The U.S. Securities and Exchange Commission (SEC) has granted a "no-action" letter to a subsidiary of the Depository Trust and Clearing Corporation (DTCC), paving the way for a new securities market tokenization service. The DTCC, which provides crucial market infrastructure for clearing, settlement, and trading of U.S. securities, announced on Thursday that its subsidiary, the Depository Trust Company (DTC), received the green light to launch a service tokenizing real-world assets held in DTC custody within a controlled production environment.
This initiative aims to bridge traditional finance (TradFi) and decentralized finance (DeFi) by leveraging blockchain technology. The DTC plans to tokenize a range of highly liquid assets, including the Russell 1000 index, exchange-traded funds (ETFs) tracking major indexes, and U.S. Treasury bills, bonds, and notes. The service is expected to roll out in the second half of 2026.
The SEC's no-action letter signifies its trust in the DTCC's plan, confirming that the agency will not pursue enforcement action if the proposed product operates as described. DTCC CEO Frank La Salla expressed his gratitude to the SEC for their trust, emphasizing the potential for transformational benefits such as collateral mobility, new trading methods, 24/7 access, and programmable assets through tokenization of the U.S. securities market. The no-action letter permits the DTC subsidiary to offer tokenization services to DTC participants and their clients on pre-approved blockchains for a three-year period.
The DTCC Tokenization Services will allow DTC participants to choose to have their security entitlements to DTC-held securities recorded using distributed ledger technology (DLT), instead of exclusively through DTC's current centralized ledger. This program aims to provide DTC participants with the advantages of blockchain and tokenization technology, including mobility, decentralization, and programmability, while maintaining the protection and accountability provided by a central securities depository (CSD) and registered clearing agency.
Under the preliminary base version of the DTCC Tokenization Services, any DTC Participant can participate, with the exception of Participants for which DTC has U.S. tax withholding or reporting obligations, or a Treasury International Capital reporting obligation.
Nasdaq has also submitted a proposed rule change to the SEC to facilitate the trading of tokenized securities on a permissioned blockchain operated by the DTC. If approved, this platform would enable investors to trade tokenized equities alongside traditional securities, with settlement occurring in near real-time.
The SEC's openness to blockchain applications suggests a favorable outcome, potentially leading to the integration of tokenization into the existing national market system. Tokenized securities will be fungible with their traditional counterparts, preserving shareholder rights such as voting and dividend distributions.
These initiatives by DTCC and Nasdaq represent a convergence of blockchain technology and institutional-grade custody solutions, paving the way for a new era of liquidity, efficiency, and accessibility in financial markets. For institutional investors, this shift presents a strategic opportunity to capitalize on the next generation of financial markets. Tokenized assets will offer 24/7 access, fractional ownership, and automated compliance via smart contracts, addressing long-standing inefficiencies in private markets. For example, tokenization automates transfer restrictions and investor accreditation checks, reducing manual oversight and operational costs. Furthermore, the ability to use tokenized assets as real-time collateral in securities financing transactions could unlock trillions in liquidity.
