U.S. SEC Approval: Trillion-Dollar Securities Tokenization Begins, On-Chain Finance Era Opens

The U.S. Securities and Exchange Commission (SEC) Division of Trading and Markets has issued a no-objection letter to the Depository Trust & Clearing Corporation (DTCC), the world’s largest securities clearinghouse, and its important subsidiary, the Depository Trust Company (DTC), allowing them to conduct a securities tokenization pilot. This decision means that highly liquid securities, including components of the Russell 1000 Index, major index ETFs, and U.S. Treasury bonds, will be able to be converted into digital tokens on the blockchain for transfer and recording. The pilot program is expected to launch in the first half of 2026 and will last three years. This move was described by SEC Commissioner Hester Peirce as “an important step in moving markets onto the chain,” marking a substantive new phase in the integration of traditional finance (TradFi) and blockchain technology.

The Milestone Significance of the SEC No-Objection Letter

In 2024, U.S. financial regulators pressed the “accelerator” for asset tokenization. The no-objection letter issued by the SEC to DTC is not just a simple approval but a milestone regulatory stance statement. It indicates that regulators are beginning to formally explore blockchain solutions for the massive and complex traditional securities markets. The essence of the no-objection letter is the SEC’s commitment that no enforcement action will be taken when DTC performs specific activities according to its submitted plan, removing significant uncertainty barriers for financial institutions innovating in the highly sensitive securities domain.

The background of this decision involves traditional financial giants like JPMorgan Chase and BlackRock, which have been active in this field for years. The SEC’s approval can be seen as a formal recognition and regulatory guidance of this industry trend. It marks a shift from early caution and observation to conditional participation and guidance. As Commissioner Hester Peirce stated, the SEC’s crypto efforts are iterative, welcoming and anticipating continuous innovation and experimentation by market participants. This letter is a concrete practice of this “iterative” regulatory philosophy.

For the entire crypto industry and traditional finance, this event sends a strong signal: security tokenization is no longer just a concept validation or fringe experiment; it is steadily moving toward the core of mainstream financial infrastructure. While the regulatory “green light” comes with restrictions (such as limited to high-liquidity securities and a three-year pilot), its symbolic and pioneering value far exceeds these temporary constraints, opening the first gate for blockchain on trillions of dollars of assets.

How DTCC’s Tokenization Blueprint Will Unfold

As the “plumber” of the U.S. financial system, DTCC and its subsidiary DTC are responsible for clearing and custody of most U.S. stocks and fixed-income products, managing assets worth hundreds of trillions of dollars. Their involvement signifies that tokenization will shift from a marginal pilot to a core processing layer of the financial system. According to DTCC executives, their tokenization model does not create entirely new digital assets but rather tokenizes the security entitlements of existing securities.

Specifically, qualifying DTC participants (usually large banks and brokerages) will be able to transfer their holdings of specific securities’ “tokenized rights” directly to another participant’s registered wallet via a registered wallet. Each transfer will be tracked and recorded on-chain by DTC’s software system, with updates synchronized to DTC’s official ledger. This ensures full consistency between on-chain tokens and off-chain legal rights. Michael Winnike, Head of Global Strategy and Market Solutions at DTCC, emphasized that this is “the same legal rights, the same shares,” just in a different form.

Core Information on DTCC’s Tokenization Pilot

Applicable Securities: Russell 1000 Index components, ETFs tracking major indices, U.S. Treasury bonds/bills/notes.

Pilot Timeline: Service launch expected in the first half of 2026.

Technical Framework: Operates on a blockchain approved and compliant with DTC’s technical standards.

Core Functionality: Enables direct peer-to-peer transfer of qualified securities rights between participants, recorded on-chain by DTC’s system.

Legal Safeguards: Tokenized rights enjoy the same legal rights and controls as traditional holdings, including capabilities to freeze or force transfer assets if stolen.

How Tokenization Will Reshape Financial Markets

The securities tokenization driven by DTCC will have profound impacts beyond technological upgrades, potentially transforming financial markets in terms of settlement efficiency, market accessibility, and system interoperability. First, the most immediate benefit is improved settlement efficiency. Although this pilot does not directly change the T+2 settlement cycle, blockchain’s inherent instant transaction confirmation and immutability lay a technological foundation for near real-time clearing and settlement (T+0 or instant settlement), which could greatly reduce counterparty risk and operational costs.

Second, tokenization will enable 7x24 hours market operation. Winnike pointed out that this new blockchain service will allow investors to transfer assets at any time, not limited to traditional market hours from Monday to Friday. This provides greater flexibility for global investors and better responsiveness to macroeconomic events happening around the clock, representing a key step for traditional markets to align with the “never sleep” crypto markets.

Finally, and most importantly, it acts as a bridge connecting traditional finance and the digital financial ecosystem. By mapping traditional securities onto blockchain in a compliant and regulated manner, institutional investors can explore DeFi applications more securely and conveniently—for example, using tokenized government bonds as collateral for lending. It also provides a replicable template and regulatory precedent for tokenizing more asset classes (such as private equity and real estate) and integrating them into a unified liquidity network.

The Tokenization Race Among Traditional Financial Giants Has Begun

The SEC’s no-objection letter to DTCC is like a starting gun, officially heralding a tokenization race led by traditional financial giants entering a heated phase. DTCC’s role as a neutral central depository is to offer tokenization “wrapping” services for existing securities. However, as Hester Peirce pointed out, other experimental paths exist. For example, some issuers have already begun directly tokenizing their own securities, making it easier for investors to hold and trade securities directly, reducing intermediaries.

Nasdaq Inc. and other exchanges have also submitted proposals to the SEC to explore their own asset tokenization solutions. Their models may focus more on the pre-trade phase. Different institutions are entering through various segments such as clearing, custody, listing, and trading, forming a multi-layered, multi-path experimental network. Regulators maintain an open stance, believing that during the early stages, investor choice is crucial, and the market is testing which approaches are effective.

The ultimate goal of this race is for DTCC to realize its vision of migrating its entire depository infrastructure (valued at $100 trillion in securities) onto blockchain. Achieving this requires the SEC to further expand the scope of no-objection relief. Whichever model ultimately prevails, a clear trend is emerging: beyond Bitcoin and Ethereum’s value storage and decentralized applications, real-world asset (RWA) tokenization driven by traditional financial assets and regulated environments is becoming the next battleground for on-chain adoption and institutional capital attraction.

The SEC’s no-objection letter, on the surface, is a license for a specific service for DTCC, but in substance, it paves a compliant path for the tokenization of traditional financial assets. It signifies that after long friction and experimentation, regulators and innovators have finally found an operational balance. From JPMorgan Chase’s internal settlement network, to BlackRock’s USD tokenization fund, to now the core custody business of DTCC going on-chain, the “blockchain+” process of traditional finance is accelerating from the outside in, from superficial to deep. This will not only bring unprecedented large-scale assets and liquidity to the crypto market but also fundamentally reshape the operational efficiency and openness of the global financial system. The era of trillions of dollars in assets going on-chain has officially begun.