The Depository Trust Company, the U.S. provider of financial market infrastructure that clears and settles securities transactions, said the SEC has given it informal approval to proceed with a tokenization service for some assets it already has in custody without incurring enforcement action.
The letter sets conditions for a time-limited rollout and ongoing reporting, while the underlying securities remain on DTC’s existing custodial rails.
It would enable DTC to offer DTCC tokenization services in a controlled production environment under federal securities laws and regulations. DTC expects 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 December 11, the staff would not recommend any enforcement action against DTC with respect to the agency’s operation of a “Preliminary Base Version” 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 contain legal conclusions and is subject to change or withdrawal.
The structure described in DTC’s request letter and staff response views tokenization as an alternative way to capture a participant’s “security rights,” rather than a change in registered owner, nominated framework, or legal basis that governs indirectly held securities.
The securities would remain registered in the name of Cede & Co., while a DTC participant who signs up could instruct DTC to represent its right using a token in a registered blockchain wallet.
Under the described operational flow, DTC would debit the participant’s eligible wire transfer entitlement from his DTC account, credit the securities to a “Digital Omnibus Account” on DTC’s centralized ledger reflecting the aggregate of tokenized entitlements, and then create and deliver a token to the participant’s registered wallet.
Token transfers would be limited to registered wallets, and DTC would maintain visibility of token movements.
The materials describe an off-chain tracking system, LedgerScan, that would scan underlying blockchains and create the record that DTC would treat as the official books and records for tokenized rights, while a separate system called Factory would support mining and delivery.
A participant who holds tokens can transfer them directly to the registered wallet of another participating company without instructing DTC to process the transfer in its centralized ledger.
How DTC’s proposed tokenized security model would work 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 default DTC account.
| Parameter | How the preliminary basic version is worded 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 (approximately 11% of participants as of October 31, 2025, according to DTC’s request letter). |
| Eligible “Subject Effects” | Russell 1000 constituents at launch (and subsequent additions), US Treasuries, bonds and notes, and index ETFs such as those tracking the S&P 500 and Nasdaq-100. |
| Where tokens can move | For registered wallets only, where DTC screens registered wallets for OFAC compliance and requires tokenization protocols that enforce distribution control and reversibility of transactions (ERC 3643 is cited as an example in DTC’s request letter). |
| Risk management at DTC | Tokenized allowances would have no collateral value and no settlement value for Net Debit Cap or Collateral Monitor calculations, and the delivery versus payment settlement would occur outside of DTC. |
| Summary package | Quarterly reporting to SEC staff on participating companies, tokenized shares and value, transfers, eligible securities, registered portfolio counts, blockchains used or rejected, outages, and any root wallet interventions. |
| Timing and sunset | DTC described proof-of-concept work in late 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 to be repealed without further action three years after launch, with DTC providing written notice at launch. |
For readers who have referred to DTCC in recent ETF coverage, with DTCC system data often misinterpreted as a regulatory green light, the staff letter addresses a different question. Those previous reports emphasized that DTCC is a post-trade infrastructure and that operational listings are not the approval gateway.
Here, the regulator is exploring whether DTC can adopt a tokenization layer around assets it already owns, subject to specified limits on scope, transferability and risk use.
The documents outline guardrails that reduce the initial scope and provide SEC staff with telemetry. DTC stated that it would not assign tokenized rights as collateral value or settlement value for key internal controls, keeping the program separate from DTC’s standard management and end-of-day settlement mechanisms.
Eligibility is limited to highly liquid securities, and tokens can only be moved between eligible wallets linked to participants.
DTC also indicated that it would publish objective technology standards, retain the ability to address defined reversal conditions, and provide quarterly reporting detailing the names of the blockchains used, as well as the blockchains it refuses to approve and the rationale for those decisions.
SEC signals a cautious path towards market digitalization
DTCC positioned the no-action letter as part of a longer arc toward a digitized market infrastructure.
DTCC CEO Frank La Salla said tokenization could enable collateral mobility, new trading modalities, 24/7 access and programmable assets, and he thanked the SEC for allowing the company to continue trading below specified limits.
DTC’s request letter describes the custodian as a registered clearing agency and a systemically important financial markets firm, and says DTC holds more than $100 trillion in securities and processes hundreds of millions of transactions annually.
The staff response will depend on the facts presented and reflect only the staff’s position on enforcement actions, and not the legal conclusions. It also says the position may be changed or withdrawn and does not address other laws or self-regulatory organizational rules that may apply.
DTC’s request letter outlines possible work beyond the preparatory phase, including expanding eligible securities, allowing tokenized rights to carry collateral or settlement value, and exploring distribution options for corporate action, including stablecoins or tokenized deposits.
Any expansion would be subject to further collaboration with SEC staff before moving beyond the preliminary parameters.
The timing places the letter alongside broader US tokenization discussions that point to estimates of approximately $68 trillion for tokenized markets, while this staff action focuses on limited deployment and quarterly reporting. DTC expects the service to be rolled out in the second half of 2026.