Securitize Is Taking Ethereum-Based Securities Into the DeFi Realm

Oct 12, 2020 at 16:30 UTCUpdated Oct 12, 2020 at 16:49 UTC.Connecting the worlds of security tokens and decentralized finance is the next logical step for Securitize, a kind of regulatory-compliant fixer when it comes to tracking and trading blockchain-based securities.

Announced Monday, Securitize is teaming up with a protocol called Tinlake from Centrifuge, which uses a clever system of non-fungible tokens to enable real-world assets to participate in DeFi.In an ideal world, any elements within the Ethereum ecosystem should be able to be built into one another, sharing new and useful features like automated market-making or other functions.

Focused on smoothing the fragmented world of private securities trading, the firm has been honing its approach to identifying the owners of assets and the regulated peer-to-peer transfer of private security tokens.

The system is already 90% of the way to DeFi composability, said Securitize CEO Carlos Domingo.

"A lot of DeFi protocols are designed for unregulated utility tokens or cryptocurrencies, so they are not really suitable for security tokens," Domingo said in an interview.

The Securitize Tinlake integration, by contrast, will be strictly for wallets that are associated with Securitize ID, so that the person on either side of a trade is known, said Domingo.

Keeping tabs on the ownership of securities contributed to a pool on some automated market-making protocol like Uniswap containing hundreds of securities, is very complex to implement, he added.

Another key question relates to who can actually publicize the trades of private securities since in the U.K. you need an MTF license, or, in the U.S., an ATS license.

Securitize is not considering adding governance tokens like Uniswap's UNI, said Domingo, because it's unclear whether those sorts of tokens are legal.

"But if these DeFi protocols become available over time for security tokens, as we think will happen, then suddenly there are other avenues for you to make money besides just holding on and waiting."