Dinari, a company based in the United States specializing in tokenized securities, is entering the blockchain space by establishing its own proprietary network. This move aligns with the growing trend of companies creating their own blockchain infrastructures.
The new blockchain, named the Dinari Financial Network, is intended to act as a hub for coordination and settlement, specifically for securities that are issued on various other platforms. These platforms include Arbitrum, Base, Plume (PLUME), and, in the near future, Solana. The Dinari Financial Network utilizes Avalanche’s (AVAX) technology to deliver its functionality.
Gabe Otte, the CEO and co-founder of Dinari, stated in an interview with CoinDesk that the blockchain will serve as the core infrastructure for their settlement and clearing system. Previously, these processes primarily occurred off-chain.
Otte also mentioned that the test network is currently operational, with plans to launch the public version within the next few weeks.
Dinari is a key player in the tokenization of equities, which is a growing movement aimed at making stock trading accessible on blockchain networks. Advocates suggest that tokenization offers benefits like around-the-clock trading, faster settlement times, and reduced operational costs.
Recently, Robinhood launched tokenized stocks on Arbitrum for its EU users, with long term ambitions to develope its own chain. Crypto exchanges like Kraken and Bybit have also begun offering tokens that represent shares of U.S. stocks and ETFs.
In June, Dinari received broker-dealer registration through FINRA with the authorization to tokenize National Market System (NMS) securities. This allows them to offer a compliant method for issuing tokenized versions of publicly traded U.S. stocks. Furthermore, Dinari is providing the core tokenization infrastructure behind the Gemini stock tokens in the EU, an exchange founded by Cameron and Tyler Winklevoss.
The Rationale Behind a New Layer 1 Blockchain
Dinari’s choice to develop its own blockchain reflects a recent trend among fintech and crypto companies. This week, both USDC stablecoin issuer Circle and payments processor Stripe have revealed plans to create their own exclusive blockchains. Similarly, other tokenization firms, such as Ondo Finance and Securitize (in partnership with Ethena), are also actively developing their own blockchain networks.
This approach is primarily driven by a desire for increased control over regulatory compliance, system uptime, and seamless integration with existing traditional finance systems, as opposed to utilizing existing public blockchains.
According to Otte, the creation of Dinari’s blockchain was a “necessity.”
He explained that many public blockchains do not provide the necessary level of compliance required for dealing with securities. Another key factor was the need to streamline and coordinate trading of Dinari-issued tokens across multiple blockchains without fragmenting liquidity.
Otte emphasized that if stock tokens are spread across various platforms, such as Solana, Arbitrum, and Base, it would fragment the massive $100 trillion market. He explained that a dedicated blockchain is needed to consolidate liquidity across different chains.
By centralizing settlement and liquidity, Dinari seeks to enable continuous and compliant trading of U.S. equities on a global scale, effectively aiming to emulate the role of the Depository Trust and Clearing Corporation (DTCC) for the stock market. The DTCC is the world’s largest securities clearing and settlement organization.
Regarding the choice of Avalanche as the foundation for their blockchain, Otte highlighted the need for flexibility and control over transaction fees (gas prices), which is difficult with rollup and layer-2 solutions. Morgan Krupetsky, VP of ecosystem growth at Ava Labs, explained that Ava Cloud enables businesses to quickly launch and customize blockchains to suit their specific requirements.
Aiming to be a Neutral Clearinghouse
Dinari intends for the Dinari Financial Network to serve as a “neutral clearinghouse” for the tokenized securities industry, according to Otte.
Initially, governance will be managed by a consortium of institutions, including Gemini, custodian BitGo, and asset manager VanEck. These institutions will act as validators and offer custody services.
Otte stated that the long-term plan is to fully decentralize the blockchain, which may include the launch of its own governance token.
Further Reading: Tokenized Equities Need an ADR Structure to Protect Investors