Frontline Insight: Web3 Lawyer Explains the Latest Changes in US Stock Tokenization

Title: “Frontline Insights | Web3 Lawyers Interpret the Latest Changes in U.S. Stock Tokenization!”

Authors: Guo Fangxin, Sha Jun

Source:

Reprinted from: Mars Finance

On December 15, 2025, U.S. time, Nasdaq officially submitted Form19b-4 to the SEC, requesting to extend trading hours for U.S. stocks and trading platform products to 23/5 (trading 23 hours daily, 5 days a week).

However, Nasdaq’s proposed trading hours are not simply extended; they are divided into two official trading sessions:

Day trading session (Eastern Time 4:00-20:00) and night trading session (Eastern Time 21:00-Next Day 4:00). Trading is paused from 20:00 to 21:00, and all unfilled orders are canceled during this pause.

Many readers were excited upon hearing this news, wondering if the U.S. is preparing for 24/7 stock tokenization trading. But Crypto Law Review carefully examined the document and wants to say: don’t rush to conclusions. Nasdaq stated in the document that many traditional securities trading rules and complex orders are not applicable during the night session, and some functions will be limited.

We have always been very interested in the tokenization of U.S. stocks, considering it one of the most important targets for real-world asset tokenization, especially given the frequent official actions by the U.S. SEC (Securities and Exchange Commission) recently.

This application has rekindled expectations for U.S. stock tokenization because it suggests that the U.S. aims to move closer to 24/7 trading in digital assets. However, a closer look reveals:

Nasdaq’s document does not mention any tokenization-related matters at all; it is solely about reforming the traditional securities system.

If you want a deeper understanding of Nasdaq’s actions, Crypto Law Review can write a dedicated article for detailed analysis. But today, we want to focus on concrete news related to U.S. stock tokenization—

The SEC officially “permits” the U.S. securities depository giant to attempt providing tokenization services.

On December 11, 2025, U.S. time, SEC staff from the Division of Trading and Markets issued a “No-Action Letter (NAL)” to DTCC, which was subsequently published on the SEC website. The letter explicitly states that, under certain conditions, the SEC will not take enforcement action against DTC for offering tokenization services related to its securities custody.

So, what exactly does this letter say? How far has the latest development in U.S. stock tokenization progressed? Let’s start with the main subjects of the letter:

Who are DTCC and DTC?

DTCC, the Depository Trust & Clearing Corporation, is a U.S.-based group company comprising various institutions responsible for custody, stock clearing, and bond clearing.

DTC, the Depository Trust Company, is a subsidiary of DTCC and the largest securities depository in the U.S. It manages the centralized custody of stocks, bonds, and other securities, handling settlement and transfer. Currently, its custody and bookkeeping scale exceeds $100 trillion. DTC can be understood as the ledger administrator for the entire U.S. stock market.

What is the relationship between DTC and stock tokenization?

In early September 2025, news broke that Nasdaq applied to the SEC to issue stocks in a tokenized form. DTC was already involved in that application.

Nasdaq stated that the only difference between tokenized stocks and traditional stocks lies in DTC’s clearing and settlement of orders.

To make this clearer, we’ve created a flowchart. The blue part shows the changes Nasdaq proposed in its September 2025 plan. It’s obvious that DTC is the key operational and implementation agency for U.S. stock tokenization.

What does the newly published “No-Action Letter” say?

Many people have simply equated this document with the SEC’s approval for DTC to use blockchain for U.S. stock bookkeeping, which is not entirely accurate. To understand this correctly, one must recognize a clause in the U.S. Securities Exchange Act:

Section 19(b) of the Securities Exchange Act of 1934 states that any self-regulatory organization (including clearing agencies) must submit rule change proposals to the SEC and obtain approval when changing rules or major business arrangements.

Both of Nasdaq’s proposals were submitted based on this regulation.

However, the rule submission process is usually lengthy, potentially delaying for months, up to 240 days. If every change requires an application and approval, the time cost becomes prohibitive. To ensure their stock tokenization pilot activities proceed smoothly, DTC applied for an exemption from fully complying with the 19b filing process during the pilot period, and the SEC granted this.

In other words, the SEC temporarily exempted DTC from some procedural filing obligations, but this does not constitute substantive approval for the application of tokenization technology in the securities market.

What does this mean for the future of U.S. stock tokenization? We need to clarify two questions:

1. What pilot activities can DTC conduct without filing?

Currently, the custody and bookkeeping of U.S. stocks operate as follows: assume a broker has an account with DTC, which uses a centralized system to record every stock and share bought or sold. DTC proposed that they could offer brokers an option: record these stock holdings on a blockchain as tokens.

In practice, this involves participants registering a qualified, DTC-approved wallet (Registered Wallet). When a participant issues a tokenization instruction to DTC, DTC will do three things:

a) Move these stocks from the original account to a master ledger pool;

b) Mint tokens on the blockchain;

c) Transfer the tokens to the participant’s wallet, representing their rights to these securities.

Afterward, these tokens can be transferred directly between brokers without each transfer going through DTC’s centralized ledger. However, all token transfers are monitored and recorded in real-time by DTC through an off-chain system called LedgerScan, which forms DTC’s official ledger. If a participant wishes to exit the tokenized state, they can send a “de-tokenization” instruction to DTC, which will burn the tokens and re-credit the securities rights to a traditional account.

The NAL also details technical and risk control limitations, including: tokens can only be transferred between wallets approved by DTC, DTC has the authority to forcibly transfer or destroy tokens in certain circumstances, and the token system is strictly isolated from DTC’s core clearing system, among others.

2. What is the significance of this letter?

From a legal perspective, Crypto Law Review emphasizes that the NAL does not equate to legal authorization or rule modification; it does not have general legal binding force, but merely reflects SEC staff’s enforcement stance under certain facts and assumptions.

The U.S. securities law system does not have a specific prohibition against blockchain bookkeeping. Regulators are mainly concerned with whether existing market structure, custody responsibilities, risk controls, and reporting obligations are maintained after adopting new technology.

Additionally, in the U.S. securities regulatory system, such letters as NAL are long regarded as important indicators of regulatory stance, especially when directed at systemically important financial institutions like DTC. Their significance often exceeds the specific business details.

The disclosure makes it clear that the exemption is based on the premise that DTC is not directly issuing or trading securities on-chain, but rather tokenizing existing securities rights within its custody system.

This tokenization is essentially a “rights mapping” or “ledger expression” designed to improve backend processing efficiency, not to alter the legal nature or ownership structure of securities. The related services operate within a controlled environment and permissioned blockchain, with strict restrictions on participants, scope, and technical architecture.

Crypto Law Review believes this regulatory attitude is very reasonable. On-chain assets are most vulnerable to money laundering and illegal fundraising. Tokenization is a new technology but should not facilitate crime. Regulators need to recognize the potential of blockchain in securities infrastructure while maintaining the boundaries of existing securities laws and custody systems.

Latest developments in U.S. stock tokenization

Discussions about U.S. stock tokenization are shifting from “compliance whether” to “how to implement.” Analyzing current market practices reveals at least two parallel but logically different paths forming:

· Led by official opinions, represented by DTCC and DTC, focusing on tokenization to improve settlement, reconciliation, and asset transfer efficiency, mainly serving institutional and wholesale market participants. In this model, tokenization is almost “invisible” to retail investors; stocks remain stocks, with only backend system upgrades.

· The other involves brokers and trading platforms acting as front-end players. For example, Robinhood and MSX have been exploring products related to crypto assets, fractional trading, and extended trading hours in recent years. If stock tokenization matures in compliance, these platforms have an inherent advantage as entry points for users. For them, tokenization does not mean reshaping the business model but is more like a technological extension of existing investment experiences—closer to real-time settlement, more flexible asset splitting, and cross-market product integration. Of course, all this depends on clearer regulatory frameworks. These explorations often operate near regulatory boundaries, balancing risk and innovation, and their value lies in testing the next-generation securities market rather than immediate scale. From a practical perspective, they serve more as samples for institutional evolution rather than direct replacements for the existing U.S. stock market.

To make this more intuitive, here is a comparative diagram:

Crypto Law Review Perspective

From a macro perspective, the core issue U.S. stock tokenization aims to solve is not “turning stocks into coins,” but how to improve asset transfer efficiency, reduce operational costs, and reserve interfaces for future cross-market collaboration—all while maintaining legal certainty and system security. In this process, compliance, technology, and market structure will coexist and evolve gradually, rather than through radical changes.

It is expected that U.S. stock tokenization will not fundamentally change Wall Street’s operation in the short term, but it is already an important project within the U.S. financial infrastructure agenda. The SEC and DTC’s interaction is more like a “pilot test” at the institutional level, setting initial boundaries for broader future exploration. For market participants, this may not be the end but a starting point worth continuous observation.