Unchained - DEX in the City: When NYSE Goes Onchain, What Happens to Financial Intermediaries?

Episode Date: January 22, 2026

Thanks to Mantle for supporting the pod—and launching the Global Hackathon 2025 with $150k in prizes, VC mentorship, and access to 7M+ Bybit users. Your next big idea could go live here The New York Stock Exchange just announced that it has developed a platform for the trading of tokenized equities with plans to unlock 24/7 trading for users. In this DEX in the City episode hosts Katherine Kirkpatrick Bos and Vy Le are joined by Superstate General Counsel Alex Zozos to unpack the implications of NYSE's move and how tokenization could reshape markets. Are traditional financial grants facing an Existential crisis? And will tokenization make most regulatory regimes redundant? Plus, Zozos explains why all tokenized equities are not the same. Hosts: Katherine Kirkpatrick Bos TuongVy Le Guests: Alex Zozos, General Counsel at Superstate Links: NYSE’s Tokenized Trading Push Marks a Quiet Win for Crypto Inside Robinhood’s Big Super App Plan: ‘There’s Still a Lot of Work to Be Done’ JPMorgan Launches Tokenized Money Market Fund on Ethereum Vy's paper on the evolution of capital markets Learn more about your ad choices. Visit megaphone.fm/adchoices

Commissioner of Perce came out with a statement that said, you know, securities are securities and there always will be securities. We love that statement because it was like, thank you. It's just a little bit like, hey guys, calm down a little bit. Like, just a reminder, tokenized securities are securities. I don't know if I've shared this with you guys before, but my secret theory about Project crypto is that it's not really about crypto per se. and that it's really about rethinking regulation more broadly. Welcome to Decks in the City where the wallets are cold and the takes are hot. Jesse is out today, so first we have V from the SEC to Web3.

Hey, everyone. And I'm your host, Catherine, KK, fluent in TradFi and Conversing and Deep Tech over at Starkware. So today we have a very special guest, Alex, so, so. G-C of the very hot tokenization OGs at Super State. And we are so excited to hear all about Alex. Before we get going, remember, we're lawyers, but we're not your lawyers. So nothing you hear of decks in the city is legal or financial advice. And it doesn't create an attorney-client relationship for the fine print.

As always, please take a look at unchainedcuret.com. I'm going to tell you more about Alex. And we're going to get to the meat of a very needy episode. all about tokenization. If you want to hear more and learn more about tokenization, we're hearing tradfi talk about it, we're hearing the world talk about moving on came with tokenization. Join us. But before we get started, a quick word from our sponsors that help make this show possible. Mantel is launching the global hackathon 2025 to accelerate the future of real world assets with a $150,000 prize pool, backing from a $4 billion treasury, and direct

access to buy bits 7 million plus users. This is the ultimate The scorebed app here with trusted stats in real-time sports news. Yeah, hey, who should I take in the Boston game? Well, statistically speaking. Nah, no more statistically speaking. I want hot takes. I want knee-jerk reactions. That's not really what I do. Is that because

you don't have any knees? Or... The score bet. Trusted sports content, seamless sports betting. Download today. 19 plus. Ontario only. If you have questions or concerns about your gambling or the gambling of someone close to you. Please go to conixontario.ca. So we're back. So as I mentioned, we have Alex with us today. We are so happy to have him. As you know, there's a lot of boss women in crypto. We like to hear from the women. But we also acknowledge that there are lots of brilliant men just like Alex. And really, when V and I were talking about guests this

week, we kept thinking there is no one better than Alex to talk about tokenization. with us today because one of many unique aspects of him is that he is ex-SCC trading and market, so he really understands the intersection between the securities laws and tokenization. Before he joined Superstate, he was also at Coinbase and in private practice. We are thrilled to have you with us, Alex, today. Thank you so much for joining us. Yeah, thank you so much for gassing me up and inviting me to this great group that you guys have I've started. I'm a long time listener, first time joining on the pot. It is an elite group. We invited you despite the fact that you are a Philly sports fan.

You know, you're also bringing some bro energy. We were talking about the big Indiana win last night, which I'm just going to say woohoo Midwest. But again, I'll find the Philly sports acceptable. Anyway, today, as I mentioned, we want to get to the meet here. I'm going to pass it over to B to start kicking off some really good questions for you. And we hope to have a really fulsome explanation, leave all of our listeners with a better understanding of what's going on. Yeah. So, Alex, thanks so much for being. Actually, our first male guest, I just realized that. No. Very brave of you. Okay. So as KK. was saying, you spent time in the SEC's Trading and Markets division, which is like, I don't know if people realize this, right? But it's,

actually like unusually relevant for tokenized equities. Can you tell us what that division does at the SEC and what you worked on when you're doing? And really quick, Alex, before you answer, V, why did you give our listeners a very quick breakdown of the SEC, frankly? I don't think this has ever been something we've discussed about. Like, what are the divisions? Who does want? Oh my gosh. Yeah. So some of you guys may know, I spent almost six years there. Most of that was in the enforcement division, which like if you were in crypto under like chair Gensler or during the Gensler area, you might have thought that the SEC just consisted of the enforcement division. But actually, the SEC has, I think, something like 20 or more divisions in offices.

So there are like some other ones that many of you probably heard of, right? So enforcement, of course, the division of corporation finance, which has. handles IPOs, registrations, disclosures. There's a division of investment management, which oversees like asset managers and exams, right? So they conduct like on-site exams of broker dealers and other SEC registrants. And then there's trading in markets, which I think the best way to describe it is like they handle the plumbing. They oversee the plumbing of the capital markets in this country. So Alex, why don't you take it from there and tell us a little bit more about what they do, what you worked on while you were there? And like, did you touch crypto at all?

Like, were you guys thinking about it at the time? Sure, sure. Maybe just to build also on some of the overview that you just provided too, there's like, I always thought about it in two buckets, right? There's like the enforcement bucket and then there's like policy divisions, right? And so treading in markets and I am, there. definitely more of the policy buckets. And then Corpfin is more on the disclosure side of things and is dealing more with a 33 Act. And so like trading in markets where I was dealt almost exclusively with the 34

Act, which is like the secondary trading of securities and as you've been describing it, the plumbing. And so, yeah, I mean, rewinding before I started at the SEC, I was at hired by Bear Stearns, worked at J.P. Morgan during the great financial crisis and kind of figured out there that the plumbing was pretty antiquated and that the SEC had a lot of power. And so that kind of drove me to go work at the SEC. I started there in 2014 after going to law school. And yeah, from there, like Flash Boys was the Michael Lewis book that had come out and it was kind of really explained how some of the plumbing was really being gamified or,

or, you know, people were utilizing regulatory modes and speed really also like KK, maybe hits home for you, like being in Chicago, getting information and having, you know, high speed trading and things like that were kind of very much at the vanguard at the time. we'll probably dive into some of that, but a lot of that's derived from and driven from, you know, this thing called regulation and a mess. But we're going to get to Pat Moore in a minute, but just to interject really quickly, people are always surprised that Chicago has such a vibrant crypto community. And I'm always like you shouldn't be surprised because you have to think about high frequency trading commodities. Like this is where this was born in many ways.

And really quick, just to interject, Corp Finn is short for, as V mentioned before, for the division of corporation finance, which is one of, I would say, alongside trading in markets and enforcement, those are probably the three most prominent, widely known slash active divisions within the SEC. So you'll hear court fit. The lawyers tend to have a vernacular that our listeners sometimes don't understand. And we are going to go on and explain reg NMS and some of these concepts in more English in a little bit. One more little translation is the 33 Act, just a reminder to our listeners, the entire securities regime in the United States was based pretty much on the 33 and 34 Act, which were cast in 1933 and 1934.

Love to remind people that the majority of the drafters were actually alive during Custer's last stand. So maybe considering why we constantly have a discussion as to whether those laws should be updated. But Alex, please, please continue. Yeah. And I mean, just rifting a little bit off of what you were saying, right? So like 33 and 34 Act, right? Like those are 1933 and 1934, right? And like, those were looking to apply some form of oversight and regulation on already existing, like, infrastructure that that was there. And so that's kind of how we ended up with more of a self-regulatory structure. And so, like, you know, New York Stock Exchange and like the Buttonwood agreement and trading, like that. happened in like the 1700s, right? And what continued to operate up until the 33 Act and obviously those were, uh, and the 34 act and those were, you know, required and and spurred upon because of, you know, uh, you know, the Great Depression and the large market crashes that happened there. But it is informative to know, like, that they predate the rules that, uh, you know,

have been created to oversee them. And that's kind of why there is this like self-regulatory. structure where exchanges regulate their members and then the commission regulates the exchange. And so that's just kind of more background and placing how the wheels on the car got changed midstream. But taking it back to like my time at the SEC and the stuff that I was working on, I was working primarily with SROs, which is a self-regulatory organization, which is like a quasi-governmental thing that has, like I said, like regulatory oversight over its members, but then the exchange has, you know, oversight over that self-regulatory organization. So the big self-regulatory organizations are the exchanges themselves. And then there's this thing called a securities association,

which there's really only one in the U.S., which is, which is, is called, which is financial industry. I don't know what the acronym is. Just in Rest GAN, or I don't know. But it's been rough. By the lot of supportive of them. And that's their mandate is really to regulate an oversee broker-dealers. Financial industry regulatory authority.

Yeah. And it's so funny. It shows you how prominent acronyms are that there are certain acronyms that transcend like what they need. Like people use only the acronym. Like no one ever uses the words for FINRA. Also, I will mention the button agreement that Alex referenced earlier. That was the founding document of the New York Stock Exchange.

And that stemmed from the fact that it was allegedly signed under a buttonwood tree, which always kind of, from a history and your perspective, that always makes me laugh. Because A, I don't know what a button would do. It doesn't create buttons. Like, I would like to, I'm going to go Google this after this episode. And second of all, it also tells you how old. nicey is, frankly, because there were trees of which to sign documents under in New York City. Like, of course, there's trees in New York City, but there aren't, like, random groves of

buttonwood trees in New York. So, I mean, fun fact, too. I don't know if it's the only copy, but there is a copy of the Buttonwood Agreement in, like, outside of the auditorium at the, at the SEC and D.C. So if you want to see some history, it's right there. I love that so much. And I love that you had the tri-fied background before you went to law school. And for our listeners, it's actually quite unusual to graduate from law school and immediately go work for a regulator. Usually people start up in private practice and then they go to regulators. But I'm sure Alex's like kind of, you know, markets institutional knowledge from working pre-law school was very helpful in that transition. I want to ask you more about supersede and how you ended up there specifically. But before we get there,

I have to tell you one hilarious story I heard. So during the government shutdown, our hero, Commissioner Perce, was apparently working. She was one of the few SEC employees that was permitted to work during the shutdown. So she was working on her own in the office, you know, no assistant, like barebone security. She was answering her own phone. And I heard not from her from one other individual that at one point during the shutdown, she picks up her phone. And there's some guy on the other end that starts saying,

what the hell's up with Mississippi? And she's like, sir, you have the wrong SEC. So I just wanted to share that. I think that's amazing. I don't know how often the securities and exchange commission gets those kind of calls, but I think that's amazing. Okay. So back to our content.

Alex, so you had this tradified background, went to law school, started with the SEC, very helpful. Private practice, Coinbase. Now you're at Super State. And Super State, along with a few others, securitize, a few other really interesting entities doing a lot of focused work on tokenization. Obviously, at some point, we're going to talk again about Canton and others. But how did you end up at Super State and tell me more about what Super State is doing? Yeah.

I mean, so the idea of moving securities on-chan has kind of been, so since I had awareness of the infrastructure. the improvements that could, you know, occur from moving things on chain. I kind of always had that in mind, and I remember I went to Coinbase in 2020 at the end of 2019, and there was listening to a podcast at the time that said, we finally settled a lot of the definitional challenges that are more of the Corp-Finn side of things. And now we're moving into 2020, where there's going to be a more receptive SEC, and we're finally going to get to tackling some of these thorny 34 issues on how to actually trade and transact on chain. Little did we know that like we're what six or seven years later and we're still

really at step zero with actually tackling a lot of those thorny issues, which is disappointing. I mean, I think even Chair Atkins and the SEC would say, you know, there was, we don't have to bemoan this, but like during the period of the Gensler era, there was like, zero. zero additional guidance put out. Like the last piece of guidance was like the SPBD that was published in December before the change of administrations. And there was no additional guidance put out between there. So there really was permafrost on kind of developing what securities on chain could

look like. And so that's like, that's challenging. But also, you know, is where we're at right now. And so what we're doing at SuperState is kind of trying to push the ball forward, use the latest technology, enable tokenization, and is really kind of derived from our founder, Robert Leshner, who originally started or previously started compound, which allows for defy lending. And so allowing that type of functionality on chain, utilizing smart contracts, is one of the, like, unlocks that. tokenization can do. And so, like, yeah, I think there's a lot of movement in moving things forward there. Well, a question. So I think we know a lot of the advantages of tokenization. I'm constantly telling people are trying to explain to trotify people. There's things like, obviously,

atomic settlement, major use cases for tokenized collateral and derivatives trading, speed, cost deficiencies, et cetera. But there's also major legal regulatory issues. So like why tokenize? Yeah, I mean, I think all of those items that you just kind of outlined are like significant. I like to look at it. And VVV has written like a fantastic article on like how we kind of got to where we are today within market structure and our like infrastructure. And maybe it's worth taking a step back because the term, and maybe we'll hopefully touch upon like the market structure bill. But the market structure bill and when I'm using the word market structure, there's kind of like two different things. The market structure bill, I think really should

focus on definitionally defining things and then determining what's regulatory bodies have oversight within that, you know, that landscape. And then when I'm talking about market structure, I'm talking about right now, I'm talking about like how TradFi exists and the intermediaries and the mechanisms with which an investor can interact and trade with securities that they hold. And so taking a step back as far as with what you were saying, like, why tokenize? It's all of the speeds and efficiencies that can be derived because they are updated and mutilated. and utilized in the latest technology rather than the antiquated or

traditional settlement features. And then in addition you give these securities themselves like crypto superpowers and that's like programmability, right? So you can like

defy lending, you can have differentiated exchange and then additionally it allows for the ability of self-custody, which creates a lot more investor choice. So there's a number of reasons to do it from a cost and efficiency perspective. From an issuer standpoint, you can have a more direct relationship with your investors. You can have more transparent corporate governance. And then from an investor perspective, you have a lot more choice and mobility with your assets and securities. So those are all reasons from like an issuer and an investor. And then from

a infrastructure standpoint. And then on the other side, I think from a policy objective, I think it creates a lot more optionality, which I think Chairman Atkins has talked about, whenever he talks about tokenization, I feel he often describes it as derisking the system. And I think de-risking here, and in my opinion, welcome to your guys' opinions on this. I think it means updating the settlement infrastructure, but I also think it means the optionality that is created because whenever you have a single point of failure, the SEC is always trying to cure and solve for single points of failure.

And there's reg SCEI, which is regulation systems compliance integrity, which applies to systemically important infrastructure. I think the problem there is you still always have risks and challenges to the extent that that infrastructure itself goes down or fails. And so creating resiliency and redundancy within the system also be risks the market structure and market infrastructure. Yeah. And I think like to that point, I think that's why this is something that I found like really remarkable. When Chair Atkins first announced project crypto, he actually said that he saw a role for decentralized software systems in the capital market, on chain capital markets of the future, right? which is really cool.

But I think, you know, to your resiliency point, I think he recognizes that decentralized systems can really help in that regard. We've had way too many where one thing goes down and takes everything else with it. I mean, it's actually really disturbing. And from a nation state national security perspective, it's also incredibly disturbing. Like, we can be centralized to the point where if a nation seat actor shuts down one security system, it disables all of our flights, which, by the way, that has basically happened. Not exactly. No, it's, and that's really interesting. And, okay, one thing, I have to tell you,

there's been a lot of really interesting use cases for tokenization. And we've touched on some of them, like the things that I mentioned, tokenized collateral derivatives trading, tokenized stock during an IPO, tokenized equity is moving on chain, like obviously huge Robin Hood announcement that kicked off a lot of conversation about this over the summer. But I will tell you, super, announced basically a partnership with Galaxy. Tell us more about that, because I raise it, I have to tell you, V and I are both in

like a thousand CryptoGC telegram chats where it's, I love these chats. I mean, sometimes they drive me crazy, but they are packed with Alpha because it's some of the smartest minds in like on the crypto bar all in these chats. And when something notable happens, you get like seven opinions on it. So you get like a broad spectrum of people's. And there's a lot of speculation. How are they doing that? How are they doing that?

I cannot tell you there's probably the most speculation I've ever seen when it came to the Super State Galaxy announcement. So tell us more about that announcement and what you can share about how that's happening. And also, Alex, like I think like to KK's point, I think there's been like a lot of misconception, even among lawyers who like work on, you know, securities law issues and tokenized equities, like not all tokenized equities are the same, right? So can you talk about that and then also like what other approaches to tokenizing equities that we're seeing out there and how they're different? Great point B. Yeah.

And so I think there's going to be a lot of different approaches, right? And I agree with like Commissioner Perce and others to say, you know, we should let the market decide. I also think we need to be transparent in what's happening and the risks that are. present in the different models and the advantages and disadvantages of them. And so, yeah, I mean, we're super excited to work with a great partner in Galaxy in bringing to market a tokenized version of their NMS stock, of the same stock that trades in traditional finance. And so what we did was really look at, you know, existing.

kind of did a back to the future moment, right? And so what happened, and again, not to guess, V up too much here, but in V's article discussing the history of where... We're not going to up to this by book. We'll put the article in the show notes. It's fine. We've only spent like five episodes, like shouting out Jesse and I's for management articles. So I'm happy that someone is finally mentioning these multitude of thought leadership.

So thank you, Alex. hint that I'd be invited Alex Willis show. Can you. Also Campbell's also co-author on that one as well. So shout out there. But I do think there probably is like a drinking game that's being played with like mentioning one of the articles that that you guys have written. So continue to put out a fantastic scholarship so that that game can continue.

But regardless, I do think it's like a back to the future moment. So with transfer agents have kind of gotten run over since the, advent of, you know, centralized security depositories and the advent of really DTC, which happened after the paperwork crisis. But before that, what would happen was, you know, securities would trade. The transfer agents registry would be updated. And that would all be done through paper. And by the way, sorry to interrupt, but transfer agents for those who aren't responsible, play a very critical role in managing financial records effectively for publicly treated companies, like tracking ownership, et cetera. So with tokenization, the question is always like, is this

existential for transfer agents? And there's a lot of complication when it comes to the transfer agent process. Please continue, Alex. Yeah. And I think the role of the transfer agent is you should and will be evolving. But they serve a critical, like an issuer arguably could serve as their own transfer aging, but there's like administrative burdens that are involved in that. So operating companies should operate their company and maybe they can employ someone that has specialization and tracking the ownership. But, but I think they will grow and evolve and develop as the markets do the same. But what we we serve in this role for Galaxy is really helping create a regulatory perimeter. So everyone that is eligible,

eligible to hold the shares can do that and that we and the issuer can know who they are. And so we do that through administering an allow list. But what happened was Galaxy engaged the SEC. They said, hey, we want to tokenize shares. We were building this technology that allowed for kind of have your take and need it to utilize the distributed network and the technology of blockchain to allow for, you know, peer-to-peer transfers and smart contract capabilities, but also knowing and leveraging that to track ownership. And so whenever if V held tokenized Galaxy and sent it to me,

that would automatically update our shareholder record. And we would know that V no longer is the holder and that I am now the holder on the official records of the issuer. And so, like, that took engagement with the SEC. Shout out to Davis Polk, who was representing Galaxy at the time. And, you know, the SEC had no further comments in some of the engagement there. And so then we were able to move forward with that. And so the movement of the shares and our role is, you know, we're an agent of the issuer.

And the shares then exist on chain. I think maybe we can go on to like downstream we want to be doing and bringing a lot more differentiated utility and we're moving towards that. And I think a little bit more regulatory clarity will help with that. But maybe I can explain some of the other models that are also out there within cocanization. So I consider that like the super state model. We've done that with public companies. Securetives also does something very similar. I don't think they've done it yet for a public company.

And then there's a handful of others. Some of them are in the, like, the backs, the, the, the, the, the on-dosed. I think they're more on, like, the receipt token type model. And that's, I think, more like akin to, like, an ADR. And that's, like, American depository receipt or something like that. And that's how you, like, sometimes they're able to trade, securities that are listed on foreign exchanges, but you kind of have like a receipt of that actual security. And so this is kind of creating a receipt that exists on chain. These right now are

happening just X U.S. and not in the U.S. And so you kind of have a little bit more counterparty risk though, because you don't actually own the shares. And then I think some of them do. have some form of enabling some of the governance rights, but you don't have those direct governance rights that you would have if you add the tokenized shares themselves. So you get economic exposure, you have some of the functionality. I think one of the things that they push is the ability to have more permissionlessness where you can transfer to whoever. and again, I think those have drawn some of the ire of the FCC after some of them got some, gain some traction.

Commissioner of Purse came out with a statement that said, you know, securities are securities and there always will be securities. I love that statement because it was like, thank you. It's just a little bit like, hey, guys, calm down a little bit. Like, just a reminder, tokenized securities are securities. Although everyone was laughing and because that's, statement was so obvious, but I do, I am always explaining to people, when you look at the global environment for tokenization, it does get a little confusing because most jurisdictions like the underlying

assets keeps its legal characteristics once it's been tokenized. But in some jurisdictions, it actually falls under a different regime by virtue of the fact that it's tokenized. So that, that, I think, is a little bit confusing globally, but it also makes sense why people are, I don't necessarily want to say regulatory arbitrage by going to different jurisdictions for this, but avoiding the United States for that SEC hook, which is a little bit more obvious and scary than some of the other issues where the temperature has been lowered, like staking, for example. I want to get more into some of those use cases, and we can talk a little bit about the NICN News, the New York Stock Exchange news, but before we get into the meat of it, and I know

V has a few more questions for you, too, we want to take another break. to thank the sponsors that make this show possible. Mantle has entered a new phase as the distribution layer connecting Tradfai and on-chain liquidity. To accelerate this vision, the Mantle Global Hackathon, 2025, is inviting developers to build scalable RWA and DFI products. Why build on Mantle? It's an ecosystem built for builders. You get direct access to buy that's 7 million plus users for potential listing exposure.

support from the $4 billion mantle treasury and mentorship from top VCs like Spartan and Anamoca brands. With six tracks, prioritizing RWA's and RealFi and a $150,000 prize pool plus grants,

this is your chance to deploy on a high performance modular L2. Register now. The link is in the show notes. Okay, and we're back. And before we get into the meat of things, I feel like I need to address the fact that my plant has disappeared this week. So, FYI, it was a real plant. It was losing leaves.

It's moved. So I'm going to work on my background. As one of a viewer pointed out to me on Twitter, it looks like I'm in an attic. Okay. Back to Substance. Be you going to do some redecorating? I mean, it needs, it's kind of sad. I'm not in an attic. Crypto Twitter is a mean place, guys. Okay. And yes, I was very sad about the plant. I'm working on it. I don't know. I'm free. She can't do it all, right? So, see, we have been referencing the New York Stock Exchange News a couple times. Why don't you give us a high level overview of what happened there? Then we'll talk more with Alex about what that means for the tokenization landscape. Yeah. So, you know, I think I think what's interesting as we were just talking about the different approaches that like crypto native companies are taking to tokenization, right? But the incumbents will not be left out of this conversation. So Alex, can you actually?

talk a little bit about, so I think it was a few weeks ago that the DTC got a no action letter from the SEC, right, to start getting involved in tokenization. Can you talk about like what they're doing and then also the most recent announcement from the New York Stock Exchange that they're jumping in, diving into tokenization too? And you tell us what they're working on and and what the differences are. Sorry, KKA. Every major trad by entity jumping in and getting their hands in, in this environment. It's like our joke, we've mentioned this in the pod before, but every institutional crypto conference, everyone is obsessed with talking about stables, payments, and tokenization. And there's people showing up from Goldman and other places saying, I don't really know this much about crypto,

but I'm here to learn about tokenization. And it's fascinating to me because it's kind of the one topic that, in my opinion, is completely like open to all legacy trad institutions. And yes, Alex Tell us more. The NICSI news, they're developing a platform for trading an on-chain settlement of tokenized U.S. equities and ETSs. Big news. Wide-grade press covered it. Very exciting to have such a legacy financial institution, effectively say we are all in. We have seen this.

I was actually at CBO when we helped launch Canton early efforts in tokenization. But this was a really like full embrace. Tell us more. Yeah, I think there's a few things there. I always like to say like the networks, like what is blockchain going to do, it's going to update the networks of value. And that is, that is all of the things you just talked about. Like that's payments, credit card, remittances, and then it's also like securities.

And so securities is, you know, multi-trillion dollar asset class. There's a lot of existing players in the space that have existing business and that potentially could be disrupted, and they're not the type to sit by idly. And so maybe it's worth just like giving a high-level overview of the landscape of big-ish names and players and kind of what they've done thus far or what some of their public statements.

So like DTC is kind of alluded to as really the warehouse for the box, that holds in the central counterparty that clears, you know, an overwhelming majority of, of equity, securities in the United States. They, in early December, came out with a no action letter, I believe it was like December 11th, where they essentially got the ability to kind of have a sandbox, where they can essentially allow you to exchange your shares for, a digital representation and potentially do some fun and different things with them there. The sandbox gives them some advantages where, you know, if you are an SRO, if you ever change

any of your rules, you need to go through this rule changing process, which is called the 19B4 rule filing process. And the SEC gets the way in on all of your rule changes. They have an exemption from 19B4 rule changes. They have an exempt. from needing to comply with SCI, which is another thing we alluded to today, system compliance integrity. And so really what it does is it allows for them to experiment in the space. I'm encouraged by it, obviously, because they are the lion's share of equity trading that happens.

I'm also marginally skeptical because they be. thing that tokenization can do is it can really disrupt clearance and settlement. One of the things it can do. And like their whole business is clearance and settlement. It's existential. Like this is what I'm always explaining to people. So, and by the way, I just want to define, as we've mentioned it a couple of times, DTC is Depository Trust Corporation.

And they are a subsidiary of Depository Trust and Clearing Corporation. So you'll hear DTC and DTCC. And, you know, they are a huge legacy institution. I think they have something like 55 trillion in total assets or some sort of insane number. And so it's hard to even describe what a huge part of Wall Street they are and have been since inception, which is something like the 70s. And a lot of what's happening truly compromises. Like it is truly existential for the core nature of DTC's business. So it certainly makes sense that you have a legacy institution like DTCC going all.

all in on tokenization because it's a little bit like evolve or die for them. But if the whole concept of tokenization and crypto is replacing intermediaries, it raises a larger, more philosophical question of where do those intermediaries go? You know, what do they do? They have to completely change or they're going to become a block cluster. Like the video store for people under the agent 20. Another address is going to this pod. I hope you're out of there.

Well, I don't think, I think one of the, so another, and we can hit down some of the other incumbents and where they stand on things. But I think it's important for them to try and be, move forward in the space. I also, but like I do think there is existential challenges to them. But I also don't think it's a zero and one type of type of, landscape. I don't think that's how things go. I mean, we only have to look at the fact that certificated securities still do exist. And so like DTC kind of essentially made

certificated securities superfluous. And there's this thing called dematerialization, which changed the need for the securities to actually just have them move and be a book entry on the books of the centralized security depository DTC. So the fact that something exists or technology exists or an operating model exists doesn't mean it will completely displace or destroy something that takes a lot of time. I think there's going to be parallel systems that are going to exist. And then there's going to be a choice. hopefully like if the regulators

you know allow for innovation and stop being beholden to an outdated model or a model that previously existed I think there will be competition and then increased investor choice which again goes to the earlier point of

creating resiliency and competition and again like I think this is fully aligned with like the way that Chairman Atkins like views you know it's in the need and the role of regulators. Like the role of regulators isn't to control things, is to create a fair environment for competition.

And so I think DTC, while could be under threat is looking to create something within tokenization, my worry is that people will try that flavor of tokenization and then become, you know, question, like what values, they actually derive from that because we don't necessarily know what type of utility and on-chain activity will be able to occur when this sandbox gets up and running.

But yeah, I don't know any other thing. Do you think that we'll have some period where, like you were saying, like there will be kind of like parallel systems and like different options for issuers and investors, like one that is still off-chain or like maybe some hybrid off-chain, on-chain system. And then like a system that's fully on-chain, meaning there are companies that are going to choose to natively issue, like to go public natively on the blockchain. So they're just like on-chain from day one. And, you know, with all of the different capabilities of being on-chain and native

chain. Like, do you think we'll have that operating in parallel? Yes, 100%. And the market will sort of figure out which model succeed. Yeah. I think that's, I think that is what, I think that is, as a former SEC person, I think that is exactly the role of the SEC. And again, is to create fair competition.

And that's like what like innovators like Super State are asking for. And I think it's fully consistent. So there's the, there's the 33 Act, the 34 Act. And then there was this really big congressional action in 1975 called the 75 amendments. And what that explicitly created in this thing called 11 cap A is the national market system, not to be confused with something that came down the pike 30 years later called reg NMS, which supposedly derives its authority from those 75 amendments. But what the 11 cap A says is there needs to be a national market system that has interconnectivity and should utilize, I think, like, there's a messaging or technology.

There's some explicit language within there that is worth rereading because I think that's exactly what blockchain technology is right now. It's disrupting and enhancing the national market system. So I think to the extent that there is a new model that we've already tested out that exists, another important feature there is allowing for the interconnectivity between the on-chain and the off-chain markets to be consistent with the 75 amendments. Yeah. So I don't know if I've shared this with you guys before, but my secret theory about Project crypto is that it's not really about crypto per se. And that it's really about rethinking regulation more broadly, right? So Chair Atkins' long-time philosophy is that market dynamics and market competition will naturally solve some of the risks that we see in securities markets better than prescriptive regulation.

And in his view, blockchain is just a technology that can help do that sort of intrinsically, meaning there are properties. of decentralized blockchain-based markets that naturally mitigate or eliminate the need for many of the regulations that we have today, including aspects of reg MMS. And, you know, there may be other kinds of technologies that can help do the same, right? So it's really about a broader deregulation agenda

as opposed to like being about crypto. I love what do you guys think of my piece of theory? I love that. And I think, look, the beautiful thing about that is a lot of what's happening in crypto, it's like what is crypto now? Like we're seeing the markets converge. It's so interesting.

We've talked with this a little bit in the context of prediction markets. Like a lot of what prediction markets are doing is not even really crypto, right? And I always talk about how they used to call internet stocks, internet stocks, I mean, when you wind the clock back and now they're just stocks.

I think we're going to see that with crypto very, very soon. We're already seeing that. So having Project Crypto be more about that. And I 100% agree. I think that theory has a lot of value. I think that's actually good for everyone because crypto shouldn't be treated differently from a sustainable perspective. You know, it should be treated differently under the securities laws.

But it's more about like how much this technology is going to affect our day-to-day lives and our broader market. I think when I think to your point, the and KK is like different. just means form fit, right? And so like the risks that are incumbent upon like a broker relationship, like what are those, right? Those are like you can misappropriate, you can misrepresent, you can have a lot of different challenges of basically contained within that. There's conflicts, there's misappropriation, and there's misrepresentation. And basically the regulatory regime for broker dealers is an outgrowth of trying to control for those features. That's why like a talism feature of brokers is taking transaction-based compensation because you have a salesman's stake.

Because you have that salesman's stake, you have a conflict of interest. We need to control for that because you, as a customer or an investor, could be taken advantage of, right? But even something like that can create its own risk, right? So, like, I brought a bunch of cases involving churning, which is when brokers just place a lot of orders for their customers in order to, like, generate a ton of transaction fees for themselves. So, like, there's all kinds of risks involved. And so, but, like, if you're operating in a dynamic where the investor has full discretion, has self-custody, right, and has different features, then you don't necessarily need

the broker apparatus, which can be onerous and you have to go through thinner registration and has historically been a blunt object. But I think to the point that we've kind of discussed, I think Project Crypto is a means to an end of taking a more holistic view of not necessarily using blunt instruments, but form-fitting operations to the risks that they actually present. And again, like, that seems pretty uncontroversial. and unless you are operate, unless you've used something that challenges the status quo as being, you know, a threat to your operating business model.

And so I think that's like, I think that's why we have some broad, big industry groups like a SIFMA, which is securities, I don't know what that acronym stands for right now either. But SIFMA, like, I think just last Thursday, put out a letter kind of advocating that wallets themselves are brokers. And again, like, this just goes back to my point where if you look at the facts of what the wallet is doing and if they're carrying out features that are broker like, then maybe you have to treat them like a broker. But if they're not, or if they're mitigated through forms of transparency that aren't present with a typical broker regime, then I don't think you, then it doesn't make sense. sense to have that model. So I think that's a case where there's an incumbent player that is trying to ensure that there isn't as much disruption because that disruption could affect their operating model. And again, like Robin Hood has lived the life cycle of this, right? Like they previously were kind of laughed out of the room of the syphemas of the world and other trade organizations.

And now they're large members of that. Right. And so like I think, there is a life, and I know we have hot takes and cold wallets here. So I think at a certain point, there's going to be, like Citadel is one of the strongest players pushing against tokenization right now because they, they profit handsomely from some of the monopolistic, regulatory monopolistic features of a regulation NMS, which allows them to print money by having faster technology. And they've made significant amounts of money from that. So I think, like, they're also probably going to live the life cycle of this where they're going to push against it because it's disruptive, because they already have a very profitable business. And then once it gets fully adopted and integrated,

they're going to be the biggest arbitragee between traditional markets and on-chain markets and one of the biggest market makers within D5 protocols. And, like, that's going to happen. It's, like, clear that's going to happen. And right now they're waving the flag and saying we need to protect the perfect markets. But if you actually look at the markets, they're not perfect. There's significant implicit costs, significant rent seeking behavior. And so I think we're going to see that life cycle evolve. But it is, I think, it's going to be important. Not perfect. Not perfect is the understatement of the show. I think the key is always to look at. statements that are being made by players, and you can do this with Super State as well.

Obviously, we have an interest in a more tokenized future because, like, we think that that's better for everyone, but we also have a vested economic interest. I think you have to look at, you know, in, you know, the motivations of each of those entities and their core businesses. I think it's a great point. And look, we could spend another hour mining Alex's brain because obviously you and Super State are really doing some cutting edge stuff at the this topic that will continue to dominate the crypto headlines, and this intersection of tradfied crypto is rarely seen as much as we see it in tokenization. We only have two minutes left. So I want to hijack the very end of our episode with our crypto good news. And it's actually perfect because this week, you were just mentioning Robin Hood.

I love that Robin Hood is a little bit aspirational for crypto because I am old enough to remember when Robin Hood was still like a little fringe and not really taking that seriously on Wall Street. And now, obviously, that couldn't be farther from the truth, in large part due to their stock price. Good for you, Robin Hood. And brilliant people like Johan and others within Robin Hood Crypto. But one of the things that I really appreciate is crypto good news also highlights use cases, not just good news. And Robin Hood did something cool a little over a year ago where they did an integration with Daffy, which is a fintag that facilitates charitable giving, among other things.

But what they do is Robin Hood customers can actually very easily donate crypto held in their accounts. To DAFI through DAFI's donor advised fund structure, they use the Robin Hood Connect feature on the DAFI platform. So what this means is it's really easy to click, click, donate crypto, it's liquidated, and then the funds can be granted to the millions of charities that exist right now that aren't ready to accept crypto automatically. Now, a lot of those charities are working on that functionality, but some charities, you can't just go and give them Bitcoin. Hey, charities, we'll help you with that. I mean, come on. Like, a lot of crypto, a lot of good people in crypto looking to, you know,

help others through the donation of their crypto. But it's awesome that Robin Hood did this with Daffee and made it easier for their customers to support their communities. I want to take a moment to say thank you, Alex, for joining us. This was an awesome episode, Chalk Full. of some complicated but very important concepts. So we will see everybody next week. When the three co-hosts are back in force,

thank you for joining us on Dex in the City.