Layer One: The first tokenized stock innovation exemptions are imminent

Welcome to Layer One: the newsletter and podcast on the intersection of crypto and the real world. Hosted by The Block's Kelvin Sparks and John Wu, President of Ava Labs, Layer One brings you inside the institutional conversations driving blockchain forward.

Last time on the podcast we were joined by Anna Wroblewska, Chief Business Officer at Dinari, to break down how tokenized equities are expanding access to U.S. capital markets globally.

In this week’s newsletter, we're taking a look at how the SEC’s upcoming innovation exemptions could drive a new surge in tokenized equities trading (and what new challenges this might create for regulators).

Innovation exemptions imminent for tokenized stocks, while perps come under fresh scrutiny

The first U.S. innovation exemptions for tokenized stocks are imminent, in what will undoubtedly be a major boon for the fast-growing sector. According to Bloomberg, the SEC is gearing up to publish new frameworks in the coming days that will allow both TradFi and crypto-native firms to experiment with tokenized equities without the burden of full registration.

One of the more controversial provisions expected to be included would give DeFi firms the green light to issue onchain wrapped versions of equities for trading in the U.S., even if they’re unaffiliated with the original issuer. In other words, they won’t need to seek approval from the company itself before listing a tokenized version of its stock.

Brett Redfearn, President of Securitize, has warned that this could result in a mass proliferation of tokenized versions of the same stocks: a crowd of clones causing confusion for investors, fragmenting the market, and disrupting effective price discovery. Perhaps most importantly, not all of these tokenized clones will be created equal.

Last week on the podcast, Wroblewska stressed her company’s focus on maintaining full 1:1 backing for its equities, along with all the shareholder rights and protections of the original stock. This is something that will not necessarily apply across the board, when synthetic or unapproved versions of tokenized stocks can be spun up without the backing of the underlying company.

Onchain derivatives have likewise been in the regulatory spotlight in recent weeks. Both the CME Group and Intercontinental Exchange are reportedly pushing for a clampdown on Hyperliquid, which has become an increasingly strong competitor in the commodities trading field. The legacy exchanges argue that Hyperliquid should be forced to register with the CFTC, making it subject to stricter KYC and market manipulation safeguards.

Some have also raised concerns over newly launched pre-IPO perpetual markets, listed on TradeXYZ, a HIP-3 exchange built on top of Hyperliquid. These markets saw a surge in volume over the past month as traders sought exposure to a wave of record-breaking tech IPOs, including Cerebras, Anthropic, OpenAI, and SpaceX. Daily trading volume in Anthropic pre-market shares spiked as high as $8 million mid-month.

These synthetic derivatives, unlike private equity sold on traditional secondary markets, don’t represent true ownership of the underlying firms. Instead, they’re instruments for speculating on the value of a company before its public launch. Some worry that such unregulated trading activity could also be subject to price manipulation or extreme volatility, interfering with effective pricing for the companies represented.

In response, the Hyperliquid Policy Center, an advocacy group supporting the exchange, argued that the transparent nature of its public ledger makes it a “uniquely hostile environment for insider trading or price manipulation” where “transparency serves as a strong deterrent for misconduct." On top of this, the onchain model has arguably proven itself more accurate, rather than less: TradeXYZ Cerebras perps traded at just 3% below its eventual Nasdaq listing price, while traditional secondary markets were as much as 34% off.

Despite the controversies, the surge in onchain equities trading shows no signs of slowing down: daily volume hit a record cumulative high of $3.57 billion earlier this week. This is mostly being driven by trading in single stocks. However, within the past six months, tokenized index funds — like Dinari’s own crypto-equities hybrid fund, the S&P Digital Markets 50 Index (SPDM) — have claimed an increasing share of the total onchain value.

As impressive as the current numbers are, these could be quickly eclipsed once U.S. innovation exemptions are in place.

Podcast Recap: Dinari’s Anna Wroblewska on Bringing US Stocks Onchain

In the Headlines: The stories driving the conversation this week

• SpaceX disclosed holdings of over 18,700 bitcoin, making it the seventh-largest holder in the world. The spacefaring giant filed fresh financial disclosures earlier this week, in the lead-up to its blockbuster public listing next month. The IPO is expected to be the largest of all time, valuing the company at an estimated $1.75 trillion and raising up to $80 billion.
• The Senate Banking Committee advanced the Clarity Act, with a 15-9 vote on the latest markup. Analysts at Bernstein said the bill, in its current state, fortifies the market edge of Circle Internet Group (issuer of USDC) by allowing for stablecoin yields to be paid out as usage incentives on third-party platforms. Lee Schneider, General Counsel at Ava Labs, announced that his firm is among those backing the bill, calling it “a workable foundation that can be refined through rulemaking.”
• U.S. Hyperliquid ETFs saw record inflows this week, signaling strong institutional appetite for exposure to DeFi’s flagship token. This month saw the launch of HYPE ETFs from both 21Shares and Bitwise, which achieved combined net inflows of $54 million over the past week. Recent data from The Block also showed Hyperliquid capturing approximately 43% of the total fees generated across major blockchains. 

Top of the Charts: Tokenized index funds have grown significantly since September

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