SEC Greenlights DTCC Tokenization: The End of 3-Day Stock Trade Settlement by 2026

Introduction

A new SEC no-action letter is paving the way to kill the traditional three-day stock trade settlement window by enabling tokenized securities on existing Wall Street infrastructure. The Depository Trust Company (DTC), part of DTCC, has received informal SEC approval to launch DTCC Tokenization Services for assets it already holds in custody, targeting a rollout in the second half of 2026. Instead of changing who legally owns the securities, the system treats tokenization as an alternative way of recording a participant’s “security entitlement,” keeping the underlying assets on DTC’s established custody rails while representing ownership via blockchain tokens.

In practice, eligible assets—initially Russell 1000 stocks, U.S. Treasury bills, notes, and bonds, and major index ETFs like those tracking the S&P 500 and Nasdaq-100—can be moved into a “Digital Omnibus Account” at DTC and mirrored as tokens in registered blockchain wallets. DTC will use an off-chain tracking tool called LedgerScan to monitor movements on approved blockchains, while another system, Factory, will handle minting and burning tokens. Transfers of these tokenized assets are restricted to allowlisted wallets that pass OFAC compliance checks and follow controlled token standards such as ERC-3643, ensuring distribution control and transaction reversibility. For now, these tokenized entitlements carry no collateral value or settlement value inside DTC’s risk systems, and delivery-versus-payment settlement occurs outside DTC.

The SEC’s cautious approach to market digitization is reflected in the tight guardrails: a limited asset set, opt-in participation, no use of tokenized positions in default management, and extensive quarterly reporting on volumes, wallets, blockchains used or rejected, and any interventions. DTCC frames this as an early, controlled step toward a future of 24/7 markets, programmable securities, and greater collateral mobility, aligning with broader estimates of a potential $68 trillion tokenization market. Any expansion—such as letting tokenized entitlements count for collateral, broadening eligible securities, or using stablecoins or tokenized deposits for corporate actions—would require further engagement with the SEC. The move signals a significant shift in traditional finance (TradFi) toward blockchain-based settlement, positioning tokenization as the backbone of faster, more efficient stock trade settlement in U.S. markets.

Background

The U.S. securities plumbing is starting to move on‑chain. A new SEC no‑action letter lets DTCC’s depository arm tokenize some of the most traded assets in global markets — but in a tightly controlled way that will feel familiar to anyone building in DeFi or fintech.

1. Why This SEC Move Matters for Stock Settlement and Tokenization

In December 2025, the U.S. Securities and Exchange Commission’s Division of Trading and Markets issued a no‑action letter to The Depository Trust Company (DTC), the central securities depository that sits at the heart of U.S. markets. The letter gives DTC staff comfort to run a pilot version of DTCC Tokenization Services, a program that will represent certain securities as blockchain-based tokens while keeping the existing legal and custody structure intact.

DTC is a subsidiary of the Depository Trust & Clearing Corporation (DTCC), which processed about $3.7 quadrillion in securities transactions and custodied roughly $99 trillion in assets in 2024 alone(DTCC). In other words, this is the backbone of Wall Street, not a side experiment.

The new tokenization service will:

• Cover highly liquid assets at launch:

  • Stocks in the Russell 1000 Index

  • U.S. Treasuries (bills, notes, bonds)

  • Major index ETFs (e.g., S&P 500, Nasdaq‑100)

• Operate on pre‑approved public or private blockchains

• Start rolling out in a controlled production environment targeted for the second half of 2026

SEC Commissioner Hester Peirce described the program as “a significant incremental step in moving markets onchain,” while emphasizing that it’s still a pilot with operational limits (SEC).

For anyone working in DeFi, RWAs, or fintech infrastructure, this is a concrete example of traditional securities tokenization at massive scale — and a signal that regulators are willing to experiment, as long as it’s done inside familiar risk and legal frameworks.

2. Quick Background: How Securities Settlement Works Today

Before looking at tokenization, it helps to clarify two key pieces:

Who is DTCC / DTC?

• DTCC is the industry‑owned utility that handles clearing, settlement, and custody for U.S. and many global securities.

• DTC is its depository. It holds securities in bulk, typically in the name of a nominee called Cede & Co. on behalf of brokers, banks, and other intermediaries.

Most end investors don’t appear directly on issuer share registers. Instead, they hold an indirect claim called a “security entitlement” through their broker or bank. DTC’s ledger tracks how many units of each security are credited to each intermediary’s account.

Why settlement feels “slow” even in 2025

The U.S. has already moved from T+3 (trade date plus three days) to T+2 and then to T+1 settlement for equities and ETFs. But in practice, a lot of friction remains:

• Cross‑border trades and some fixed income flows can still take days.

• Reconciliation between multiple ledgers (brokers, custodians, CSDs) creates operational risk and capital drag.

• Markets still operate largely on business hours, even as investors and crypto markets are effectively 24/7.

The promise of tokenized settlement is to compress those frictions — not just by changing a calendar convention (T+3 vs. T+1), but by putting ownership and transfer on shared, programmable infrastructure.

3. What the SEC No‑Action Letter Actually Allows

A no‑action letter is not a law or rule change. It’s a statement that SEC staff will not recommend enforcement action if a firm does a specific thing under specific facts and conditions.

In this case, the staff said it would not recommend action against DTC for operating the “Preliminary Base Version” of its tokenization service under:

• Regulation SCI (systems compliance & integrity)

• Exchange Act Section 19(b) and Rule 19b‑4

• Exchange Act Rules 17Ad‑22(e) and 17Ad‑25(i) and (j) (SEC no‑action letter)

• Key points from the letter and related disclosures:

• It is time‑limited: the staff position automatically expires three years after launch, unless extended.

• It covers only a defined universe of “Subject Securities” (Russell 1000, U.S. Treasuries, and major index ETFs).

• It imposes strict guardrails around:

  • Which blockchains and token standards can be used

  • Who can hold tokens

  • How tokens interact (or don’t interact) with DTC’s risk systems

The SEC is explicit that this is about enforcement discretion, not a broad policy blessing. The stance can be modified or revoked and does not address other federal or state laws that might apply.

For builders, this is important: it’s a narrow, well‑documented sandbox, not a blanket green light for all tokenized securities projects.

4. How DTCC’s Tokenized Securities Model Works

At a high level, DTCC is not turning stocks into native on‑chain assets. Instead, it is offering an alternate representation of an existing security entitlement on a blockchain.

4.1. Legal ownership doesn’t change

• The underlying securities remain registered in the name of Cede & Co., DTC’s nominee.

• What changes is how an opting‑in DTC participant’s entitlement is recorded:

  • Instead of existing only on DTC’s centralized ledger, it is also represented as a token in a registered blockchain wallet.

So we still have an indirect holding system — just with an additional, programmable layer on top.

4.2. Tokenization flow: from book‑entry to token

The no‑action letter and DTC’s own documentation describe the following flow:

1. Tokenization instruction

A DTC participant (e.g., a broker) that has opted in sends DTC a tokenization instruction for eligible securities in its DTC account.

2. Movement to Digital Omnibus Account

 DTC:

• Debits the securities from that participant’s regular DTC account.

• Credits them to a special “Digital Omnibus Account” on its centralized ledger, which aggregates all tokenized entitlements.

3. Minting the token

Using a system called Factory, DTC mints a token representing that entitlement and delivers it to the participant’s registered blockchain wallet.

4. Off‑chain tracking of tokens

A separate system called LedgerScan monitors the approved blockchains, tracks token movements, and produces the record that DTC treats as its official books and records for tokenized positions.

In practice, this looks very much like a wrapped asset model familiar from DeFi: the asset sits in a central omnibus account, and a tokenized representation moves between allowlisted addresses.

4.3. Transfers and de‑tokenization

• A participant holding tokens can:

1. Transfer them directly on‑chain to another participant’s registered wallet, without a separate instruction to DTC.

• If a participant wants to go back to traditional book‑entry:

1. They send a de‑tokenization instruction.

2. DTC burns the token in the registered wallet.

3. DTC debits the securities from the Digital Omnibus Account and credits them back to the participant’s standard DTC account.

Throughout this process, LedgerScan ensures there is no double‑spend: assets in the Digital Omnibus Account are not otherwise transferable until the corresponding token is burned.

5. Guardrails: Who Can Participate and How Risk Is Controlled

For a DeFi/fintech audience, the constraints are as interesting as the technical flow.

5.1. Participant and wallet restrictions

• Only DTC participants (e.g., broker‑dealers, custodians, banks) can take part.

• Participation is opt‑in and can be ended at any time with notice.

• Only these participants can register a wallet, and:

  • Tokens are only transferable to registered wallets.

  • DTC conducts OFAC sanctions screening on registered wallets.

• Tokenization protocols must support:

  • Distribution control (only approved wallets can receive tokens)

  • Transaction reversibility, so DTC can address errors, lost keys, or malfeasance.

DTC cites standards like ERC‑3643 (a permissioned token standard) as examples of the kind of protocol they expect to support.

5.2. No collateral or settlement value (yet)

One of the most important limitations:

• Tokenized entitlements have no collateral or settlement value within DTC’s risk management systems:

  • They are excluded from Net Debit Cap and Collateral Monitor calculations.

  • Delivery‑versus‑payment (DvP) settlement happens outside DTC for tokenized transfers.

This keeps the pilot walled off from DTCC’s core default management and end‑of‑day settlement mechanics. It also means you can’t yet, for example, post tokenized entitlements as collateral in DTC’s own margin framework.

5.3. Reporting and transparency

DTC commits to a substantial oversight package for the SEC, including quarterly reports on:

• Participating firms

• Total tokenized shares and value

• Token transfer volumes

• Eligible securities list

• Number of registered wallets

• Names of blockchains used (and those rejected, with rationale)

• Any “root‑wallet” interventions or outages

Technology standards, approved blockchains, and any associated fees will be publicly disclosed.

From a regulatory perspective, this gives the SEC telemetry on how tokenization behaves in the wild, without fully rewriting existing rules.

6. How This Fits Into the Bigger Tokenization Trend

DTCC is explicit that it sees this as part of a longer arc toward digitized markets. CEO Frank La Salla has highlighted benefits such as collateral mobility, new trading modalities, 24/7 access, and programmable assets, while insisting they must be delivered with the same resilience and investor protections as traditional rails (DTCC).

This move also lands against a broader backdrop:

• A joint report by BCG and ADDX estimates that asset tokenization could become a $16.1 trillion opportunity by 2030 in a conservative case, with an upside scenario as high as $68 trillion, spanning real estate, debt, funds, and other real‑world assets (MarketsMedia / BCG).

• The real‑world asset (RWA) segment in DeFi has grown rapidly, led by tokenized Treasuries and money‑market funds, as investors seek on‑chain exposure to traditional yield.

• Global regulators and central banks are experimenting with wholesale CBDCs, DLT settlement systems, and sandboxes to understand tokenized securities and payments.

The DTCC pilot is notable because it applies tokenization directly to the assets already sitting in the core of the system — rather than creating parallel, off‑to‑the‑side structures.

7. What This Means for DeFi, Fintech, and Institutional Builders

While this is an infrastructure‑level initiative, it has clear implications for anyone thinking about on‑chain capital markets.

7.1. Closer alignment between TradFi and DeFi tokenization models

The design is strikingly familiar to DeFi primitives:

• A centralized custodian manages real‑world assets.

• A token represents a claim on that pool.

• Transfers occur on‑chain between permissioned addresses.

• An off‑chain system maintains the canonical record and handles exceptions.

For RWA protocols, this validates a pattern that regulators and systemically important infrastructures are willing to accept — provided there are:

• Clear technology standards

• Strong KYC/AML and sanctions controls

• Well‑defined reversal mechanisms and operational resilience

7.2. Limitations to keep in mind

At the same time, it’s important not to over‑interpret the move:

• No direct retail wallets: End investors still access these tokens via intermediaries. There’s no native on‑chain “Apple share in your MetaMask” happening here.

• No change to corporate law: The legal record of ownership still rests with Cede & Co. and intermediaries, not with on‑chain addresses.

• No immediate impact on margin, repo, or derivatives inside DTCC: because tokenized entitlements have no collateral or settlement value in DTC’s internal models (for now).

So this is not yet the fully disintermediated, smart‑contract‑settled equity market many in DeFi imagine — but it is a significant step toward programmable, 24/7‑capable post‑trade infrastructure.

For fintech and DeFi teams, potential areas to watch include:

• Interoperability tooling

Helping institutions connect their internal books, custody systems, and risk models to tokenized entitlements and on‑chain workflows.

• Compliance‑aware smart contracts

Building token standards and DeFi primitives that can plug into permissioned, reversible tokenization models like the one DTC is adopting.

• Liquidity and analytics layers

Providing visibility, risk analytics, and routing across multiple tokenized venues, including DTCC‑connected RWAs, tokenized funds, and on‑chain money markets.

• Corporate actions and distributions

DTC’s request letter explicitly mentions future exploration of corporate action distributions via stablecoins or tokenized deposits — an area ripe for experimentation if and when the preliminary phase expands.

• The Bottom Line: A Careful, Meaningful Step Toward On‑Chain Markets

The SEC’s no‑action letter for DTC’s tokenization services doesn’t abolish settlement cycles overnight, nor does it magically turn U.S. stocks into native blockchain assets. What it does is more subtle but still significant:

8. The Bottom Line: A Careful, Meaningful Step Toward On‑Chain Markets

The SEC’s no‑action letter for DTC’s tokenization services doesn’t abolish settlement cycles overnight, nor does it magically turn U.S. stocks into native blockchain assets. What it does is more subtle but still significant:

• It legitimizes a specific, large‑scale securities tokenization model at the core of U.S. market infrastructure.

• It shows regulators are willing to accommodate tokenized securities as long as:

  • Legal ownership structures remain familiar.

  • Risk is ring‑fenced.

  • Reporting and oversight are robust.

• It creates a path to incrementally layer programmability and 24/7 transferability on top of existing custodial rails.

For a DeFi and fintech audience, this is a strong signal: tokenized securities and blockchain‑based settlement are moving from concept to implementation inside the most conservative parts of TradFi. The immediate use cases may feel constrained, but the direction of travel is clear — and the scale of the potential market, as multiple studies suggest, could reach into the tens of trillions of dollars over the next decade (MarketsMedia / BCG).