COMPETITIVE ANALYSIS: SECURITIZE vs. OTCM PROTOCOL DOCUMENT
Digital Securities Market Positioning · Architecture · Regulatory Compliance Groovy Company, Inc. dba OTCM Protocol · |
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BlackRock’s tokenization partner Securitize dominates institutional digital securities with more than $4 billion in assets tokenized and a $1.25 billion valuation. However, its middleware-on-public-chains architecture, centralized compliance overrides, and limited secondary liquidity reveal structural vulnerabilities that create significant opportunities for alternative approaches.
OTCM Protocol offers a fundamentally different model built on complete infrastructure control, mathematically-enforced security via Solana SPL Token-2022 (ST22), and a Global Unified CEDEX Liquidity Pool that makes liquidity withdrawal mathematically impossible. This architecture positions OTCM Protocol to capture the underserved $50 billion illiquid OTC securities market that Securitize’s institutional model cannot economically address.
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Company Overview and Institutional Dominance
Securitize was founded in November 2017 by Carlos Domingo and Jamie Finn to serve as a bridge between Wall Street and blockchain-based securities. The company raised approximately $147–200 million across funding rounds, with a pivotal $47 million Series C in May 2024 led by BlackRock. This investment placed Joseph Chalom, BlackRock’s Global Head of Strategic Ecosystem Partnerships, on Securitize’s board, cementing the institutional relationship that defines the company’s market position.
In October 2025, Securitize announced a SPAC merger with Cantor Equity Partners II at a $1.25 billion pre-money valuation, with an expected Nasdaq listing under ticker SECZ in the first half of 2026. The BlackRock relationship represents Securitize’s crown jewel. The BUIDL fund (BlackRock USD Institutional Digital Liquidity Fund), launched in March 2024, has grown to more than $2.5 billion in AUM — the world’s largest tokenized real-world asset. Beyond BlackRock, Securitize counts Apollo, KKR, Hamilton Lane, and VanEck as institutional clients.
Regulatory Positioning — Issuer-Sponsored Model
In its October 2025 submission to the SEC Crypto Task Force, CEO Carlos Domingo articulated Securitize’s core regulatory philosophy: intermediaries should not tokenize public equity without the issuer’s direct involvement and assent. The company’s SEC-registered digital transfer agent works directly with issuers to “natively” mint tokenized securities without intermediary layers.
• Permissioned Architecture: All investors are KYC-verified and wallets are whitelisted before any transaction can occur
• Rules-Based Smart Contracts: Enforce lawful transfers and AML compliance throughout the asset lifecycle
• Token Recovery: Lost, stolen, or impaired tokens can be burned and reissued by the transfer agent
• Not Bearer Securities: Securitize explicitly emphasizes regulatory accountability of token holders
Notably, Securitize’s SEC submission explicitly characterizes competing approaches — including permissionless wrapped tokens and derivative securities — as “regulatory arbitrage” that creates “an uneven playing field.” This reflects Securitize’s institutional DNA and strategy of building within existing frameworks rather than seeking exemptions. However, it also reveals a fundamental philosophical difference with platforms serving markets that traditional infrastructure has abandoned.
Technology Architecture — Middleware on Public Chains
Securitize operates as blockchain-agnostic middleware, deploying the ERC-3643 (T-REX) token standard across more than 15 public blockchains including Ethereum, Polygon, Avalanche, and Solana. While this multi-chain approach provides flexibility, Securitize runs no blockchain infrastructure of its own. This means the platform inherits the limitations of general-purpose chains — gas fee volatility, scalability constraints, and computational limits on complex compliance rules.
Critical Limitations
Limitation | Detail |
Limited Liquidity | Securitize Markets ATS reports approximately $600,000 in daily trading volume — modest for a platform claiming market leadership |
Trading Disruptions | User complaints document trading suspended for months due to custodian restructuring — revealing operational dependencies outside Securitize’s control |
Admin Overrides | ERC-3643 includes force transfer, freeze, and recovery functions allowing administrators to override on-chain ownership — antithetical to blockchain’s trust-minimization principles |
High Costs | Setup fees exceeding $100,000 and minimum investments of $10,000–$5,000,000 exclude smaller issuers and retail investors |
External Infrastructure | Relies on external DEXs and bridges (Wormhole) for broader liquidity — introducing counterparty and smart contract risk outside Securitize’s control |
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Complete Infrastructure Control — The Alesia Doctrine
OTCM Protocol’s architecture reflects a strategic philosophy drawn from Caesar’s siege of Alesia: build complete defensive infrastructure rather than rely on external dependencies. Where Securitize deploys on public chains it does not control, OTCM Protocol builds proprietary infrastructure on Solana specifically designed for Digital Securities operations.
This architectural decision emerged from a critical discovery during development. Major decentralized exchanges like Raydium, Orca, and Meteora cannot support Token-2022 Transfer Hooks, meaning that tokens traded on these platforms would lose all 42 security controls. Rather than compromise compliance to fit existing infrastructure, OTCM Protocol built CEDEX — a custom exchange that preserves all 42 Transfer Hook controls on every transaction.
Regulatory Positioning — Category 1 Model B, Release No. 33-11412
OTCM Protocol’s regulatory engagement with the SEC Crypto Task Force culminated in full alignment with Release No. 33-11412 (March 17, 2026) and the January 28, 2026 Joint Staff Statement on Tokenized Securities, which established the definitive framework for compliant tokenization.
SEC Category 1 Model B Requirement | OTCM Protocol Implementation |
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Issuer Authorization | Board resolution required before ST22 minting | Binding | |
Official Shareholder Register | Certificate of Designation + Empire Stock Transfer master file | Binding | |
SEC-Registered Custodian | Empire Stock Transfer — Exchange Act §17A | Binding | |
True Equity Backing | 1:1 |
| Binding |
Digital Securities Classification | ST22 Digital Securities = Category 5 under Release No. 33-11412 | Binding | |
CUSIP Assignment |
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| Binding |
Investor Protections | 42 Transfer Hook controls + protective conversion triggers | Binding |
Binding
SEC Quote — January 28, 2026 Joint Staff “Form should be disregarded for substance, and the emphasis should be on economic reality.” This principle directly validates OTCM Protocol’s Category 1 Model B architecture: Empire Stock Transfer maintains the authoritative off-chain master securityholder file; the Solana blockchain serves as the operational notification layer. |
Token Standard Architecture — ERC-3643 vs. ST22
Securitize: ERC-3643 on Ethereum
Securitize builds on ERC-3643 (T-REX), developed by Tokeny Solutions. With more than $28 billion in tokenized assets, ERC-3643 is the dominant standard for institutional security tokens on Ethereum. Its architecture adds compliance functionality through a five-component overlay: T-REX Token contract, ONCHAINID (ERC-734/735), Identity Registry, Compliance Contract, and Trusted Issuers Registry.
• Admin Override Vulnerability: forceTransfer(), freezePartialTokens(), and recoveryAddress() allow administrators to move tokens without holder consent
• Registry Manipulation Risk: Compliance depends on off-chain identity registries that can be modified
• Gas Volatility: Ethereum transaction fees have historically ranged from $1 to more than $40 during network congestion
• Throughput Constraints: Ethereum processes approximately 15 TPS, creating bottlenecks at scale
• Application-Layer Bypass Risk: Compliance checks are application-layer smart contract calls — a caller with direct EVM access can bypass the T-REX overlay entirely
OTCM Protocol: SPL Token-2022 (ST22) on Solana
OTCM Protocol builds on Solana’s Token-2022 program, a native upgrade to Solana’s SPL token standard that embeds compliance directly into the protocol layer. Unlike ERC-3643’s smart contract overlay, Token-2022 Transfer Hooks execute inside the Solana runtime — there is no bypass path.
• Runtime Enforcement: Transfer Hook controls execute inside the Solana runtime — mathematically impossible to bypass regardless of caller
• Atomic Execution: 42 compliance controls execute atomically with the token transfer — if any control fails, the entire transaction reverts
• No Admin Override: No forceTransfer equivalent exists — immutability is architectural, not policy
• Ultra-Low Costs: ~$0.00025 per transaction enables micro-transactions and high-frequency trading
• Near-Instant Finality: ~400ms vs. Ethereum’s 12+ second block times
• Formally Verified: Certora formal verification of six mathematical invariants pre-mainnet
Token Standard Comparison
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Global Unified CEDEX Liquidity Pool — — The pool is funded by three sources: (1) OTCM Protocol Solana Treasury — protocol-owned SOL treasury provides initial seeding and ongoing support; (2) OTCM Staking Pool — 2% of every staking reward distributed routes to the Global Pool via immutable Transfer Hook before rewards reach staker wallets; (3) 0.44% of every ST22 Digital Securities transaction — permanently locked by immutable Transfer Hook on both primary offerings and CEDEX secondary trades. There is no per-issuer pool architecture. The Global Pool is shared across all ST22 issuers. This means each new issuer adds transaction volume that deepens liquidity for all issuers on the platform. |
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Tokenized Issuers | Daily Volume (est.) | Annual Volume | Annual Protocol Revenue (5%) |
3 (Beta) | $200K | $73M | $3.65M |
50 issuers | $3.3M | $1.2B | $60M |
250 issuers | $16.7M | $6.1B | $305M |
1,000 issuers | $66.7M | $24.3B | $1.22B |
2,000 issuers (Year 5 target) | $133M | $48.5B | $2.4B |
All projections are highly speculative. These assume the beta test average of approximately $67,000 daily volume per issuer. Actual volume varies by issuer market cap, shareholder base, and trading interest. With more than 11,000 OTC companies in the addressable market, even modest penetration generates substantial protocol revenue.
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Dimension | Securitize | OTCM Protocol |
Primary Target | NASDAQ-bound institutional assets (BlackRock, Apollo, KKR) | OTC companies, 15c2-11 casualties, global SMEs |
Investor Focus | Accredited/institutional ($10K–$5M minimum) | All Empire-verified accredited investors |
Setup Costs | $100,000+ enterprise pricing | $1,000–$25,000 issuer-friendly |
Market Size | Premium segment (well-served by traditional finance) | $50B+ trapped shareholder value (blue ocean) |
Competitive Position | Crowded institutional market | Underserved OTC market with no comparable alternative |
Liquidity Model | Depends on institutional market makers | Global Unified CEDEX Liquidity Pool — permanent |
Transaction Economics | $1–$40+ per transfer (Ethereum L1) | ~$0.00025 per transfer (Solana) |
Why OTC Markets Represent Blockchain’s True Opportunity — For OTC companies and their shareholders, OTCM Protocol tokenization represents transformation from zero liquidity to functioning markets. The value proposition is not incremental improvement but the difference between having a market and having none. OTCM Protocol’s $50 billion addressable market consists of trapped shareholder value held by real people who currently cannot sell at any price. Securitize cannot economically serve this market at $100,000+ setup fees and $1–$40 per transaction. This is not competitive overlap — it is a different universe of companies and shareholders that traditional finance has structurally abandoned. |
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Dimension | Securitize | OTCM Protocol | Advantage |
Token Standard | ERC-3643 on Ethereum | SPL Token-2022 (ST22) on Solana | OTCM Protocol |
Transaction Cost | $1–$40+ gas fees | ~$0.00025 | OTCM Protocol |
Transaction Speed | ~15 TPS, 12+ second blocks | 65,000+ TPS, ~400ms | OTCM Protocol |
Admin Override | Yes — force transfer, freeze, recover | No — mathematically impossible | OTCM Protocol |
Compliance Enforcement | Application layer — bypassable | Runtime — no bypass path | OTCM Protocol |
Transfer Agent | Empire Stock Transfer (via structure) | Empire Stock Transfer (COO/President dual role) | Tie |
Secondary Liquidity | ~$600K/day ATS, market hours only | 24/7 CEDEX + Global Unified Liquidity Pool | OTCM Protocol |
Liquidity Permanence | Withdrawable by market makers | LP tokens burned — mathematically permanent | OTCM Protocol |
Target Market | NASDAQ/institutional ($100K+ setup) | OTC illiquid Digital Securities ($1K–$25K) | Different |
Regulatory Licenses | Transfer Agent, Broker-Dealer, ATS, EU MiCA | Release No. 33-11412 Category 1 Model B | Securitize wins |
Institutional Partners | BlackRock, Apollo, KKR, Hamilton Lane | Empire Stock Transfer (Patrick Mokros dual role) | Securitize wins |
Valuation | $1.25B SPAC merger | Early stage | Securitize wins |
Market Opportunity | Premium segment (competitive) | $50B+ underserved (blue ocean) | OTCM Protocol |
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Where Securitize Wins
• First-mover regulatory moat with transfer agent, broker-dealer, ATS, and EU MiCA registrations
• Institutional relationships with BlackRock, Apollo, KKR, and Hamilton Lane — unmatched institutional credibility
• $1.25 billion SPAC valuation validates market acceptance of its institutional-focused approach
• ERC-3643 with $28B+ in tokenized assets establishes institutional standard on Ethereum
• EU MiCA compatibility — first firm licensed in both the United States and the European Union
Where OTCM Protocol Wins
• Infrastructure Independence: The Alesia Doctrine eliminates third-party failure vectors that cause Securitize trading suspensions
• Mathematical Security: 42 Transfer Hook controls execute inside the Solana runtime — cannot be overridden, cannot enable rugpulls, cannot be bypassed
• Permanent Liquidity: Global Unified CEDEX Liquidity Pool — LP tokens burned — withdrawal mathematically impossible for any party
• Blue Ocean Opportunity: The $50 billion underserved OTC Digital Securities market has no comparable alternative — Securitize cannot economically serve it
• Binding Regulatory Framework: Release No. 33-11412 (March 17, 2026) confirms ST22 Digital Securities as Category 5 under binding federal interpretation — not Staff guidance
• Transaction Economics: ~$0.00025 per transfer vs. $1–$40+ — 200,000× cost advantage enables mid-market issuers impossible on Ethereum
Securitize and OTCM Protocol serve fundamentally different markets with fundamentally different architectures. Securitize’s institutional DNA makes it ideal for BlackRock-style clients who need regulatory comfort and are willing to accept centralized control. OTCM Protocol’s infrastructure independence and mathematical security make it ideal for the vast underserved market of illiquid Digital Securities where traditional finance has failed. The competitive threat to Securitize is not OTCM Protocol taking its institutional clients. Rather, it is OTCM Protocol demonstrating that a better model exists. When OTCM Protocol’s ST22 architecture processes billions in daily volume with zero admin overrides, instant settlement, and sub-cent fees, Securitize’s middleware-on-Ethereum model will appear increasingly antiquated. The long-term trajectory favors OTCM Protocol’s approach. Mathematically-enforced security, runtime-level compliance, and infrastructure independence represent the future of tokenized Digital Securities, while Securitize’s centralized control and external dependencies represent a bridge to that future rather than the destination. |
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78 SW 7th Street, Suite 500 · · Miami, FL 33130 · · October 3, 2025
Via Electronic Mail — The Honorable Paul S. Atkins, U.S. Securities and Exchange Commission, 100 F Street NE, Washington, D.C. 20549
Re: Securitize’s Compliant, Issuer-Sponsored Security Tokenization Model
Dear Chairman Atkins, Securitize appreciates the opportunity to provide a high-level overview of the firm’s tokenization model as a contrast to some of the alternative offerings that have recently come to market, specifically as it relates to public equities. Securitize provides highly scalable and compliant tokenization solutions via its regulated subsidiaries that cover issuance, distribution and secondary market trading. The firm has pursued an approach that is innovative, leverages frontier-edge technologies of blockchains and smart contracts, all within a highly compliant model, unlike many other current and potential market entrants. We do not need or seek exemptions with respect to existing securities regulations, although some existing rules need to be modernized to accommodate blockchain solutions. It is our view that some of the ‘competing’ offerings to our approach represent a regulatory arbitrage and create the potential for an uneven playing field for other compliant ecosystem participants.
I. Tokenization Models
Recent enthusiasm to tokenize public securities has catalyzed a range of offerings that call into question the appropriate form of tokenized assets. Securitize’s model is characterized as issuer-sponsored in contrast to some of the other approaches: we do not believe intermediaries should be tokenizing public equity without the issuer’s involvement and assent.
A. Issuer-Sponsored
— Securitize Transfer Agent, LLC, an SEC-registered digital transfer agent, works directly with issuers to “natively” (meaning without intermediary layers) issue or mint a tokenized public equity. The tokenized security is the equivalent of the traditionally issued security. The tokenization process involves converting traditional shares held in book entry form at DTCC to a tokenized form captured on a blockchain-based master security file of the transfer agent. The tokenized security confers the same ownership rights as the traditional security, including voting rights, dividend rights and other corporate actions. Investors are always KYC-verified and their wallets are whitelisted. Whitelisting, coupled with rules-based smart contracts, ensures lawful transfers and AML compliance are always enforced throughout the lifecycle of the asset.
B. Permissionless “Wrapped” Tokens
— SPVs are created to hold the traditional shares, and a token representing an ownership interest in the SPV is issued (a wrapped token) to provide exposure to the stock held in the SPV. This approach introduces additional counterparty risk to the investor as any potential claims would be against the SPV and not the actual issuer of the stock. The wrapped token does not confer any ownership rights equivalent to owning the underlying stock, e.g., voting rights, dividend rights. Other than at the point of purchase or redemption, investors who purchase in the secondary market are not subject to any KYC requirements. After the initial purchase, the wrapped tokens can be freely transferred from wallet to wallet without verifications or sanctions screening.
C. Derivative Securities
— Synthetic products that provide exposure to the underlying stock. This is analogous to a total return swap or security-based swap (SBS) construct and should be deemed to be a security or security-based swap. Exposure is purely economic: the product does not allow redemption for shares or units in the underlying asset and does not offer rights that would attach to a security purchased directly. Investors are exposed to counterparty risk of the token issuer and attendant liquidity pool. If the security is SBS, the full panoply of SBS rules would have to be addressed.
III. Transferability and Token Control: Permissioned vs. Permissionless
— Securitize implements smart contracts with rules that govern the transferability of its tokenized securities. Coupled with the KYC verification and whitelisting requirements, this ensures that only eligible and approved investors can engage and transact as smart contracts enforce compliance with suitability, AML and issuer-defined requirements. Moreover, given the smart contract architecture and the existence of an off-chain security master file, any lost, stolen or otherwise impaired tokens can be burned and reissued by the TA (at the direction of the BD or the issuer) such that investors are made whole. These are, therefore, not bearer securities.
IV. Secondary Market Trading
— Securitize Markets, LLC is an SEC-registered and FINRA member broker dealer that operates the Securitize Markets ATS and has bilateral relationships with OTC market makers. The firm’s ATS provides several options to compliantly trade tokenized securities, including a standard order book and an RFQ option. The firm plans on offering trading in tokenized NMS stocks and will do so within the existing framework of Reg NMS and related regulations for off-chain transactions.
Sincerely, Carlos Domingo, Chief Executive Officer
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Overview: Solving the $50 Billion OTC Market Crisis
OTCM Protocol creates permanent, SEC-compliant market infrastructure for Digital Securities that traditional finance has abandoned. Over 11,000 companies trade on OTC markets, yet thousands have become completely untradeable, trapping an estimated $50+ billion in shareholder value. Traditional market infrastructure fails these Digital Securities through compounding inefficiencies: market makers ignore stocks trading less than $50,000 daily; compliance costs of $25,000–$75,000 annually force companies to abandon market reporting; once securities fall into the grey market, traditional finance offers no path to liquidity.
SEC Category 1 Model B Regulatory Framework
OTCM Protocol operates within the SEC’s January 28, 2026 Joint Staff Statement on Tokenized Securities and the superseding binding authority of Release No. 33-11412 (March 17, 2026) through full Category 1 (Issuer-Sponsored) compliance — the gold standard for tokenized Digital Securities.
SEC Category 1 Requirement | OTCM Implementation | Status | |
Direct Issuer Authorization | Board resolution required for |
| Binding |
Transfer Agent Custody | Empire Stock Transfer (SEC Section 17A registered) maintains custody | Binding | |
Digital Securities Classification | ST22 tokens = Category 5 Digital Securities under Release No. 33-11412 | Binding | |
Direct Ownership | Token holders have direct beneficial ownership claims on |
| Binding |
Counterparty Risk Eliminated | No third-party intermediary between holder and equity | Binding | |
Regulatory Recordkeeping | Rules 17Ad-2 through 17Ad-13 compliance | Binding |
Nine-Layer Platform Architecture — V7.V8.0
Layer | Component | What It Does |
L1 | Solana Foundation | 65,000+ TPS, ~$0.00025/tx, ~400ms finality |
L2 | SPL Token-2022 Transfer Hooks | 42 compliance controls enforced atomically inside the Solana runtime on every ST22 transfer — no bypass path |
L3 | Global Unified CEDEX Liquidity Pool | Single protocol-owned pool shared by all ST22 issuers · funded by OTCM Treasury + staking reinvestment + 0.44% fee lock · LP tokens burned |
L4 | Custom AMM Engine | Purpose-built CPMM with u128 arithmetic · rounding toward Global Pool |
L5 | CEDEX | Only trading venue where SPL Token-2022 Transfer Hook compliance is preserved on every trade |
L6 | Oracle Network | 1:1 custody attestation every ~400ms · OFAC · AML · TWAP price · EDGAR intelligence |
L7 | Protocol Governance & Parameter Management | 3-of-5 multi-sig (adjustable params) · 5-of-9 multi-sig (upgrades) · 42 Transfer Hook controls immutable |
L8 | Wallet Infrastructure | KYC/AML-enforced iOS and Android · Ledger/Trezor hardware wallet support |
L9 | Predictive AI Module | XGBoost IDOS scoring across 15,000+ OTC companies · EDGAR NLP pipeline |
Revenue Model — V7V8 Authoritative
OTCM Protocol charges a 5% fee on ALL ST22 Digital Securities transactions — applied identically at both the primary offering phase and all secondary market trading on CEDEX.
Fee Component | Rate | Mechanism |
Global Unified CEDEX Liquidity Pool | 0.44% | Permanently locked by immutable Transfer Hook on every transaction — not withdrawable by any party |
OTCM Protocol platform revenue | 4.56% | Funds infrastructure, compliance, development, staking reward distributions |
Issuer secondary fee share | None | Issuers receive 95% of primary raise proceeds only — no ongoing secondary trading share |
Key Policy Recommendations
• Confirm that SEC-registered transfer agents satisfy the regulated custody requirement for Category 1 Digital Securities tokenization
• Recognize that Category 1 tokenization of Digital Securities in markets abandoned by traditional infrastructure provides unique investor protection benefits
• Acknowledge that smart contract-based compliance controls (Transfer Hooks executing inside the Solana runtime) can provide investor protection equal to or superior to traditional market mechanisms
• Clarify that public, permissionless blockchains such as Solana may be used for Category 1 Digital Securities when paired with SEC-registered transfer agent custody and 1:1 verifiable equity backing
• Provide guidance on the use of bonding curve automated market makers for Category 1 Digital Securities, recognizing their potential to provide continuous liquidity without traditional market maker dependency
Respectfully submitted, Frank Yglesias, Chief Technology Officer, OTCM Protocol — Groovy Company, Inc. dba OTCM Protocol, A Wyoming Corporation
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Confidentiality Notice and Disclaimer This document is confidential and prepared for internal strategic use only. Distribution limited to authorized personnel. The competitive analysis is based on publicly available information and internal analysis as of March 2026. ST22 Digital Securities are Category 5 Digital Securities under Release No. 33-11412. This document does not constitute an offer to sell or solicitation of an offer to buy any securities. Groovy Company, Inc. dba OTCM Protocol is a Wyoming Corporation (CIK: 1499275). |
CONFIDENTIAL
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