Dinari: Confirming Asset-Settled Perps On U.S. Equities (The Full Story)

Gabriel Otte (0:00)

But what we can now do, allow people to do with our D-shares, is way more unlocked than it used to be.

Robbie (0:07)

Welcome back to The Rollup, guys. Hit the like button, hit the subscribe. It's the easiest way to support our channel. We interview some of the best minds in finance every single day. Enjoy today's show. And we're back here at Avalanche Summit Day 2 We're here with Gabe Otte, the founder and CEO of Dinari. SEC tokenization exemption day. What a day, what a time to be alive, Gabe. How are you doing?

Good, good, good.

Andy (0:29)

Andy's euphoric because Zcash is pushing 1500 It feels like we're being validated by the market because we've been just preaching ever since things were so apathetic and it felt like just nothing could really take us up or down. We've just been continuously day in and day out talking with people that are just building the future of finance such as yourself.

And today, not only is the market validating us, but also the regulatory bodies. And I'm sure you must feel vindicated as well because this tokenization exemption feels as if it was written specifically for Dinari. And so maybe you could just give us the reaction, both your personal reaction, and then how Dinari is reacting to this exemption, how people should be thinking about this.

Gabriel Otte (1:10)

Yeah, you said it. I couldn't have written it better myself. I think the surprises to me, because we knew it was going to be KYC, because their consumer protection is really important, right? But it wasn't going to be this permissionless thing.

And we knew that it was going to support venues trading tokenized stocks, which is great. I think for me, the surprise was like they just cut out synthetics altogether.

Robbie (1:34)

Yeah.

Gabriel Otte (1:36)

And really validated this idea of like, yeah, just because it's tokenized doesn't mean that the consumers get less, right? They have to get the same rights and exposure as if you're actually owning the stock. But for as long as your tokenized stock is that, is stock.

Robbie (1:52)

Right.

Gabriel Otte (1:53)

Now, it can be traded on DeFi venues that are also compliant. And that's a huge breakthrough.

We're already launching the US, but what we can now do, allow people to do with our d-shares, is way more unlocked than it used to be.

Andy (2:10)

Yeah.

Gabriel Otte (2:11)

Yeah, I love it.

Andy (2:12)

And so, one of the things that we're continuing to hear is that the SEC and the CFTC, but in this case, the SEC, is looking for feedback. Like really what this is, this tokenization exemption is a proposal.

Robbie (2:25)

It's like a pilot almost.

Andy (2:26)

It's like a pilot proposal that they're putting out there, and now we're in this comment period. And the SEC in particular is looking for commentary on this proposal. And my understanding is that both on the depth and scope of this proposal, they're looking for feedback. You know, it's a temporary proposal, and it's somewhat limited. And so, like you said, limited to permission, right? Not full permission list, open access. And so, as we think through the comment period and what this ultimately looks like when it goes into effect, you know, they can't do too much and make it too broad or so infinite because, you know, then they get sued by different states and different legislators.

And so, what should they be emphasizing? From your perspective, as an industry leader building tokenized assets, what should the SEC take into account during this commentary period to really tighten this exemption and make this as strong a guidance as it should be?

Gabriel Otte (3:17)

Yeah, so I think the main thing to keep in mind for the regulators is, how do we bring all these on-chain features to stock trading without violating the protections that already exist for the end user? That's the needle that they have to thread, and I think that's what they're using this five-year period to really try to figure out of what's going to be allowed and what's not going to be allowed so that we can have all these benefits to on-chaining stocks without destroying the capital markets. So, case in point, AMMs, which is part of this innovation exemption, they're allowed to handle tokenized stocks. Well, what's the benefit of AMMs compared to Clubs? Well, one very straightforward thing that we can test now is ticker-to-ticker swaps.

Apple directly to Nvidia. Doesn't happen today.

Is that a net benefit for the end user? And how? Is that a taxable event? If you do a direct swap ticker-to-ticker as opposed to settling in cash as an intermediary, these are the types of questions that really need to be answered for the benefit of the end user without completely upending the capital markets.