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SEC Gives the DTCC the Ability to Offer Tokenization Services on Pre-approved Blockchains
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2025-12-15 | 10m
On December 11, 2025, the U.S. Securities and Exchange Commission (SEC) issued a historic No-Action Letter to The Depository Trust Company (DTC), a subsidiary of the Depository Trust & Clearing Corporation (DTCC). This letter authorizes the DTCC to launch a three-year pilot program, beginning in the second half of 2026, to tokenize a defined set of traditional securities on pre-approved blockchain networks. The approved assets include the most liquid and core instruments in the U.S. market: constituents of the Russell 1000 index, exchange-traded funds (ETFs) tracking major indices, and U.S. Treasury bills, notes, and bonds.
What's DTCC?
The Depository Trust & Clearing Corporation (DTCC) is a foundational, industry-owned financial market utility that operates at the heart of the U.S. and global financial system. Its primary role is to provide post-trade clearance, settlement, custody, and information services for securities transactions, acting as a central counterparty that ensures stability and reduces risk. Originally created in 1973 to solve a "paperwork crisis" that was overwhelming Wall Street, DTCC now processes quadrillions of dollars in transactions annually, clearing an average of nearly $7 trillion in U.S. Treasuries alone every day. Currently, DTCC is leading major market infrastructure reforms, including the transition to a faster T+1 settlement cycle for equities and expanding central clearing for U.S. Treasuries. Crucially for crypto and digital asset space, as mentioned in your previous article, the SEC has recently authorized DTCC to pilot a program for tokenizing traditional securities, positioning this traditional finance giant to play a pivotal role in bridging legacy systems with blockchain-based innovation.
The SEC’s No-Action Letter
The SEC’s approval mechanism, a "No-Action Letter," is a powerful regulatory tool that provides conditional assurance. It states that, based on the specific facts and circumstances presented by the DTCC, the SEC staff will not recommend enforcement action for the described activities. This approach allows for innovation within a carefully constructed sandbox, offering regulatory certainty without the need for sweeping, permanent rule changes at the outset.
The letter’s conditions are precise, reflecting a philosophy of "move fast with guardrails." The pilot is authorized for a three-year period, creating a clear timeline for evaluation. It will operate in a "controlled production environment," initially accessible only to DTC participants (major banks, broker-dealers, custodians) and their institutional clients. Most crucially, the SEC and DTCC have agreed that every tokenized security must be a perfect legal and economic mirror of its traditional counterpart. As stated by DTCC, these digital representations will carry "the same entitlements, investor protection, and ownership rights" as the assets held in its traditional ledger. This principle ensures that tokenization is a change in form and efficiency, not a dilution of investor rights or market integrity.
This conditional approval accelerates the path to market. Frank La Salla, DTCC President and CEO, acknowledged that the authorization allows the service to launch "more quickly than would have otherwise been possible. In exchange for this expedited path, the DTCC has committed to a regime of heightened transparency and oversight. The firm is required to provide the SEC with quarterly reports detailing participation metrics, the value of tokenized assets, the performance and selection of blockchain networks, operational outages, and the use of any corrective powers. This data-driven approach will provide regulators with an unprecedented real-time view into the practical application of blockchain at scale, informing future policy.
The DTCC’s Strategic Pivot
For the DTCC, this initiative is far more than an experiment; it is a strategic imperative to remain the central node in an evolving financial ecosystem. Having spent nearly a decade exploring distributed ledger technology (DLT) through projects like Project Ion, the DTCC is now moving from research to implementation. The service will be built on the firm’s existing ComposerX platform suite, designed to bridge disparate systems and create what Brian Steele, DTCC’s President of Clearing & Securities Services, calls "a unified liquidity pool" across traditional and digital markets.
The executive vision behind this move is clear. Frank La Salla frames tokenization as a source of "transformational benefits such as collateral mobility, new trading modalities, 24/7 access and programmable assets". However, he immediately couples this vision with a warning about the foundation: "This will only be achievable if market infrastructure provides a robust foundation to usher in this new digital era. This statement encapsulates the DTCC’s entire thesis. The firm is positioning itself not as a disruptor, but as the essential, trusted bridge. It aims to inject the resilience, legal certainty, and operational standards of traditional markets into the digital asset space.
Nadine Chakar, DTCC’s Managing Director and Head of Digital Assets, emphasizes that DLT "has the power to reshape markets," and the firm is championing this transformation through "innovative actions and bold solutions. By leveraging its unique position, the DTCC seeks to solve the core adoption dilemma for institutional players: how to embrace the efficiency of blockchain without sacrificing the security and finality they have relied upon for decades. The pilot is their answer—a pathway to digital markets with, in Steele’s words, "uncompromising security, sound legal footing and seamless interoperability".
Building an Institutional-Grade On-Chain System
The technical design of the DTCC’s tokenization service is meticulously crafted to meet institutional requirements. It will operate on pre-approved Layer 1 and Layer 2 blockchain networks, with specific providers to be announced following a rigorous vetting process based on security, performance, and interoperability standards. Industry analysts widely anticipate that Ethereum, which currently hosts a dominant share of the tokenized real-world asset market, will be among the selected networks.
The operational model is a hybrid, balancing innovation with control. Participants will use DTCC-registered wallets to hold and transact tokenized securities. This creates a permissioned layer within potentially permissionless blockchains, ensuring that all activity is tied to known, regulated entities. The tokens themselves will not freely circulate on public decentralized exchanges. Instead, they will move only between these registered wallets, with every transaction recorded and mirrored on the DTCC’s central ledger. This "dual-ledger" approach maintains the DTCC’s role as the system of record and the source of legal truth.
A critical and revealing feature of the design is the inclusion of a "root wallet" or reversal authority retained by the DTC. This capability allows the DTCC to correct errors or reverse transactions in cases of misconduct, a clear departure from the "code is law" immutability prized in pure decentralized finance (DeFi). This concession to traditional operational risk management underscores the pilot’s purpose: it is a test of practical utility for institutions, not a philosophical adoption of crypto-native ideals. It ensures that the transition to blockchain can occur without compromising the settlement finality and error-correction mechanisms that large-scale finance demands.
Unlocking Efficiency and New Possibilities
The successful implementation of this pilot promises to fundamentally alter key aspects of capital markets. The most immediate impact will be on settlement. Today, U.S. equity trades settle on a T+1 cycle (one business day after the trade). Blockchain-based settlement can reduce this to minutes or even seconds, a state known as near-real-time or atomic settlement. This drastic compression reduces counterparty risk, frees up capital currently tied up in the settlement process, and significantly lowers operational and financing costs. Estimates suggest blockchain settlement could reduce associated costs by up to 90%.
Beyond speed, tokenization enables profound structural changes. The following table summarizes the paradigm shift from traditional to tokenized securities:
| Feature | Traditional Securities | Tokenized Securities (via DTCC Pilot) |
| Settlement Time | T+1 (1 business day) | Near-real-time (seconds/minutes) |
| Market Hours | Limited to exchange hours (e.g., 9:30 AM - 4:00 PM ET) | Potential for 24/7/365 transaction capability |
| Fractionalization | Difficult, costly, and limited by custodial practices | Enabled at the protocol level, allowing micro-investment in high-value assets |
| Collateral Utility | Slow and fragmented mobilization across silos | "Collateral mobility" – programmable, instantly transferable collateral |
| Compliance & Distribution | Manual, batch-processed (e.g., dividend payments) | Automated via smart contracts (e.g., instant coupon payments, tax withholding) |
These capabilities unlock new financial products and strategies. Portfolio managers could dynamically rebalance or pledge collateral 24/7. Asset managers could create funds with exposure to fractions of high-priced stocks or private assets, enhancing accessibility. The programmability of tokenized assets allows for the automation of complex corporate actions and compliance rules, reducing administrative overhead and error.
Furthermore, the DTCC’s entry validates and massively accelerates the entire Real World Asset (RWA) tokenization trend. It provides a clear, regulated blueprint for other institutions. As noted in the broader regulatory context, firms like JPMorgan, Coinbase, and Kraken are already advancing their own tokenized offerings. The DTCC pilot establishes the technical and legal templates they are likely to follow, setting a de facto institutional standard for how traditional assets move on-chain.
A Shift in the U.S. Regulatory Posture Toward Digital Assets
The DTCC approval did not occur in a vacuum. It is the centerpiece of a noticeable and consequential shift in the U.S. regulatory posture toward digital assets, particularly following the change in presidential administration. Observers note that U.S. regulators have adopted a "markedly more crypto-friendly posture" under the Trump administration compared to the previous era.
This shift has been signaled from the top. Earlier in 2025, SEC Chairman Paul S. Atkins gave a landmark speech that amounted to a "systematic reflection" on past enforcement-heavy approaches. He argued that "rules should be written clearly, not enforced through fear," and acknowledged that current securities disclosure forms were ill-suited for many crypto assets, famously stating, "You shouldn't force a square peg into a round hole. The DTCC No-Action Letter is a direct manifestation of this new philosophy—providing a clear, if temporary, pathway for compliant innovation.
Concurrent actions reinforce this trend. On the same day as the DTCC news, the Commodity Futures Trading Commission (CFTC) rolled back 2020 guidance on the "actual delivery" of digital assets, easing constraints on certain derivatives structures. Earlier, the SEC’s Division of Investment Management issued a No-Action Letter clarifying that state-chartered trust companies could act as qualified custodians for digital assets, a move to open up the custodial landscape for investment advisers. Furthermore, the Office of the Comptroller of the Currency (OCC) has affirmed that cryptocurrency companies seeking federal bank charters should be evaluated on the same terms as traditional institutions.
This coordinated movement suggests a strategic pivot. The U.S. appears to be moving from a stance of defensive skepticism to one of proactive architectural leadership. The goal is not to let innovation run wild, but to domesticate it within the U.S. regulatory perimeter, thereby capturing the economic benefits and setting the global standard. As one analysis put it, "SEC and OCC’s regulatory direction is, in fact, the U.S. competing for global digital financial standards. The DTCC, as a globally influential utility, is the perfect vehicle for this strategy.
Challenges and the Road Ahead
Despite the overwhelming significance of this development, the path forward is not without challenges and open questions. First, the pilot is just a test. Its three-year timeline will be scrutinized for any operational hiccups, security incidents, or unforeseen market impacts. The quarterly reporting to the SEC will be a critical transparency mechanism, and any significant issues could slow or alter the broader rollout.
Second, the selection of "pre-approved blockchains" will be a highly contentious and watched decision. It has the potential to pick winners and losers in the layer 1 and layer 2 ecosystem. The criteria for approval likely encompass transaction throughput, finality mechanisms, security audits, governance, and energy consumption, which will itself become a new benchmark for institutional-grade blockchain networks.
Third, there remains a healthy regulatory debate. Even within the SEC, Commissioner Hester Peirce, a noted advocate for innovation, has cautioned that while tokenization is "fascinating, it is not magical." She emphasizes that "tokenized securities remain securities," and all relevant laws still apply. Furthermore, industry watchdogs have submitted comments urging the SEC to apply existing securities laws rigorously to tokenized products and reject the creation of a two-tiered regulatory system that could lead to arbitrage. The DTCC pilot, by fully mirroring existing securities, seems designed to directly address this concern, but the debate will continue as models evolve.
Finally, the long-term architectural question remains: Is this a bridge to a decentralized future, or a means of centralizing control over digital assets? The use of registered wallets and reversal powers clearly prioritizes control and stability over pure decentralization. This may be a necessary evolutionary step, but it also sets a precedent for how blockchain is implemented at the highest levels of finance.
Conclusion
The SEC’s authorization for the DTCC to tokenize trillions of dollars in core U.S. securities is a defining moment for the 21st-century financial system. It represents the moment when the establishment stopped viewing blockchain as a threat and began strategically deploying it as a tool for modernization. This is not a story of a decentralized uprising overthrowing the old guard; it is a story of the old guard masterfully adapting and co-opting disruptive technology to reinforce its own centrality.
The implications are vast. For institutional investors, it promises a future of unprecedented operational efficiency, new product possibilities, and global 24/7 market access, all wrapped in the familiar blanket of DTCC’s security and legal certainty. For the crypto industry, it is the ultimate legitimization. The technology is no longer just for speculative tokens and decentralized applications; it is now the chosen engine for upgrading the world’s largest capital market.
As the pilot launches in late 2026 and begins its three-year journey, the entire financial world will be watching. Every transaction, every report, and every network performance metric will be a data point in the most consequential financial infrastructure experiment of our time. The DTCC and the SEC have laid the cornerstone. The bridge between TradFi and digital assets is now under construction, and it is being built to last. The fusion of legacy trust with frontier technology has officially begun, and it will reshape the architecture of global finance for generations to come.
References:
The Block. (2025, December 12).
DTCC subsidiary authorized to offer tokenization service for US securities beginning 2026.
https://www.theblock.co/post/382331/dtcc-subsidiary-tokenization-service-us-securities?ref=biztoc.com
Coinglass. (2025, May 14).
Lawyer’s perspective: interpreting the U.S. SEC chairman’s detailed discussion of on-chain issuance, custody, and trading.
https://www.coinglass.com/zh/news/473010
Investing.com. (2025, December 12).
What are the implications of frequent favorable SEC and OCC regulations?
https://cn.investing.com/analysis/article-200496510
Yahoo Finance. (n.d.).
SEC approves tokenized securities for DTCC. Yahoo Finance.
https://finance.yahoo.com/news/sec-approves-tokenized-securities-dtcc-121715413.html
DTCC. (2025, December 11).
Paving the way to tokenized DTC-custodied assets. DTCC.
https://www.dtcc.com/news/2025/december/11/paving-the-way-to-tokenized-dtc-custodied-assets
U.S. Securities and Exchange Commission (SEC). (2025, December 11).
DTCC no-action letter [PDF]. U.S. Securities and Exchange Commission.
https://www.sec.gov/files/tm/no-action/dtc-nal-121125.pdf
CoinCatch Team
Disclaimer:
Digital asset prices carry high market risk and price volatility. You should carefully consider your investment experience, financial situation, investment objectives, and risk tolerance. CoinCatch is not responsible for any losses that may occur. This article should not be considered financial advice.
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