Tokenization finally touches the core ledger
The SEC’s no-action letter for DTC’s tokenization pilot signals a shift from blockchain demos to real market infrastructure. Tokenized assets, investor protections, and programmable finance can now converge inside the core U.S. securities settlement system.
This week, the SEC staff issued a no-action letter supporting The Depository Trust Company’s (DTC) plan to launch a pilot tokenization service. It’s a quietly consequential move. DTC isn’t a crypto venue or an experimental lab. It’s a central pillar of U.S. capital markets infrastructure, where trillions in securities settle daily.
The arrival of tokenization at the DTC is a signal that market infrastructure is ready to test whether programmable assets can live inside the machinery that defines legal ownership.
The metaphor of tokenization has always been easy: take an asset, represent it digitally, and move it across a blockchain (or onchain).
The hard part has been getting that metaphor to line up with how markets actually function and integrate with key things like rules, reversibility, custody, and governance. This week's no-action letter marks the clearest moment yet when tokenization isn’t being tested in isolation. It’s being tested under the supervision of the systems and regulators that already supervise real markets.
Daniel McGlynn
From tech demo to durable system
Tokenization has spent the past decade proving that it's technically feasible to move digital representations of value. There’s no shortage of proofs-of-concept showing assets jumping between wallets onchain.
But proving movement was never the blocker. The real challenge has always been credibility, or getting tokenized representations to plug into the legal and operational systems that make markets safe, reliable, and accountable.
That’s where this week’s news lands differently. The DTC program isn’t just a new blockchain integration. It’s a wedge into market infrastructure, the part of the financial system where “ownership” isn’t theoretical. Instead, it's actually settled.
A short history of stuckness
Most tokenization efforts have fallen into the same pattern: a slick technical layer on top of an unconvincing legal base. Tokenize real estate, tokenized gold, tokenized anything, but when you ask who arbitrates disputes, reversals, or custody breakdowns, the answers get fuzzy.
The legal infrastructure has tried to help. Over the past three years, significant efforts have gone into modernizing commercial law to accommodate digital assets.
In the U.S., the Uniform Commercial Code (UCC) was updated to include Article 12, creating the category of “controllable electronic records” (CERs) or a way to treat digital tokens as property under traditional legal frameworks.
These reforms clarified how property rights and secured interests can work for digital representations of value. But they didn’t create regulated markets. Property law might tell you what something is. Securities law still tells you how it’s traded, cleared, and settled.
What was missing was a bridge between the new digital definitions and the old, heavily rule-bound systems that markets rely on. This week’s no-action letter is a first step onto that bridge.
Daniel McGlynn
Why the DTC pathway matters
This is a proposal from DTCC, the parent of DTC, and the linchpin of post-trade operations for U.S. securities. The program doesn’t invent a new asset class, instead it wraps existing security entitlements, held at DTC, in tokenized form for participants already inside the DTC framework.
As Commissioner Hester Peirce put it in her statement supporting the move, this approach keeps core protections and ownership rights intact while adding the flexibility of programmable infrastructure.
Importantly, the pilot is “permissioned enough” to be governable. The no-action relief is tightly scoped: a limited number of participants, a defined set of eligible securities, and guardrails on reporting and controls. This allows regulators to observe how programmable features behave inside a system that already knows how to enforce reversals, manage exceptions, and contain risk.
But the biggest shift may be conceptual. DTC is positioning itself as a standards-setting layer, which will translate to deciding which chains and protocols qualify as “supported,” and creating interoperability conditions that resemble real-world compliance, not crypto-world maximalism.
Tokenization, in this model, becomes a new mode or new innovation for market infrastructure, not an end-run around it.
Daniel McGlynn
What this unlocks
Four things change when tokenization moves inside DTC.
First, the source of truth is already trusted. Most tokenization pilots struggle to establish who gets to say what’s “real.” When the source is a central securities depository with a legal monopoly on settlement finality, that question is settled.
Second, the program creates regulatory space for programmability inside existing investor protections. Participants can test mobility and decentralization features without abandoning the legal safeguards and fail-safes that make mainstream markets resilient.
Third, it opens the door to tokenized cash flows, not just tokenized assets. One detail in the no-action materials is worth noting: tokenized records will be able to trigger DTC’s centralized systems to execute payments, like dividends from corporate actions. This is critical. Programmable markets won’t scale until cash legs and yield mechanics work onchain and off.
Fourth, the pilot begins exactly where tokenized finance could make the biggest impact: collateral and financing workflows. The eligible assets, things like treasurys, ETFs, blue-chip equities, are the instruments that sit at the heart of repo markets, prime brokerage, and securities lending. Tokenizing these assets under the hood of DTC hints at a future where collateral can move faster, settle cleaner, and adapt to more dynamic risk models.
As DTCC has hinted in its own framing, this is less about retail access and more about post-trade optimization. But the downstream effects could touch everything.
Daniel McGlynn
Limits, gaps, and next layers
While making interesting progress towards more widespread tokenization, the pilot leaves major questions open.
Chain governance remains unresolved. “Supported blockchains” will be defined by DTC, but which ones qualify, under what standards, and who controls those standards over time will shape the ecosystem’s direction.
The cash leg, especially as it relates to programmable payments, leans into stablecoin and tokenized deposit territory. If tokenized securities move more fluidly than the cash that settles them, friction returns.
And primary issuance is out of scope. This pilot touches post-trade processes, not the initial distribution of securities. Issuer-led tokenization still lives on a separate track, with its own legal and operational puzzles.
Peirce made this point explicitly: tokenized securities are still securities. Wrapping them in code does not alter their regulatory DNA.
What to watch next
- DTCC’s publication of standards for which blockchains and protocols qualify
- Which market participants adopt first: custody, financing, ETF creation, or lending
- Whether the pilot evolves to include cash-leg integration, collateral optimization, or interoperability with programmable money layers
The decade ahead
Tokenization has spent a decade proving it can digitally represent assets. The next decade will be about proving that these representations can survive inside real markets, with rules and standards that scale.
This week’s letter doesn’t settle the future. But it plants tokenization’s flag inside the market’s core ledger. That’s the shift.