Securitize’s $400M Bet to Bring Wall Street Onchain

Transcript

Bankless Nation Securitize just completed its spa 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 you have crossed a particular line both a finish line and yet again at another beginning line. Congratulations and welcome back on. >> Thank you. Thank you. Thanks for having me again.

>> Is the uh is the world tokenized yet? >> Is not the world tokenized yet? We're really far away from tokenizing the world. We are at the at the very early stages of tokenizing. As you know the the the assets on chain that are really like you know onchain 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? So, >> 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, 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? >> So, first and foremost, we're 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 register our transfer agent, but a transfer agent is basically an SEC register entity that can actually take securities from an issuer. An issue could be an asset manager like Black Rock or could be a publicly trade 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, etc. 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 uh you know a public blockchain and that's the the and that's the process of tokenization where you issue a token which is basically an entry on on a on a ledger which is a a blockchain that represents this uh underlying security. Besides that, we are also a broker dealer and that makes a big difference because we cannot only tokenize things and put things on chain but we can actually trade them and when we launch our own equity on chain we actually launch 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 etc. So our whole you know tech stack and licenses allows you to do more things beyond the pure tokenization. Now in terms of how we make money we're we make money uh 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 you manage etc. And as a broker dealer we make money with transactions. So when something moves around uh you know we take a very small uh fee out of it and that's the other

source of monetization that we have. Also I think you I have mentioned this on the podcast before but we also acquire a fund admin business um 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. The reason we wanted to do that is because onchain as you know is 24/7 and you know instant issuance of securities instant liquidity etc. And somebody needs to reconcile that with the underlying which might actually not move 24/7 and that's the role of a of an admin. So we realized when we started working with with uh Black Rockck that not having that piece of the puzzle you know create a lot of friction for us. So we ended up owning that thing. So so we're basically three

different business within one. the transfer agent tokenization platform, the broker dealer and then the fund administration. >> Using that lens of the three different businesses, uh the transfer agent that is a volumebased business and so you just want a ton of volume being traded. Uh 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. The transfer agent is more like either a SAS business where you have a a subscription and and we have charge 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 the of the asset that we manage. The the broker deal is is the opposite. It's 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 onchain equity then then we take transaction fees. is not one is recurring, the other one is reoccurring. So, >> 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?

>> It's it's actually demand. Yes. the supply side. I think today everybody wants to tokenize everything and and I think that there is no there's no bottleneck on on supply and of you know asset managers, banks, issues etc. that want to tokenize uh things. The the the bottleneck is in in the consumption side like who is actually buying those funds who is actually trading them on chain etc. 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 uh 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 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 have to buy a hardware modem and dial up and connect to the phone etc. So there was a friction to consume uh 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 etc 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 when you're connected to a blockchain and you can transact with it without a friction that's when when everything you know changes completely.

So, >> say 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 what's your answer to why tokenization benefits them? How would you answer that question? >> It depends on the asset class. So, there's not a single answer. Um because in some like let's say funds, this is just the one particular example. So we, as you know, because we announced it on your on your podcast, we we tokenize the the the tokenized uh treasury funds with uh with Black Rock. 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, uh we do daily dividends, uh payout, uh by issuing more tokens that represent more shares of the fund. We're the only one of the entire Black Rock portfolio that does the the daily dividend reinvest. uh and that obviously means that the fund performs better. We have onchain liquidity so you can liquidate your position 24/7 etc. So so that that's the pitch for a fund manager is basically I can take your fund and 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 etc.

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 uh equities is a different story, right? It's about you know how can you reach the the wallets of the people that are on crypto that want to consume things from their wallet. How can you do 247 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 uh on chain and leverage the asset uh by you know borrowing on a defi protocol etc. 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

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short. They're punchy. I think this crypto cycle is harder to navigate than most. So, let's do it together. Go subscribe to this podcast. Search the DeFi Report wherever you get your podcast YouTube Apple Spotify or find a link in the show notes. There's a new episode waiting for you. Now, there there's two worlds that I'm seeing here uh when it comes to tokenized at least at least stocks. And maybe it's it's broader than that, but there there's like the Robin Hood just announced their Robin Hood tokenized stocks. We've had tokenized stocks from Ono for for years now. And these people are tokenizing equities in a in a sense with different less strategies and different back-end 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 want to put stocks on chain? Well, because you know I might buy tokenized Google via unis swap on the Ethereum layer one because that's where I have my money. Uh and so so that's just like a providing a a service to like an Ethereum retail user or why does like Robin Hood want tokenized socks on chain like so they can be in in Robin Hood wallet. It's not really a service being provided to the to the equity company itself. >> Correct.

>> 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 highfidelity tokenization of the asset what benefits do you have versus some of these like third party models like or Robin Hood?

>> So on Robood are not the same. So so don't want to mix them in the same uh back but just gen 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 etc. Um first you're not buying the real thing. You're buying a synthetic or a derivative. So you're taking counterparty risk with a company. Um you know tokenization was meant to reduce intermediaries not to increase the number of intermediaries which is exactly what what's happening here. You're also fragmenting liquidity because none of them are funible 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. There was one uh I believe it was ono token that had an split but they didn't manage the split on chain so it was split on the on the markets and the other token was trading at five different uh five times different price because it didn't get the split. Uh so you're not part of the of the cap table etc. So what we do is we give you a token that is the same shared uh that exists in markets is issued through the transfer agent. So you're in the books and records of the transfer agent. You show up as a uh as a holder. You get access to all the dividends, the you know corporate actions, vote, governance, uh whatever. You're not taking any any counterpart to risk. And you're also not fragmented liquidity because these tokens uh 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, you can't just like trade an stock at a different price that it trades in somewhere elsewhere, right? There's something called regonms 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 sort 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 the the derivatives of US securities.

they will bypass uh you know restrictions for buyers. I think uh Tom Farley from Bullies the other day published that you know he's the CEO of Bullies and the day before the earning announcements when he knows whether the stock is going to go up or down 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 uh obviously now you know crypto right? So people will play regulatory arbitrage as long as they can uh but but it's not a sustainable uh 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 so we can do more things uh uh 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 QIP number and everything. >> Some of those things that you listed I actually consider perks. Uh mainly the permissionless transferability. Uh, 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 I appreciate that that is possible with some of these like offshore stocks because for all securitized assets, it's all KYC, correct?

>> So, you have to be KYC to be able to hold the asset. The we work with permissionless blockchains, but the asset itself is permission. All securities that are issue in a compliant manner are like that like companies like superstate brass or or or figure we follow regulations but you're right those things are permissionless and I think the issues is is even is bigger than that because some of the platforms are actually distributing these uh these assets they're not regulated platforms they are offshore you know Chinese crypto platforms probably selling to Chinese people connecting with a VPN etc 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.

>> Right. Right. Yeah. I I think we're just we'll just see a growth of two different worlds. There is the onchain, you know, by the books compliant, you know, no intermediaries or intermediary minimized world that you're operating in uh you know, directly piped into the DTCC, you know, tokenizing the onetoone actual ownership. And then there's the offshore world which has like third parties uh and there's some like lossiness there. 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 do you agree with that bifurcation?

>> 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 and buy crypto there and that eventually didn't last and and you know now every single centralized exchange has you know KYC and and AML procedures etc. So and 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 Mika was imposed and some people had to close because they couldn't follow the regulations etc. 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 with 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 and then we go back to you know lawsuits and things like that with the people that are not following regulations. So >> is do so do you think the the model that you're bringing to the table the you know the compliant by the books you know cross your tees dot your eyes version of tokenizing stocks that will eventually push out the third party tokenization the offshore tokenization the less compliant or gray gray compliant you think your world pushes out the other

>> I think so because keep in mind that what is the advantage of the permissionless version so the the advantage is first they can distribute through unlicensed exchanges but the moment the exchanges are forced to distribute securities with regulations that there's changes do KYC already. So there's no reason why they couldn't just have a a broker dealer and distribute it. And then then there's now every single D5 protocol has adopted technology some of that developed by us to be able to post those assets as collateral. And there's also onchain trading just connecting your wallet with USDC etc. Once your wallet has been wisted 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 instead of the

the you know fake versions if you want that have regulatory risk, counterparty risk etc. >> Yeah, I I do see the liquidity issue being pretty big. Uh we I once upon a time I thought stocks would become tokenized and issued on chain way faster and than 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 like you said the biggest bottleneck right now is just the demand side for you know tokenizing securities or funds or whatever onchain. And I would would imagine there's just like a bunch of existing infrastructure like the market

makers and the liquidity around the New York Stock Exchange and the NASDAQ that there just doesn't exist that same level of liquidity. Like you can go and and look at all the tokenized stocks from, you know, Robin Hood like anywhere and like all of them are kind of just fragmented liquidity. None of them really have any sort of like epicenter or Loki of trading activity. Uh, 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?

>> 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 uh to do market making for for our own uh tokenized equity. You will not see them doing that for let's say on somebody else. Why? because they're taking a regulatory risk that they don't want to take because they've already through this problems in the US and then second because it's also difficult to hedge because you you you're basically trading a derivative you people call them tokenizer stocks but they're not stocks they are something else so 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 so I don't see that those

things becoming you very liquid at any time soon. While when 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 as the issuers come on chain and and you will see now that with the partnerships we have with uh computer and continental which are two of the largest asset uh transfer agents and and bullies acquiring equinity. 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, >> one thing I I 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 Robin Hood uh 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 uh $1.3 million of Alphabet. They have a million of Vanguard. You know, $700,000 of Micron, you know, not in large amounts, but I can't imagine like Securitize 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. And there's like so many companies in the S&P 500 that I want to get tokenized on

chain. So like what how far away do you think we are from securitized tokenizing like Apple or Nvidia? Can we get there? >> So f first I just want to say I believe that what Robin Hood does is regulatory compliant in the jurisdictions where they are. So I don't think that Robin between permissionless tokens and things like that. So it's a bit of a deep nuance there. >> Um uh so it's still a derivative but it's is it's a legally issue. Um and I 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 Robin Hood actually is a good example of how five years ago I remember six years ago they started doing uh um retail IPOs. I don't know if you remember that Robin Hood

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 after they did the SpaceX and I could buy SpaceX of shares at the IPO price from Robin Hood. And by the way, the the the people that were promoting the tokenized SpaceX IPO, they failed miserably and none of them could actually deliver anything because obviously they were, you know, I don't know even know what they were doing, but certainly not what Rob was doing. So, but then now they it became a norm, right? Like every single company that you know does an IPO, it offers a retail trench. So I think eventually there will be the tokenized version the tokenized trench 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 would do it because what would not do it like there is no if you do it in a compliant way there is no risk for you as a company you extend your user base you extend your distribution you extend your liquidity uh etc. So it will it will happen. >> What are the um the lowest hanging fruits for secure ties to tokenize? If the the gold standard is like some of the company's most desirable companies like the Nvidia, the the Apples, uh, but we have to get, you know, from A to B.

What's the the lowest hanging fruit for securitiz to tokenize? Like what's the sector that is most approximate, most easy for you guys to work with today? >> I think there's two areas. One is is crypto companies that already get the advantage of uh tokenization. So, so now that many of them are using the transfer agents we partner with, we're in discussions with some of them. uh can't mention names but I think crypto companies will want to have their equity natively tokenized and and controlled by them and and provide the real thing to their to their users. The second thing is there's a ton of other companies that are kind of like retail centric that they have a lot of like retail following that uh you know have maybe 50% of their cap table is is retail and for those companies is is more interesting to

increase the amount of retail participation on on their stock and those are also kind of like the the lowhanging fruit to to go after. I don't think that trying to go to Apple today is is is the right answer. These are very large conservative companies that are not 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 stuff? 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 or you know, cryptoj etc. and those are the first ones that will adopt this. What about what about funds uh like not equities or not not publicly traded companies but like other vehicles? What

are what are non-equity vehicles that are like pretty uh solid candidates for tokenization? >> I think funds are already in a different stage of adoption because you know you got two years ago Black Rockck tokenize a fund and Black Rockck is the largest asset manager. So we already got the apple of the fans Black Rockck and then we got Apollo and then we got uh you know BNY and then I know the >> competitors have Frankie Templeton token eyes and wisdom tree etc. So I think that on the fund space is is much better because you already got the the the quality ones doing it. Uh so so it's it's easier now that discussion with with the funds uh than with the issuers tokenized stocks. You said is 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 was the first ones and now there's like five different companies doing it but it's very very early days fans 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 >> one of the big things that you guys did when you guys spacked public was uh you guys tokenized your own uh stock tokenize your own equity which makes sense obviously you would do that like you that's what you knew you would 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 I just want to talk about it like talk

about the what that was like behind the scenes and and the strategy and and where the where is that ticker SECZ trading? Did you have to talk to Coinbase and and Kraken to get these listed? Talk about that experience. >> So, um we did two things. First, we allow shareholders to tokenize their their equities. So through our through the transgress continental and then securityize partnered with Continental to be their tokenization arm. So through Continental when you were receiving your shares of securityize the last few days before we were listed. you got a notice saying if you want to tokenize you can just uh you know let us know and uh and we offer two different chains uh Avalanch to start but we're planning on on expanding and then you could um you know opt to receive your shares in tokenized form

and I believe there was like uh I can't remember how many shares like 200,000 shares or something like that that opted to tokenize so so now it became the the largest uh you know native no native token the largest tokenized asset including the non-native ones I think the only other native one this figure um which is around 200 million or something like that. Uh I don't remember. I think we are like 250 million. Um but not only we allow them to tokenize but we also turn on uh trading. Um we're doing it in Solana for the time being because we're working with with J and J has a a propm technology in Salana. 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 for you know public equities are very cumbersome in terms of pricing right because as I mentioned there's something that most people don't know but there's some rules in in public markets in the US that if you you can you can buy shares in multiple places right there's tons of like venues where traders can actually buy shares but if one place they're offering you $1001 and the other one is offering you $12 $2, the 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, NBBO. 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 the exchanges. So we we are basically trading on chain where you basically swap USDC by by tokenized uh sexisC 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 MBVO jump also gets that then we match the trade we confirm that it's within the range uh that is regulatory acceptable and then we offer you the trade but at least you know that you're swapping USDC by by tokeniz securityize and you always get the the best price and that's that has a a degree of complexity that we had to go through and that most people don't

realize but this is why we could do it for in a legal way from day That seems very complex. Are 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 onchain or crypto context? If it's if it's completely segregated from like the the trap, >> you have to fetch the the price from so so this this um this MBBO this national best bid on offer price.

>> Yeah. Yeah, >> it's actually offered by by a group of uh companies that are called SIP securities information processors. So we actually >> they they're kind of like an oracle. They spit out price oracle like we fit the price off chain and feed it on chain uh to jump and then jump gets their price from 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 and we settle it happens at at least >> at that price because we also have to report every single trade to to FINRA so so right will verify that we're actually following the the regulations now >> so so like Trump being a market maker on chain they have to offer for a price that price or higher correct >> 100%. Yeah.

>> Okay. >> Now, okay. >> The the interesting thing is that this this whole thing of the the the this MS securities and MBBO except 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 and it actually the opposite happened. So now in the 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're forced to route the trade to them. So it actually has fragmented you know markets and and polkin which is currently 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 descent with this approach and then very recently the SEC has published um a note saying that they're trying to eliminate

those rules. There are two rules called 611 610. This is very technical regulatory so hold with me. But basically this this ruling 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 they discrepancy market makers fixes that so so that kind of best price uh concept doesn't >> it happens it happens emergently the market just does that. >> Exactly. So, so they are trying to eliminate this. Um, I believe 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 not don't have to follow those those privates that it gets very tricky on chain because obviously as you know you know these blocks and then you can be somebody can front it. So there's a lot of all the typical complexity of um 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're going to eliminate this that's what the SEC has proposed. Uh 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 it with these rules but with the hope that this will get eliminated over time and it will become simpler to trade on chain. Yeah, it seems like it would

be a boon to your job your and securitize and really compliant tokenized assets on chain if they just didn't have to deal with that because it sounds complex and hard. >> Correct. It will be much better. Um 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 cheap things. Yeah. Yeah. Of course. This is uh they're like you know >> well we just created an intermediary >> the often equivalent of the crypto oracles. Right. >> Right. Right. Right. Yeah. Wow. It's off chain chain link. >> Exactly. So, so that you have to pay for them and and then uh 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 it's 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 and you're going to buy at you know 10.5 and then the price move and there's a 10.6 and then you 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 over time. >> Why did SECZ the tokenized version of securitize launch on avalanche and Salana? >> So we wanted to be in in two chains uh one anm chain and the other one anm chain. Um we've had partnerships with both Avalanche and and Salana for for many years. Avalanche was the first company we worked with to tokenize the

KKKR fund uh back in the days. We also have um the approval in Europe for our worker 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 that's unnecessary complexity. Solana. This is where the the prop amm technology that JAM uses to to match 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.

And we had to build some things around it to fit this uh this uh price from um from national markets but it was available there and Salana is already doing that for crypto and and their propm actually provides a better slippage for crypto assets already with their propm so that technology was available there and then we since we partnered with them as a market maker that's but it makes sense and we've obviously done a lot of things over the years with sona has also very fast uh you know block size uh block time which is advant antages 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 and we hope to expand in the future. So >> when uh you think about tokenizing stocks on Ethereum does the tokenizing

stock on the Ethereum layer 1 provide any specific or unique challenges because of the way that Ethereum is built. >> I think on Ethereum you have to deal with um you know the block time. >> Yeah. 12 seconds. Yeah. And then you have to deal with uh me issues, right? That people can front it. So, so those are two things that there's some people >> Why is why is ME relevant if only people that are trading the stock are KYCed 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?

>> 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 white list wallets. So those wallets can trade on chain in a permissionless manner. So once the wallets are permission are whit listed then that's it. It's the rest functions exactly the same as uh any other um you know onchain trading. Um so so there's all the companies working on on kind of similar propm technology that Jam has in Solana that works on >> so prop amm technology is really important for you guys because that allows you to be compliant because it it keeps the uh execution compliant. It keeps the execution in a tight range of price. They actually real AMMs. I just listened a podcast this morning were

talking about saying prop AMMs are not AMM. So they're not like automated market makers. There's an actual market maker behind but they are kind of working in 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 >> sorry I sorry I interrupted you. uh faster block times out of Ethereum would be good for secure ties. What else? >> Faster block times and then having the right prop we don't build the the proper event technology. We act as a broker dealer that was built by by um 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 we're now looking at that's

why I was listening to this podcast this morning about who else is doing prom in in which uh chains etc because obviously the plan is to to expand and to bring this to avalanche first and then to uh to other chains but we will need that kind of tech. Yeah. >> So this is like a a request for startup or request for product from securitize which is like you need a propm on Ethereum. >> You have a good RFQ or propm that works well that works in in Ethereum and other technologies reach out to us. We'd love to talk to you. We want to expand trading as many space as possible. As 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, is this going to fragment liquidity? Or

when we announced this project with um 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? Is it going to increase liquidity? And 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 uh from from around the world. Um so but then you need to have it in as many places as possible as you know crypto unfortunately is is a fragmented world with many blockchains. So the hope is that we can bring this into multiple chains as well.

>> If the SEC does away with the rule about uh 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 the constraints relaxed? I mean you still want to try to offer customers the best price possible. Um so and then also keep in mind that market makers are also hing within with the national markets. Uh 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 >> hey Banklist Nation it's David. If you're hearing this that's because you are listening to the free bank list podcast feed. Did you know that there is a premium bank list 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 Banks 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 Banklist 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 Banklist Premium and there is a link in the show notes to get started. Cheers to a good 2026. One subject, one subject that people are pretty excited about are uh equity per.

Are you talking to any perp platforms or what do you think about getting securitized assets into a perp platform? >> We we are talking to per companies. I think that pers and and the spot markets are very complimentary. They're two different things. That's most people say, "Oh, why do you want tokenized equities if you can trade per?" Well, per different thing. You're you're trading perpetual futures. You're trading futures essentially. You have to post collateral. You can be liquidated, etc. But per need spot market, right? Because per need to feed the market from somewhere else. So all these pers that are trading today um you know equities they're not they don't have a 24/7 spot

market while the per sometimes trades 24/7 and we just talked to a per uh platform that he was saying he was telling us that uh I'm not sure I can 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 there's no spot price right so so per today are great innovation that works very well for markets is 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 pers are you know less efficient. So so I do believe that these two things are very complimentary and that as we get more native tokenized equities you'll also be able to post them as collateral for per you'll also

be able to get a better pricing for uh for the per 24/7 etc. So I think this very the innovations that are happening that are kind of converging from originally crypto innovations like per 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 trader so I'm not like super familiar with how they like what they used to do >> at the beginning um that can actually happen as well on on equities markets and I was talking to 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, 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 per converging with um you know spot markets are a very interesting innovation. 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 onchain. Like as we've seen like to 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 per tokenized asset itself. >> I what we need to do is get more real tokenized assets because that the only issue that if the per is trading the asset but the the spot market is a derivative you're not like getting necessarily the same uh instrument on the same price. So, >> so Curies, when you guys spacked uh 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? >> 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. Um, by the way, having $400 million is actually an insurance policy from a company perspective because now we don't need to think about running out

of money for foreseeable many, many, many years to come hopefully. Uh so so this is uh this is really good but obviously we need to put the money to work like we kind of just like keep it on the bank earnings. So there's a number of things uh we're looking we're not looking at necessarily buying a competitor. I think that it's too much overlap in terms of uh tech etc will still the largest uh platform. So so buying you know the second or the third or fourth or whatever like that's probably not where I want to spend the money. I think that it's more interesting to add more capabilities uh you know things like you know training related stuff that what do we need to complement uh you know tokenized equities or or what do we need to complement uh 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 they're buying like what what can we do to continue expanding the the product portfolio this is where where we're looking and then we're also looking at international opportunities we're very been very US- ccentric which I believe the right thing to do. But now that we're bigger, I think it's looking at what is that 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. >> Carlos, let's uh zoom forward about 12 months. Uh so it's July 2027. Uh 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? Uh what does that world look like? What are

your goals for the next 12 months? >> I don't know. So 12 months is a very specific number. I don't know if uh exactly 12 months where we will be. But if you look at let's say three years give you like a bit of side. I think first I think that on the fund side 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 10 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 u AAA bonds, CLOS that you know have 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 etc that we're looking at from a from an asset perspective. Um on the equity side is a different story because every equity is different right so it's not the same tokenized security and you know tokenize Apple or tokenize 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 a we're getting a pipeline of customers that we can bring on chain and then make sure as you said that there's liquidity on chain that's is the most important thing there's liquidity and then there's the complimentary with the with the per uh etc. If you look at where the projections are from the industry, the projections are all over the place.

Like every single, you know, you have from like to trillion dollars and people saying, you know, $30 trillion. I don't think we get to $30 trillion tomorrow. I think within we're at like 30 or 35 billion or whatever. So, if we get to a trillion dollars within the next three years, let's say, I think that's a massive milestone. I think the trillion dollar number is kind of like what kind of moves the needle from from a size perspective and from a uh and if we get to a trillion dollars 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 that will be hundred billion dollars in 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 were by ourselves for for a very long time in the in the industry and that doesn't help anybody. So >> 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. >> All right. Thanks for having me again. >> Bank, 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 bikeless journey. Thanks a lot.