By Hannah Lang
(Reuters) -Dinari, a startup that offers blockchain-based U.S. stocks, has secured a broker-dealer registration for its subsidiary, a move the company says makes it the first tokenized equity platform to secure such approval in the U.S.
The move allows San Francisco-based Dinari to offer stock trading via blockchain technology for the first time to investors in the U.S., an offering that crypto companies like Coinbase and Kraken are also actively exploring as firms look to capitalize on an evolving U.S. regulatory stance toward cryptocurrencies.
Tokenizing equities is a process in which shares of a company are converted into digital tokens, similar to how cryptocurrencies are traded. Instead of holding the securities directly, investors hold tokens that represent ownership of the securities.
Proponents have said that tokenized equities could reduce trading costs, enable faster settlement, and facilitate around-the-clock trading.
“For me, the end game is how can we elevate the entire financial system, which means not just a broker-dealer that’s on chain, but an exchange that’s on chain,” said Gabriel Otte, the co-founder and CEO of Dinari.
“But where it starts is creating a tokenized stock standard that’s actually legal in the United States. No one else can claim that today,” he added.
Unlike retail brokerages like Charles Schwab or Robinhood, Dinari works with other companies to integrate its interface into their platforms instead of offering its services directly to customers.
Dinari will begin making its broker-dealer entity operational in the coming quarter, the company said. Otte added that Dinari has already arranged several partnerships, which he declined to name on the record.
Dinari’s tokenized equities — called dShares — are already available via decentralized finance platforms like Coinbase’s Base blockchain network, but only for users outside of the U.S.
Tokenized equities have become a buzzword among crypto industry participants as many companies have announced plans or are exploring new ways to use blockchain technology.
Crypto exchange Kraken said last month that it is launching tokens of U.S. equities, called xStocks, which will be available in select markets outside the United States. Coinbase is also seeking a green light from the U.S. Securities and Exchange Commission to offer tokenized equities to its customers, the crypto exchange’s chief legal officer said.
Still, critics have said there are plenty of gaps that need to be addressed before tokenized equities can be commonly traded. The World Economic Forum, in a report last month, pointed to a lack of sufficient secondary-market liquidity as well as the lack of a clear global standard as two major challenges for adoption.
(Reporting by Hannah Lang in New York; Editing by Lisa Shumaker)
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