SEC Greenlights DTC Tokenization Services in Landmark No-Action Letter for Securities on Blockchain

TL;DR

• The SEC’s Division of Trading and Markets granted no-action relief to The Depository Trust Company for securities tokenization on December 11, 2025
• DTC participants will be able to tokenize security entitlements and transfer them on approved blockchains
• The relief covers Russell 1000 securities, US Treasuries, and major index-tracking ETFs
• The program is structured as a three-year pilot with significant operational limitations
• Commissioner Hester Peirce called it a “significant incremental step in moving markets onchain”

The United States Securities and Exchange Commission has taken a landmark step toward integrating blockchain technology into the nation’s core securities infrastructure. On December 11, 2025, the staff of the SEC’s Division of Trading and Markets issued a no-action letter to The Depository Trust Company, granting regulatory relief that enables DTC to launch a pilot version of its securities tokenization program on approved blockchains.

The decision represents the most significant regulatory approval for on-chain securities settlement in U.S. history. DTC, a subsidiary of the Depository Trust and Clearing Corporation, serves as the sole central securities depository in the United States and is designated as systemically important. Its involvement in tokenization signals that blockchain technology is no longer a niche experiment but is being woven into the fabric of mainstream financial infrastructure.

How the Tokenization Program Works

Under the terms of the no-action letter, DTC participants — primarily SEC-registered broker-dealers and certain banking entities — will be able to register blockchain wallets with DTC on approved blockchains that meet DTC’s technology standards. Once registered, participants can instruct DTC to tokenize their security entitlements to eligible securities held in their regular DTC accounts.

The process involves several key steps. DTC debits the subject securities from the participant’s traditional account and credits them to a digital omnibus account — an account on DTC’s centralized ledger that reflects the sum of all tokenized security entitlements across all registered wallets. DTC then mints and delivers tokens representing the participant’s security entitlement to their specified registered wallet. This converts a traditional book-entry entitlement into a tokenized security entitlement recorded on a blockchain.

Participants with tokenized security entitlements can transfer these tokens directly to the registered wallet of another participant without needing to instruct DTC separately. DTC’s software system tracks each transfer to record tokenized entitlements for its official books and records. The result is a system where traditional securities can move on a blockchain with the institutional safeguards and record-keeping that market participants and regulators expect.

Eligible Securities and Operational Scope

The no-action letter defines a specific set of eligible securities for the initial phase of the program. These include securities in the Russell 1000 Index at the time of launch, US Treasuries, and exchange-traded funds that track major indexes such as the S&P 500 and the Nasdaq 100. This scope covers a substantial portion of the most liquid and widely held securities in the U.S. markets.

However, the program comes with notable operational limitations. DTC will not give collateral or settlement value to tokenized security entitlements, meaning they cannot be used for margin purposes or to settle obligations through the National Securities Clearing Corporation’s normal delivery-versus-payment processing. The tokenization services will operate alongside, but not integrated with, DTC’s existing settlement infrastructure.

The relief is available for a three-year period following the launch of the tokenization services, giving DTC and its participants a substantial window to test and refine the technology in a real-world environment without the full burden of existing regulatory requirements.

Regulatory Relief and Its Implications

The no-action letter grants DTC relief from several key regulatory requirements under the Securities Exchange Act. These include the proposed rule change process that ordinarily subjects proposed changes to a central securities depository’s operations to public notice and comment. Under the terms of the letter, DTC’s changes to the tokenization services will not need to be filed as proposed rule changes with the SEC during the relief period.

The relief also covers covered clearing agency standards under Exchange Act Rules 17ad-22(e) and 17ad-25(i)-(j), as well as Regulation Systems Compliance and Integrity, which governs the technology infrastructure of key market participants. This sweeping relief reflects the SEC staff’s recognition that applying the full weight of existing regulations to a pilot program could stifle innovation before it has a chance to demonstrate its potential.

The decision has drawn both praise and scrutiny from legal experts. Analysts at Sidley Austin noted that the no-action letter “preferences DTC in the marketplace by giving it significant regulatory advantages to engage in the Tokenization Services without having to conduct them in compliance with existing regulations.” The firm raised the question of whether the letter creates a government-backed competitive advantage for DTC over other market participants who might seek to offer similar tokenization services.

Commissioner Peirce’s Endorsement

SEC Commissioner Hester M. Peirce, long known as one of the commission’s most crypto-friendly members, issued a statement celebrating the decision. Titled “Tokenization Trending,” Peirce’s statement described the no-action letter as “a significant incremental step in moving markets onchain.”

Peirce emphasized that DTC’s tokenized entitlement model is a promising but early step on the tokenization journey. She noted that other market participants are exploring alternate experimental avenues, including issuers who have begun tokenizing their own securities directly, potentially enabling investors to hold and transact in securities without intermediaries.

“Investor choice is critical, particularly at this early stage when the market is testing what works,” Peirce wrote. She cautioned that different tokenization structures may raise distinct regulatory considerations, reinforcing the idea that the SEC’s approach to crypto will continue to be iterative and adaptive rather than prescriptive.

The Broader Tokenization Trend

The DTC no-action letter does not exist in a vacuum. It is part of a broader acceleration of tokenization initiatives across the financial services industry and the regulatory landscape. SEC Chairman Paul Atkins has repeatedly expressed his view that tokenization can benefit U.S. securities markets and has the potential to modernize market infrastructure.

In September 2025, Nasdaq filed a proposed rule change with the SEC that foreshadowed DTC’s tokenization plans. The financial industry has been moving toward blockchain-based settlement for years, with major institutions including JPMorgan, BlackRock, and Goldman Sachs experimenting with tokenized assets. The SEC’s decision to grant regulatory relief to the nation’s central securities depository represents the most concrete step yet toward making tokenization a mainstream feature of U.S. capital markets.

The timing is also significant. The CFTC’s parallel actions on digital asset collateral, announced days earlier, and the broader regulatory momentum under the Trump administration’s pro-crypto posture suggest that tokenization is rapidly moving from proof-of-concept to production. Financial institutions that have been watching from the sidelines now have a clear regulatory pathway — at least for the pilot phase — to begin integrating blockchain technology into their operations.

Challenges and Open Questions

Despite the optimism, significant challenges remain. The no-action letter applies only to DTC and its direct participants, leaving questions about how the broader ecosystem of financial intermediaries, asset managers, and retail investors will interact with tokenized securities. The program’s restriction to peer-to-peer transfers between registered wallets means that the full vision of 24/7 on-chain trading remains some distance away.

There are also questions about the competitive landscape. If other market participants seek to provide similar tokenization services in the United States, it is uncertain whether the SEC or its staff will afford the same or similar relief. The concern is that DTC’s natural monopoly position, combined with regulatory advantages conferred by the no-action letter, could concentrate the tokenization market in ways that ultimately limit innovation and competition.

Technical challenges persist as well. The requirement that blockchains meet DTC’s technology standards introduces a gatekeeping function that could favor established enterprise blockchain solutions over newer or more decentralized alternatives. Security, scalability, and interoperability will all need to be demonstrated at scale before tokenization can become the default settlement mechanism for U.S. securities.

Why This Matters

The SEC’s no-action letter to DTC is a watershed moment for the intersection of traditional finance and blockchain technology. For the first time, the United States’ central securities depository has explicit regulatory permission to tokenize securities and enable on-chain transfers between institutional participants. This is not a startup experiment or a regulatory sandbox — it is the foundation of the U.S. securities settlement infrastructure embracing blockchain.

For the blockchain and crypto industry, the decision validates a thesis that many have been building toward for years: that tokenization of traditional financial assets represents one of the most significant practical applications of distributed ledger technology. The involvement of DTC, which processes trillions of dollars in securities transactions daily, brings an institutional credibility to tokenization that no private-sector initiative could match.

For investors and market participants, the three-year pilot program offers a window into the future of securities settlement. If successful, tokenization could reduce settlement times, lower transaction costs, enable 24/7 trading, and create new forms of financial products that combine the stability of traditional securities with the programmability of blockchain tokens. The journey from pilot to production will be long, but on December 11, 2025, the first major regulatory milestone was cleared.

Disclaimer: This article is for informational purposes only and does not constitute financial, legal, or investment advice. The regulatory landscape for digital assets and securities tokenization is rapidly evolving, and readers should consult qualified professionals for guidance specific to their circumstances. The mention of specific companies or regulatory actions does not constitute an endorsement.