The Depository Trust Company, the U.S. financial market infrastructure provider that clears and settles securities trades, said the SEC has given it informal approval to move ahead with a tokenization service for some assets it already holds in custody, without facing enforcement action.
The letter sets conditions for a time-limited rollout and ongoing reporting while keeping the underlying securities on DTC’s existing custody rails.
It would allow DTC to offer DTCC Tokenization Services in a controlled production environment under federal securities laws and regulations. DTC anticipates a rollout in the second half of 2026.
SEC grants conditional green light for DTC’s tokenization pilot
According to the SEC staff response dated Dec. 11, the staff would not recommend enforcement action against DTC in relation to its operation of a “Preliminary Base Version” of the service under Regulation Systems Compliance and Integrity (Reg SCI), Exchange Act Section 19(b) and Rule 19b-4, and Exchange Act Rules 17Ad-22(e) and 17Ad-25(i) and (j).
The staff said the position is based on the facts presented, does not state legal conclusions, and can be modified or revoked.
The structure described in DTC’s request letter and the staff response treats tokenization as an alternate way to record a participant’s “security entitlement,” rather than a change to the registered owner, nominee framework, or the legal basis that governs indirectly held securities.
The securities would remain registered in the name of Cede & Co., while a DTC participant that opts in could instruct DTC to represent its entitlement using a token held in a registered blockchain wallet.
Under the operational flow described, DTC would debit the participant’s eligible book-entry entitlement from its DTC account, credit the securities to a “Digital Omnibus Account” on DTC’s centralized ledger that reflects the aggregate of tokenized entitlements, then mint and deliver a token to the participant’s registered wallet.
Token transfers would be limited to registered wallets, and DTC would retain visibility into token movements.
The materials describe an off-chain tracking system, LedgerScan, that would scan underlying blockchains and create the record DTC would treat as its official books and records for tokenized entitlements, while a separate system called Factory would support minting and delivery.
A participant holding tokens could transfer them directly to the registered wallet of another participating firm without instructing DTC to process the transfer on its centralized ledger.
How DTC’s proposed tokenized securities model would operate in practice
The documents also describe a de-tokenization flow in which DTC would burn the token and return the entitlement to the participant’s standard DTC account.
| Parameter | How the Preliminary Base Version is framed in the SEC staff letter |
|---|---|
| Who can participate | DTC participants on an opt-in basis, with certain participants excluded while tax withholding/reporting and Treasury International Capital reporting issues are addressed (about 11% of participants as of Oct. 31, 2025, according to DTC’s request letter). |
| Eligible “Subject Securities” | Russell 1000 constituents at launch (and later additions), U.S. Treasury bills, bonds, and notes, and index ETFs such as those tracking the S&P 500 and Nasdaq-100. |
| Where tokens can move | Only to registered wallets, with DTC screening registered wallets for OFAC compliance and requiring tokenization protocols that enforce distribution control and transaction reversibility (ERC 3643 is cited as an example in DTC’s request letter). |
| Risk controls at DTC | Tokenized entitlements would have no collateral value and no settlement value for Net Debit Cap or Collateral Monitor calculations, and delivery-versus-payment settlement would occur away from DTC. |
| Oversight package | Quarterly reporting to SEC staff on participating firms, tokenized shares and value, transfers, eligible securities, registered wallet counts, blockchains used or declined, outages, and any root-wallet interventions. |
| Timing and sunset | DTC described proof-of-concept work in fall 2025 using synthetic assets, limited live pilots with select participants in early 2026, a broader rollout in the second half of 2026, and a staff position that is withdrawn without further action three years after launch, with DTC providing written notice at launch. |
For readers who have seen DTCC referenced in recent ETF coverage, where DTCC system entries are often misread as a regulatory green light, the staff letter addresses a different question. Those earlier reports have emphasized that DTCC is post-trade infrastructure and that operational listings are not the approvals gate.
Here, the regulator is addressing whether DTC can operate a tokenization layer around assets it already holds, under specified limits on scope, transferability, and risk use.
The documents outline guardrails that narrow the initial scope and provide SEC staff with telemetry. DTC stated it would not assign tokenized entitlements collateral value or settlement value for key internal controls, which keeps the program separate from DTC’s default management and end-of-day settlement mechanics.
Eligibility is limited to highly liquid securities, and tokens can move only between allowlisted wallets tied to participants.
DTC also represented that it would publish objective technology standards, maintain the ability to address defined reversal conditions, and provide quarterly reporting that includes the names of blockchains used, as well as the blockchains it declines to approve and the rationale for those decisions.
SEC signals cautious path toward market digitization
DTCC positioned the no-action letter as part of a longer arc toward digitized market infrastructure.
DTCC CEO Frank La Salla said tokenization can enable collateral mobility, new trading modalities, 24/7 access, and programmable assets, and he thanked the SEC for allowing the firm to proceed under specified limits.
DTC’s request letter describes the depository as a registered clearing agency and a systemically important financial market utility, and it says DTC custodies more than $100 trillion in securities and processes hundreds of millions of transactions each year.
The staff response is conditioned on the facts presented and expresses only the staff position on enforcement action, not legal conclusions. It also says the position can be modified or revoked and does not address other laws or self-regulatory organization rules that may apply.
DTC’s request letter outlines potential work after the preliminary phase, including expanding eligible securities, allowing tokenized entitlements to carry collateral or settlement value, and exploring corporate action distribution options that could include stablecoins or tokenized deposits.
Any expansion would be subject to further engagement with SEC staff before moving beyond the preliminary parameters.
The timing places the letter alongside broader U.S. tokenization discussions that have referenced estimates around $68 trillion for tokenized markets, while this staff action focuses on a constrained deployment and quarterly reporting. DTC said it expects to begin rolling out the service in the second half of 2026.
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