold it, and when I want to sell it, I sell it. So you're you're taking a different risk, there are leverages, etc. But perps need spot markets, right? Because perps need to fit the market from somewhere else. So all these perps that are trading today, you know, equities, they are not, they don't have a 24/7 spot market, while the perps sometimes trades 24/7. Now, we just talked to a perp platform that he was saying, he

• 39:48Speaker 01

  was telling us that, I'm not sure, I can't disclose the name, but that they actually are not allowing to update the funding rate during the weekends, because they don't have spot price. And then we just don't know what the funding rate should be, because it's not spot price, right? So so perps today are a great innovation that works very well for markets that have a continuous spot market, that they can actually fit the the the market price all the time. When you don't have that, then perps are, you know, less efficient. So so I do believe that these two things are very complementary, and that as we get more native tokenized equities, you'll also be able to post them as collateral for perps. You'll also be able to get a better pricing for for the perps 24/7, etc. So I think this is very, the innovations that are happening are kind of converging from

• 40:31Speaker 01

  originally crypto innovations like perps for Bitcoin, etc., into the traditional equities markets are super interesting. And there's another thing that is interesting, you know, in crypto, people do this this basis trade. Where they can just like, you know, buy the spot and short the future. The other way around, I'm not traders, so I'm not like super familiar with how they're like, what I used to do at the beginning. That can actually happen as well on equities markets. And I was talking to a trader the other day. He was telling me that if you had efficient, you know, per markets and spot markets on chain for things like SpaceX, there's 100 basis points difference today that you could actually make. So that's, that will increase trading in both platforms, on the per platform and on the spot platform. So I think it's this purpose converging with, you know, a spot markets are a very interesting innovation.

• 41:16Speaker 00

  Yeah, that's my, that's the clearest path that I see for tokenized stocks, tokenized equities or tokenization broadly, growing in liquidity is having the full internal basis trade, like complete on-chain. It's like, as we've seen, like tokenized stocks have gotten some amount of liquidity, you know, sporadically around wherever, whoever the issuer is or wherever the venue is, but it hasn't been amazing and we definitely want more liquidity. And I think like tokenized equities or tokenized stocks inside of per platforms where the spot and the perp is in the same venue is actually a massive unlock for the industry. It's a massive unlock for perps and for the actual tokenized asset itself.

• 41:52Speaker 01

  I agree. What we need to do is get more real tokenized assets because I think that the whole issue that if the perp is trading the asset, but the, the spot market is a derivative, if you're not like getting necessarily the same instrument on the same price, so.

• 42:05Speaker 00

  Securitized, when you guys backed into the market last week, you guys also raised $400 million. What are you going to spend that money on? You going shopping? What are you going shopping for?

• 42:14Speaker 01

  We're going shopping, yeah. Well, so we, I've mentioned this many times, like we don't need $400 million to run the company. By the way, having $400 million is actually an insurance policy from company perspective because now we don't need to think about running out of money for foreseeable many, many, many years to come, hopefully. So, so this is, this is really good, but obviously we need to put the money to work. Like we can't just like keep it on the bank earnings. So there's a number of things we're looking, we're not looking at necessarily buying a competitor. I think that it's too much overlap in terms of tech, et cetera. We're still the largest platform, so buying, you know, the second or the third or fourth or whatever, that's probably not where I want to spend the money. I think that it's more interesting to add more capabilities, you know, things like,

• 42:56Speaker 01

  you know, training related stuff that what do we need to complement, you know, tokenized equities or what do we need to complement, you know, tokenized funds that adds value to, or to our customers or the fund admin business. We have 650 digital asset funds, like what else are they're buying? Like what, what can we do to continue expanding the, the product portfolio? This is where we're looking. And then we're also looking at international opportunities. We've been very US centric, which I believe was the right thing to do, but now that we are bigger, I think it's looking at what is out, can we do in other jurisdictions from, from a licensing perspective and what other interesting things are there is something else we're looking at.

• 43:32Speaker 00

  Carlos, let's zoom forward about 12 months. So it's July 2027. What does the world of securitized tokenized assets look like? How many more are there? What's, how much more AUM or TVL, whatever you want to use? What does that world look like? What are your goals for the next 12 months?

• 43:51Speaker 01

  I don't know. 12 months is a very specific number. I don't know if exactly 12 months where we will be, but if you look at, let's say, three years, we give you like a bit of a, I think first, I think that on the fun side, the, the strategy is not to bring as many funds as possible because we're also the distributor. So we don't want to have like 10 funds that are very similar, doing the same thing with two different asset managers. This is why we're very selective of who we work with and we're trying to kind of build a portfolio of different assets that complement each other. So, so we have treasuries today, we have AAA bonds, CLOs that, you know, have a slightly higher yield than, than treasuries. We have credit, so there's a bunch of, you know, assets in between that are higher yield, still liquid, et cetera, that we're looking at from a, from an asset perspective. On the equity side, it's a different story because every equity is different, right?

• 44:36Speaker 01

  So it's not the same tokenized securitized and, you know, tokenized Apple or tokenized SaaS there. We want to get as many as possible. So we are activating now the partnerships with the, with the transfer agents to, to getting, we're getting a pipeline of customers that we can bring them chain and then make sure, as you said, that there's liquidity on chain. This is the most important thing. There's liquidity and then there's a complementary with the, with the perps, et cetera. If you look at what the projections are from the industry, the projections are all over the place, like every single, you know, you have from like $20 trillion and the people saying, you know, $30 trillion. I don't think we get to $30 trillion tomorrow, but I think within, we are at like 30 or 35 billion or whatever. So if we get to $1 trillion within the next three years, let's say, I think that's a massive milestone.

• 45:20Speaker 01

  I think the trillion dollar number is kind of like, well, it kind of moves the needle from, from a size perspective and from, and if we get to $1 trillion, I think, you know, we don't need to get a huge market share. Let's say we stay lower than we are now at 10% market share of $1 trillion. There will be $100 billion in AUM plus transactions, which is, you know, 20 times what we have today on the platform. So that's kind of like the, the north star of how we get to the trillion dollars. And by the way, this is not just me, it has to be collectively the industry, you know, pushing forward and the fact that now there's so many people doing tokenization, even if I might not agree with certain models, but this is a good thing, right? Because we, we were by ourselves for, for a very long time in the, in the industry and that doesn't help anybody, so.

• 46:02Speaker 00

  Well, Carlos, you have a whole entire world to tokenize, so I'll let you get back at it. Thanks for coming on the show today.

• 46:07Speaker 01

  All right. Thanks for having me again.

• 46:08Speaker 00

  Bankless nation, you guys know the deal. Crypto is risky. You can lose what you put in, but nonetheless, this frontier is not for everyone, but we are glad you're with us on the bankless journey. Thanks a lot.