SEC Crypto Deadline Is Here🚨Who Wins?🚀Sentora Interview

0:00 The SEC's deadline is today, and today we're going to be breaking down what that might mean into the market and also revealing some very interesting things, including what tokens could be applied. So make sure to stick around for all that good stuff. I want to thank our sponsor today, and that is Tangent, where you guys can get into full self custody. Very easy to do your secure crypto hardware wallet. And one of the things about Tangent that I think a lot of people misunderstand with self custody.

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0:51 Tell them we sent you. Let's start right here. And I want to start with this statement from Digital Policy Alert. obviously talking about what's going on with the SEC. And this was the period for comment. And this course now reached its deadline, October 20th. It is here now. There's a lot of things that have happened over the last 30, 45 days as we started to see Paul Atkins and team starting to push out some sort of alignment of how these rules for crypto are going to be applied.

1:19 And we went in, dove in a little deeper and found out exactly what was going on. So some of this In terms of backing, these are the ones that, of course, we show here. Scaramucci, SkyBridge, you had Hyperliquid, Rialto, Hedera, Paul Josie, who is a securities lawyer. These are the guys who kind of have been backing what's happening with the SEC and say, yeah, it looks good.

1:41 We're ready to go.

1:42 The people that are wanting changes, though, has been five key law professors, Davis Polk, who is the Wall Street law firm, and then also Avalanche. These are more interested in where Safe Harbor is written in and how it applies. And I'll explain that. But when you look at it, here's Hyperliquid's five asks. These were in the comment period.

2:03 We did some research to find out exactly what was being dropped in here. You had airdrops are not investments. Dex trading exemptions, pretty big. protecting builders, another one. Auto buybacks are different. These are rules, not a central policy or not a central party. And then also keep state preemption, which would be after the safe harbor component. And then you had the safe harbor trap, which was the issue that a lot of people were looking at. And this could pretty much set it up for using it where it could look like an admission. And this is where Davis Polk, which was the Wall Street Law Forum, he wants a core test that's A little bit better, so the one that's there is unclear.

2:45 Avalanche came in, Avalabs.

2:46 They want to come in and write something to the exit side into the rule. And then you had Hedera asking for one clear answer on this for Safe Harbor. And then there were some closed-door meetings, which was surprising to me. Canton had a closed-door meeting. They didn't do a public comment, which I don't know.

3:03 Why that is.

3:05 What were they not wanting out in public, but just— for you guys to kind of know. And then you had Coinbase that, of course, put one out, and Digital Chamber also putting one out on August 19th. So September 2nd was the most latest one. What they asked for, not necessarily in the memo, so be aware of that.

3:23 The last thing was, which is kind of surprising, this was actually in the discovery that we put out, and that was two different elements, wildcards that were in the docket. One was on GTA 6, which is possibly an in-game currency. If you guys go back and look at our GTA 6 videos, you'll find that almost two years ago we were calling for at some point there will be a in-game currency. And in fact, it looks as though there is going to be one called Shark Bucks. We'll see how that plays out.

3:50 You also have Mr.

3:51 Beast with Beast Token putting in a utility token with 100 million supply cap. This is an interesting one as well. I want to bring in a guest. And this will get into a little bit where tokenized stocks are heading because this has a large portion of what's happening with this ruling right here. Joining me is Jesus Rodriguez, who is the co-founder and CTO of Centora.

4:13 How are you Jesus?

4:14 Very good, Paul. Thank you for having me.

4:17 So nice to have you.

4:18 I want to go first before we get started, because there's a lot here. I want to dive into what's happening with Kraken and xStocks in general. And this is kind of just a little bit of a diagram here where Centora is involved.

4:33 Explain this to our audience.

4:35 How Centora works on these vaults and how that's connected to Camino, what Firelight is connected with.

4:43 Give me kind of a rundown of how you guys work.

4:45 Yeah, so as a matter of context, so Centora is the biggest institutional DeFi provider in the market. So we have this platform called EarnOS that essentially allows large companies to basically access EOS or borrow some DeFi in a very safe way. So we've run over 300 strategies, 1,000 risk models. We incubated a cover slash insurance protocol called Farlight independently of Centora. We work with large stable coin issuers like PayPal, Freepo, and others and have over $ 3 billion in assets deployed. One of our marquee programs is that we power Kraken. So Kraken has become sort of the the best earned program, DeFi earned program in the market.

5:37 It was very well architected. It launched last year with a number of vaults in stable vaults. Then we launched a Bitcoin vault that achieved 700 million very, very quickly. And then Kraken has been really pushing the innovation boundaries in terms of tokenized equity. So very early on, they worked with the Xtalk team and decided to back that team eventually ended up acquiring the company as part of Payward that is the parent company of Kraken. So one of the ideas that we had was what if we could launch bots for a specific tokenized equity? So today, when you look at the The value that on-chain finance could bring to tokenized equities, there are two things that are very hard to do as an equity holder. So

6:31 if I want to borrow cash against my equities, if you're very wealthy, you can, but the rates are very, very prohibited. And if you want to earn yield against your equities, I want to earn yield against my Microsoft stock, I can't. So building that utility on-chain is one of the promises of DeFi. So the X-Dock Vault was the first attempt to show how that's possible. Essentially, the way it works is users deploy their tokenized equities and behind the scenes, there is a strategy that borrows the stables, deploying to a stable vault at a higher yield than the user makes. The difference and the risk is being managed automatically. Beta is our partner and the vault infrastructure provider for the solution and Centora is providing all the

7:17 yield capabilities.

7:19 So with Centora as kind of the governing company, I'm showing right here on screen Kraken being able to kind of address your point right here, earning.

7:28 Yield on your X stocks.

7:31 With Centora, though, and Firelight, how much risk is there right now in terms of these vaults themselves? And what do you guys do to kind of ensure to minimize that risk?

7:43 Yeah, so I'll make the distinction between the two. So Centora we built for the last four years a fairly sophisticated AI-first risk management engine that processes thousands of signals block by block to protect capital. This is the engine that protects your lending positions against liquidations or your AMM positions against a sleep ash or a well exit in the market, things like that. Now, one question that we always received was, particularly as we evolve, into companies like Kraken or FinTechs. We power deal earn as well. So particularly as we evolve into that demographic, we always were faced with the question, well, if you guys can manage risk, can you price? And that is sort of a covert

8:37 insurance question. That is a problem that was never solved in DeFi at a scale. So about a year and a half ago, we incubated a project called Firelight, as a subsidiary of Centora that came up with a sort of, let's say, a clever way to come up with large capital to protect assets in DeFi. The company raised $ 8 million independently of Centora. We launched a few weeks ago, and one of the first things that we did was Centora launched two protected vaults as part of the launch and then Kraken. launch a protected pod and next week or the following week we have another big announcement of another partner so we want farlight to become the cover or insurance layer for DeFi which we think is a very um it's a very uh primitive very missing primitive

9:32 in DeFi and it uses XRP as a source of capital to uh to ensure DeFi and given your audience i think this is extremely relevant.

9:42 So, okay, I'm looking at how Firelight is adding $ 30 million in.

9:47 Cover to the Kraken USDC vault.

9:51 Explain to me how that is enough, because this would seem as though this is going to be a much more popular vault, which is going to drive a lot more value on the market. this. Is this a scaled coverage that you're going to grow with as the vault grows?

10:05 Explain how that works.

10:06 That's what it is. So if you think about the history of DeFi, so if you look at any financial market, Typically, the financial evolution of the market and the evolution of the insurance of the market, they go together. Maybe the insurance trails a couple of iterations. In DeFi, that never happened. So DeFi has evolved for the last five years and it has grown to hundreds of millions. And there was no insurance or cover solution that had any meaningful traction, maybe a hundred million, but very tiny. So you have this gap now that you, how do you ensure protect hundreds of billions? Which I always say is the problem that you never want to face as a startup, but you need to start with a scale. So for us

10:53 is where do we find the scale? We had a very good technical model to. price technical and economic risk, given that at Centoro we have been protecting capital for a long time. So how do we achieve a scale? And this is why XRP gave us. So the magic bullet to this is what if we could use non-DeFi correlated assets like XRP, like XLM, even like Bitcoin to some extent. You can stake those assets and protect premier properties in DeFi. centora bolts avid markets morpho bolts things like that so essentially you're using an asset that has zero cost of capital because it has no yield and you get the equivalent of a yield of the top properties in in d5 now we don't want to start so we have about 80 100 million that to to

11:47 start with uh we're adding more but we want to go step by step so day one We added two Centauri bolts. And following two weeks, we added this Kraken bolt that started 30 million, but it's going to grow. And we're adding more Kraken bolts. In a few days, you're going to see another big announcement of another premier crypto company. And we have more. We want all the top properties in DeFi, all the top protocols, all the top curators, all the top bolts to protect the assets using Firelight.

12:20 I'm looking at the website there on Firelight on how it enables DeFi cover for this working. I understand pretty much everything here. My question is this resolution of incidents that you're mentioning.

12:34 Explain how that works.

12:36 Where do you guys plug in to actually solve some of the problems that do happen?

12:41 Yeah, so Firelight is a platform built for frontier tech cover at insurance so the bigger vision that we have that obviously is not where we're at today is probably we're not going to be in the next few months is what could you enable when you make insurance programmable like is when you can ensure something as granular as a transaction and if you look at the way tech is going so frontier tech call it ai call it robotics call it biotech Those industries are evolving at a pace that traditional insurance models cannot keep up. So Lloyds of London is not set up to insure AI agents.

13:29 So we wanted to build a new platform that in the future could do a lot of those things. So the way it works is you just take your XRP or XLM. Automatically, there is an ending when you request cover for a specific bolt for a specific asset. That price is called a risk graph. So it understands the risk of every asset on every chain across the entire footprint.

13:52 It gives you a price. You start paying the cover. Now, if there is an incident, because this is all AI-based, the platform automatically recognizes that there is an issue that might affect some of the covers. And then all the evidence is compiled on-chain. And then there is a consortium of some of the best risk managers in DeFi. And Centora, on purpose, doesn't participate. It's not part of the consortium.

14:18 So we decided to preclude ourselves to avoid any conflict of interest, given that we're covering a lot of our positions. By default, we didn't think it was fair that we had a seat at the consortium, but companies are hyper-native, like others out there. They preview the evidence, they vote, and if they vote, the claims get pressed. All right.

14:37 I like it. Good explanation there. Okay.

14:40 So is this, when you look at doing what you guys are doing with Kraken, will this kind of model be available in the United States?

14:53 Yeah. So we, so the question about where is, where do we take funds from? It changes quite a bit. So we initially decided to not take U.S. and Europe for something. I think that's very fluid at the moment. The current administration is way friendlier to this topic, so we're evaluating it constantly. But the Kraken arm per se, it is available to U.S.

15:32 Holders.

15:34 What I discover is that Tokenized equities, they're very sentiment driven so far because the way it works is it's not like I can take my Nvidia stock and immediately, the process of tokenizing is complicated. Most people just go and buy a tokenized equity, which is something that it took us a little bit to understand that culturally it's a different demographic than your traditional Uh, equity holders. So a lot of what you're seeing in terms of adoption is, is being driven by what you're seeing in the news, what you're, what's happening, hyperliquid and curves and, uh, and things, uh, things like that. Now this value proposition that I can go from NVIDIA to more NVIDIA using tokenization and DeFi

16:23 underneath is beautiful. So this doesn't exist in traditional market. This is the one use case. for tokenized equities. So in the, there is a world in which all the other use cases don't make sense. Like if, why would you tokenize stocks? I mean, you get access to markets. Markets are gonna go 24 seven. Anyway, so trading, not that interesting. There is a use case for perps maybe, but a lot of traditional exchanges are adopting perps. So that's gonna become a table stakes. The one thing that you can do, the two things that you can do with on-chain programmable finance and tokenized equities that you cannot do in traditional markets is borrow cash, borrow stables, and earn yield. Those are the two. So that intersection, it

17:15 is a massive deal. Like go and try and call your broker and say, tell them that you want to borrow against your micro or whatever stock and you will see the rates. I mean, they're double digits. They're prohibited. Now, It's kind of like Morpho.

17:30 Morpho has done a really good job at that, you know, on crypto.

17:33 They've been able to really... These ones are in Solana, but we have the same solution on Morpho, right? Just because Xtalk has a better position in Solana right now, we decided to launch with Camino. But we could do the same. Morpho has done a phenomenal job. On this, it has been one of the platforms pushing that. Ave, Morpho, Camino, they're the three platforms that are very well positioned to capture sort of that market. Now the challenge is the user experience today is not there. So you have to go buy the stock and earn the yield, whether what you really want is I want to take my Microsoft stock and receive more Microsoft stock and all this disappears.

18:17 So once we figure out how to do that with the right prime broker, with that entire network, and Kraken has all the ingredients because they have their licenses, they have the the technology. So I think they're going to be the first company to get there.

18:32 Okay.

18:32 Well, I'm kind of curious because you've got Coinbase, which has already established a very deep relationship with Morpho. Morpho has already started to set up a large amount of user base that's accustomed to taking loans out on crypto. And now you've got potentially tokenized securities coming into Coinbase, which essentially I'm assuming was going to be able to translate into.

18:53 Morpho pretty quickly.

18:55 They do have a user experience that's very enticing and and easy. Do you think that's going to be the race between Morpho and what you see coming out of Kraken maybe?

19:05 Interestingly enough, what BASE announced was tokenized equities in Aave on BASE, which is interesting considering the relationship that Coinbase and Morpho have. I think both, if I have to guess, the race is going to be between Kraken, Coinbase and Robinhood. Those are the three that are in the best position.

19:28 How long do you.

19:29 Think, Jesus, how long do you think, really, before here?

19:32 The technology is there. All these companies have the license. The technology is there. So I think this is a matter of months if the effort is there. So the yields there, the bonuses are there, the stable incentives are there. So it's how do I go from, my broker account to integrate all this thing behind the scenes.

19:54 What do you think about this right here?

19:55 Because this is an argument I think a lot of people have with lending, especially with something like a Morpho, where you've got that variable lending rate that goes against your crypto at any given time. You never really know what that fee is. but Camino goes out, they launched this fixed rate borrowing, and this is for tokenized assets.

20:12 So that's a big, to me, that's a huge, huge advantage. Do you think everybody's gonna go in this direction in the future?

20:21 No, I think a lot of credit markets have a combination of fixed rates and variable. rate in DeFi we never figure out the the fixed rate because most of the lending is over collateralized with assets that fluctuating in price I think Morpho recently came out with Midnight to address this Camino follow with this solution I think there is a market structuring friction there that you have to have the counterparty on the other side to maintain that rate and A lot of these products still need to work to build that muscle to get there. But eventually, I believe you're going to see fixed rates in DeFi and you're going to see variable trades as well.

21:10 Do you think we'll get to a point in DeFi where I'm holding my stocks in whatever wallet I've got out there, whether it's doing something with X stocks or Kraken or maybe even over on BASE? where I won't have KYC involved. And I'll be able to use whether it's zero proof or other ways to be able to lend against my stocks, just like my crypto, without going into KYC.

21:38 Do you think that will happen?

21:40 Yeah. So many, a couple of years ago, I wrote an essay about this, tried to be a little bit polemic at the time, which essentially said, We don't need to brute force our way to KYC in DeFi. So when you look at traditional KYC, the way that you identify if a specific investment vehicle is clean or not is you take a statistical sample of the participants. So because everything is visible on chain, you can do two things.

22:14 You can scan the vault, and we do that today, and say, well, this is 99%. This has three degrees of proximity to a mixer or something like that that could trigger a red flag and that could give you a KYC score. And you don't need to go wallet by wallet. And the other one is you could start launching bolts that have KYC. And you incentivize the participants.

22:40 You pay a higher deal for that. What I think is it will be a wasted opportunity is if the regulators come and say, oh, you have Morpho, you have to KYC all the votes. Can they do it? Absolutely. But I think that's a brute force approach that is neglecting the technology innovations that blockchain brings to the table.

23:01 So as you said, if I want my tokenized equity, and I want to lend it down to a specific vault, I'll be fine saying this vault has a 99% score. And there's AI agents that are doing that on my behalf. I don't need to know every single address. I think that's what programmable finance should aim to build.

23:25 Well, the question will be, does the SEC agree with you? And that's, you know, obviously we were reporting on that today. Of course they will.

23:32 Where does the SEC allow AI agents to kind of come in and meet on-chain finance?

23:39 Do you think that's coming? We saw the.

23:43 Period right now that has expired, and most likely the SEC is going to start applying this. It's likely we're going to see more rulemaking coming out that could go in this direction.

23:53 What do you think?

23:54 Yeah, so that topic sits at the intersection of multiple things. My background is in AI. That is what I teach, what I do. I built several AI companies in recent years. So I spend a lot of time on this. So AI regulation by itself is a big thing that you've probably seen, right? That has been a core topic on Congress committees recently. So identity for agents haven't been hasn't been solved yet. So what is the identity of your agent?

24:25 Is it your identity? Is it a new identity that is delegated? So that is a layer that needs to be solved. So does your agent inherit your KYC? By definition, it is a brand new thing. So agentic commerce is happening. I think this is unstoppable right now. And the typical argument on chain is, oh, agents cannot have bank accounts. Well, they're sort of getting credit cards and things, right? That there are mechanisms for that. So it is important if on-chain financing wants to be a participant in that identity commerce economy, there is a window of time to make that work because there is a lot of companies I think Tempo particularly is extremely well positioned for this. Stripe is obsessed with agentic commerce and they're pushing it really hard.

25:16 I think Coinbase is doing their part. Circle seems that they have ambitions to do that with ARK as well. But what is that regulation of that? It's a combination of e-commerce regulation with crypto regulation with AI regulations.

25:34 No doubt. No doubt. There is some pushback, though.

25:37 A couple of things that I want to highlight here is you had NASDAQ along with some other companies, CoreWeek, Broadcom, Verizon. There was nine different companies out there objecting to tokenized trading of their shares.

25:50 Not only that, then you have, of.

25:52 Course, the best troll of all, which is Adam Aaron, the CEO of, yeah, so we've talked.

25:58 About him with AMC.

26:00 And he's been pushing back constantly with Robin, and they're just, you know, jousting in the open now. Do you think we're going to have companies that finally realize this is going to be good for stockholders? It's going to be good for the companies themselves? Or do you think there's going to be a class of stocks out there that just fight this?

26:22 I think the short term is you're going to see a class of companies. companies that fight this. It's not completely, obviously I don't sympathize with that, but I don't think it's completely crazy because the implementations today, they are on a little bit of a gray area. And again, regulatory structuring is not my domain, but I talk to a lot of these players and a lot of these vehicles, you give up your voting rights, whether that, I don't know how many times you vote on the stocks that you own. I particularly don't ever, but So I don't know how important that is or not, but you end up making some concessions there that some people classify as not an equity. And then what the bigger argument here

27:13 is the level of fragmentation that is causing in the market, whether it trades on some venues, it trades 24 seven in others and things like that. So that is a bigger argument. So I think in the short term, you're going to see a lot of that fight, but this is unstoppable. I don't think you're going to win that fight with agents coming on chain, with the level of innovation that programmable finance. I think you're on the bright side of history if you're fighting this.

27:44 All right. So I've got a list.

27:45 As we analyzed a lot of the comment period for the SEC, what kind of projects and companies could come out of this as a winner? And then we analyze this against how much some of these tokens have gone down since their all time highs. And where these, you know, there might be some winners here. So obviously we show the big ones there, ETH, HOOD, SOL, CIRCLE, HYPERLICUID, UNISWAP, AVE, ONDO in there at 79% down, 84% down on UNISWAP.

28:13 But the biggest ones have been LIDO at 95, JITO at 92% down. and Jupiter at 85% down. So all these markets look like they're going to benefit from what's happening with these SEC rules, tokenized stocks, the eventually agentic payment. Is anyone on this list here, first of all, that you would say this might be a big winner, or are we missing.

28:41 Anyone on this list?

28:42 So look, I think... Uniswap, the AMN should be a beneficiary of this because the tokenized security exception basically allows you to trade these things on AMN. So they should be a winner. I think Hyperliquid could come out of this looking pretty good. As well, there is, I don't think it's in this set of comments, but there have been a lot of speculation of what the SEC is going to do in terms of DeFi and bots or legal team and Centauri meets with the SEC. regularly. So I think that's a lot of the pressure that you're seeing on the Alice and Morpheus of the world, but who knows? I mean, I think some regulatory guidance is better than no guidance at this point.

29:25 Oh yeah, for sure.

29:26 Listen, okay, so we're going to cover this a lot more because I think there's going to be some pretty big breaking news items that are going to come out of this SEC finalization, especially as we get into new rulemaking. So Jesus, it's been great having you on the show. Thank you so much for coming in today.

29:43 We appreciate it.

29:43 Thank you for having me.

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