FailsBothProngsLagrange@Opacity

@carlosdomingo @lex_node The real question is have you filled for relief from having a registered broker/exchange intermediate the trading of tokenized securities? Without that the TA + BD is kinda mid tbh

Also another issues you mention (rightly so) in your article like issuer-imposed restrictions, other rules like rule 144, etc are things we can program onchain from our TA administration module since as an SEC registered TA we have to comply with those other issues (and we do), that is actually not visible to you on-chain but merely looking at the smart contracts

In this article, I dismantle the entire security token industry as it's existed to date — ERC-3643, Securitize, Canton, all of it. The tokens aren't securities. The compliance modules don't discharge anyone's obligations. The transfer agents, brokers, and depositaries are still there, controlling everything more than they do in TradFi. The god-mode admin keys make the tokens unpledgeable as collateral. The chain is a notification layer for intermediaries that don't need one. Canton is the most extreme case: DTCC reimplemented in DAML instead of COBOL. @gluk64 is right that it's not a blockchain. Then I lay out what it actually takes to put securities onchain: make the chain the ledger, make the token the entry, and stop dressing intermediaries up in smart contract costumes.

@dawufi Modular shipping container data center funded by muni bond daos

we need more data centers

@RebeccaRettig1 @solana @blockworksDAS This isn’t tokenization. It’s margin preservation tech with a blockchain skin. I can’t wait for these innovation exemptions to come out

1/ I've been quiet/taking the high rd while those pushing permissioned networks FUD permissionless networks (esp @solana) *everywhere*. I actually knew this was coming immediately after my panel @blockworksDAS & tackled it w/o naming names on stage. But I'll now be direct . . .

This is certainly a problem in the existing market structure, but it can be fixed. The investment company act requires registered funds to report a daily NAV. The private markets don’t have deep liquidity, so that fund just marks up to VC/PE rounds. That fund is just Wall Street dumping assets on retail at a premium. If you had deep secondary liquidity for private assets, then you couldn’t play games with NAV. Price discovery is the best NAV

this is why retail is banned from private investments

The purist vs. pragmatist debate is the wrong fight. The real question is simpler: who’s your customer? One path sells to existing market structure. Banks, clearinghouses, asset managers. Canton is a good product for that market. You’re not disrupting anyone. You’re helping incumbents run faster and defend their margins. You get 24/7 markets. Incremental, but real. The other path skips them entirely. No broker taking a spread. No clearinghouse sitting in the middle. Assets trade on AMMs. The intermediaries don’t get upgraded. They get deleted. The blocker on path two isn’t technical. It’s that 80+ years of securities law regulates through intermediaries. Every registration class, every reporting obligation, every investor protection flows through a licensed entity. Take that away and regulators lose their grip point. That’s not a bug they’ll ignore. So yes, the feds will define what counts. But first someone has to show them what path two even looks like. @ChainYoda dw i figured out how to do #2 using economic security. I just need @sreeramkannan to go off at the SEC

Decentralization is a legal, not technical construct. For Bitcoiners, Ethereum was not enough, for Ethereum guys solana was not enough, for solana guys L2s were not enough and for L2s Canton is not enough. If the feds say it’s decentralized, it’s decentralized. Hence CLARITY

@colludingnode @thepablob Be careful cnode Pablo will martyr himself for me, and the people’s capital market if it comes down to it

@thepablob @EulerLagrange I mean literally yes, those things are bullshit lmao

It undemocratically side-steps financial regulations that are in place for a reason So yes, unironically. We the people don’t consent.

The status quo isn’t the safe option. It’s just the slow-moving disaster. The bargain of American capitalism used to work like this: companies raised from the public, everyday people shared in the upside, and businesses had a wealthy customer base to sell into. A virtuous cycle. Post-Enron regulations broke that cycle. Being a public company became a compliance nightmare, so companies stay private longer. Now SpaceX will IPO at $1T+. The same retail investors you’re worried about protecting will buy in at the top, after all the real returns have already gone to VCs and sovereign wealth funds. That’s not investor protection. That’s using retail as exit liquidity. Sound familiar? And the opacity argument cuts the other way too. In 2008, one Morgan Stanley desk was trying to offload MBSs while another desk was buying them back. The left hand didn’t know what the right hand was doing. The goal isn’t deregulation. It’s legibility. Open, programmable rails where everyone can see the same book. The intermediaries will call that deregulation because they profit from the fog. The next FTX risk isn’t too much transparency. It’s not enough.

@thepablob @EulerLagrange Data sovereignty = meaningless platitude Transparency = already possible without tokenization Liquidity = institutions don’t want liquidity if it comes from 12 year olds in the Philippines

@chainyoda For the tokenization of private credit I think you mean the investment company act of 1940 (mutual funds, etfs). You’d have to get past both the ‘34 and ‘40 act to tokenize any fund for US investors.

My 2 recent speeches. One on Materiality and Mona Lisa and the other on Investment Companies and Cartoons: sec.gov/newsroom/speec… and sec.gov/newsroom/speec…

Thank you for your service. Most retrospectives on your tenure will lead with crypto. That is fair but slightly off. The real argument was always bigger: what is the SEC actually for. You made the same case in different rooms for eight years. The agency keeps confusing "we can imagine a risk" with "we are authorized to control this." The safe harbor was not really about tokens. It was the whole theory. The 1934 intermediary stack is quietly becoming historically optional and you were one of the few people at the agency willing to say that out loud. That observation will matter more in the next decade than most of what was actually enacted during yours. The framework now taking shape for tokenized securities and DeFi traces directly back to ideas that were lonely dissents in 2018. Some of us were paying attention. Thank you for treating statutory authority as a feature rather than an inconvenience. The reasonable investor noticed. 🫡

@Melt_Dem zkTLS (new niche tech) opens the door to accessing private user data at a large scale. Silly example of asking people to share Alo Yoga activity to correlate with Erewhon. Sky is the limit

The isolated team model made sense when data aggregation was the hard part. That’s been commoditized. The funds winning now aren’t buying alt data. They’re generating proprietary data no one else has. The real moat was never the data. No one ever got rich from the right answer. They got rich from the right question.

looking for examples of selling data to hedge funds that worked

distributed permissionless defi without the right solutions, have maximal extractable value. centralized, permissioned "defi" has my extractable value the former presents the opportunity to innovate financial markets. its a much more interesting problem to solve. the latter is the worst type of defi. BAMdio

There are two different things happening right now, and we keep calling them both "tokenization." They're not the same. They don't have the same customers. You can't build for both at once. Incremental Tokenization is what DTCC and NYSE are doing. Rails get faster. Settlement goes T+0. The broker, the exchange, the clearinghouse, they're all still there, just running on better infrastructure. The hidden tax the article describes doesn't disappear. It gets more efficient. More durable. Better defended. This is good business. The incumbents will pay well for it. Protocol Markets is the other thing. Imagine the S&P 500 trading on an AMM, and in a liquidity pool. No broker taking a spread. No clearinghouse sitting in the middle for two days. No custodian charging for safekeeping. That's not a faster version of what we have. That's Wall Street assets with crypto market structure. The intermediaries don't get upgraded. They get skipped. Two paths. Different customers. Different companies. Figure out which one you're building before you figure out who you're selling to.

"The exchanges didn't build E*TRADE. They didn't build Bloomberg. They didn't build the order management systems and prime brokerage platforms that defined the next era. Those were built by founders who saw what was coming."

@banamlas @FinancialCmte It definitely is a hard problem without an obvious solution. I think there is a way to thread the needle here, but not a topic to dive into on a X thread lmao. Ty for your responses 🫡

@EulerLagrange @FinancialCmte There's no political/policy/legal path I see where retail investment apps under central control, whether DeFi-based or not, will be permitted to offer access to NMS securities alongside unregistered securities or scams to US users. Application of NMS will come thru retail apps.

Grateful for opportunity to testify @FinancialCmte yesterday! Tokenized securities = securities, reg/leg updates need to achieve same/better outcomes, framework needs to be durable - "innovation exemption" likely to disappoint, and US should lead onchain capital markets. 🇺🇸 1/4

Good point on sequencing. But Reg NMS may be less central than it seems. If tokenized securities trade without brokers or exchanges, Reg NMS technically doesn’t apply. That’s not a feature. It’s a gap. But filling it means negotiating with DTCC. That’s not a rulemaking problem. It’s a political one. Lots of firms would happily cut DTCC out. If enough of them show up, including traditional asset managers who want unified TradFi/DeFi liquidity, the rulemaking can be aggressive. If it’s just venture-backed crypto companies, there will be a compromise that preserves the status quo. My read: the SEC releases exemptions first, then watches how factions organize. The exemptions are the market signal mechanism. They can’t rewrite Reg NMS without knowing which way the weight falls.

Yes, but they are moving in linear sequence and not on parallel tracks. Innovation exemption might be ok if they were working on specifics of Reg NMS updates in parallel, e.g., integrating SIP into AMM price oracles, clarifying use of blockchains by registrants, etc. but they aren't. The rulemaking process to embark on the latter is 2+ years long. They haven't started.

From some comments by Hester/Atkins the goal is to use the exceptions to inform more durable rule making. Like a Reg AMM or something. If the they release a section 36 exemption from broker/dealer/exchange registration for tokenized securities to trade on AMMs, that would be historic no?

@EulerLagrange @FinancialCmte Bc the institutions need legal certainty and not months long permissions. Vol/product caps prevent scale. EU tried it: 3 projects in 3 years. Similar disappointments in Australia and UK. Singapore an exception bc they worked on durable framework / Project Guardian at same time.

@dawufi Easier to trick one person vs the world

i find it odd that salespeople take pride in being able to sell absolute dogshit but the same energy doesn't seem to transfer over to marketers... if anyone has ideas why i'd love to hear em