Securitize takes contrarian stance in crypto war with SEC

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Securitize, a blockchain company that specializes in tokenizing real-world assets, doesn’t buy the argument that crypto companies don’t know how to register with US regulators, it’s done.

“People don’t know how to register? Carlos Domingo, the company’s founder and CEO, asked. “Well, we know how to register. It’s just the normal registration path.”

He was referring to some of the heated rhetoric that has taken place as crypto exchanges Coinbase and Binance fight new lawsuits from the U.S. Securities and Exchange Commission and advocate for new legislation for the industry. On Wednesday, Gemini co-founder Tyler Winklevoss called the SEC “downright evil” for filing lawsuits intended to “destroy crypto companies under the false premise that the rules are clear when they know that they are not”.

Coinbase CEO Brian Armstrong has also been a vocal critic of the regulator and says the registration process for crypto businesses has been unclear.

“These are the rules”

Securitize, for its part, was founded in 2017 and has raised over $120 million. The company obtained a registered transfer agent license in July 2019 and owns a broker.

“We have this set of licenses and the underlying technology to be able to go through the tokenization process end-to-end,” Domingo said in an interview, acknowledging that tokenization “starts with the premise that it’s regulated.”

“What the SEC is telling everyone is ‘if you want to sign up, these are the rules,'” he continued. “The SEC is not going to create a different path for cryptocurrencies, which is to say completely different from what other companies are doing.”

While Domingo said Congress could eventually pass new legislation, he said that would be unlikely in the next two to three years. And despite fears that crypto firms may start to outsource some activities, he doesn’t see too many companies leaving the country.

Are you going to Dubai?

“It’s 20% of the global economy, but it’s 40% of global capital markets,” Domingo said. “Anyone who thinks they can ignore the United States is probably missing out on the largest, most mature and sophisticated financial services market.”

“This narrative that people can go to Dubai to operate, it means first they’re operating from a very small jurisdiction, and it doesn’t actually allow you to then solicit investors in other parts of the world,” he said.

“In Europe, you have regulation for trading digital asset securities, but the type of securities you can trade was limited,” Domingo added.

The United States “is the most reliable and trusted capital market in the world for a reason,” he said. “It has a very strong regulatory framework, and that’s why it attracts capital.”

Tokenization sector

While there has always been interest in the tokenization industry, he said there hasn’t been massive adoption in the past, with many crypto firms focusing on initial coin offerings, decentralized finance, governance tokens and NFTs. Now, amid regulatory repression in the US, there’s more interest in the space, and the company is seeing more institutional adoption.

“Cryptocurrencies have realized that on-chain magic bean issuance, you know, goes as far as it goes,” Domingo said. “These are assets that have no intrinsic value, which are problematic as we have seen. They are very illiquid and easy to manipulate.”

The company launched a new feeder fund last month that offers token exposure to Polygon to a private credit fund from asset manager Hamilton Lane.

Securitize, meanwhile, doubled its revenue in 2022, and Domingo said the company expects 50% to 100% growth this year, despite the so-called crypto winter.

(Updates with citation in 11th paragraph.)

2023 The Block Crypto, Inc. All rights reserved. This article is provided for informational purposes only. It is not offered or intended for use as legal, tax, investment, financial or other advice.

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