On-Chain Equities and the Evolution of Market Infrastructure with Mike Cagney of Figure

Key Points

• Figure transitioned to a public company and restructured, separating blockchain-intensive operations before recombining them under new leadership to navigate regulatory challenges.
• The core vision is issuing equities natively on blockchain (not just tokenizing existing ones) to unlock transactional efficiency, liquidity, and DeFi benefits like collateralized lending, bypassing traditional intermediaries like DTCC and NASDAQ.
• A key innovation is creating a distinct blockchain-based equity that trades on Figure's ATS (a decentralized exchange model) with a swap mechanism to the traditional NASDAQ version, ensuring liquidity and arbitrage alignment.
• This approach challenges the entire traditional equity stack (exchanges, brokers, prime brokers) by enabling direct wallet-based trading, 24/7 global access, and integrated DeFi services like stock lending.
• The future is seen as bifurcating between native blockchain securities with real collateral/governance value and prediction markets for price bets, with legacy "wrapper" tokenization models viewed as unsustainable.

Summary

In this interview, Mike Cagney details Figure's evolution into a public company and its pioneering approach to integrating equities with blockchain technology. He explains that Figure's journey involved restructuring to manage regulatory headwinds, ultimately leading to a public listing. Cagney argues that merely tokenizing existing DTCC-held securities (creating "wrappers") is limited, as it fails to unlock the full potential of blockchain due to regulatory constraints like Reg NMS and offers poor collateral value. Instead, Figure's strategy is to issue a separate, native blockchain equity—a distinct security from its NASDAQ-traded stock. This equity will trade on Figure's Alternative Trading System (ATS), which functions like a decentralized exchange, allowing direct trading from a digital wallet without traditional brokers.

The core value propositions are threefold: transactional efficiency (e.g., reducing proxy voting costs), enhanced liquidity via 24/7 global, democratized access, and most importantly, integration with decentralized finance (DeFi). This enables uses like using stock as collateral for loans or creating transparent, efficient stock lending markets, shifting economic value back to investors. To address liquidity concerns, Figure established a novel swap mechanism allowing conversion between the blockchain and NASDAQ versions, ensuring price alignment through arbitrage.

Cagney believes this model represents a foundational challenge to the traditional equity ecosystem, eliminating the need for central registries (DTCC), traditional exchanges, and prime brokers. He predicts the market will bifurcate: sustainable models will involve either native blockchain securities with full ownership rights or purely synthetic prediction markets. Legacy efforts to tokenize existing securities without creating a distinct on-chain asset are viewed as non-viable long-term. The transition is poised to redefine market infrastructure by directly connecting capital sources and uses through DeFi, moving toward a disintermediated, global equity market.