Crypto Startup Aims to Tokenize Stocks by Playing by the Rules

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For years, cryptocurrency startups have tried to replicate parts of the US stock market on the blockchain for use by digital-asset investors around the world, often without worrying too much about getting approval from regulators first.

The latest project, however, is an attempt to turn equities into crypto tokens in a way that won’t run afoul of securities laws, and it has scored the backing of one of Wall Street’s most well-known trading firms. Susquehanna International Group joined former Coinbase Global inc. executive Balaji Srinivasan and other investors in funding the company called Dinari, based in Los Altos, California.

The project is part of a growing list of efforts to turn real-world assets into digital tokens that trade on blockchains. Decentralized finance, the corner of the crypto world that proponents hope to make a more transparent and decentralized version of Wall Street, once offered triple-digit returns during an era of ultra-low interest rates.

The most well-known previous efforts to tokenize US stocks included the Mirror Protocol built on the Terra blockchain. Those unregistered tokens drew SEC scrutiny even before the collapse of Terra’s stablecoin caused some $40 billion in losses and triggered a global manhunt for the project’s co-founder, Do Kwon.

Dinari has its work cut out for it when it comes to creating anything that remotely resembles the functionalities of the world’s largest stock market.

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