The two-path game behind DTCC's US stock tokenization: DTCC's "reform" versus the crypto-native "revolution"

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Author: Bocai Bocai｜bocaibocai

On December 11, 2025, the Depository Trust & Clearing Corporation (DTCC) received a “No-Action Letter” from the SEC, allowing it to tokenize the securities assets it custody on the blockchain.

The news was met with industry applause and quickly became the focus of attention—$99 trillion in custodial assets are about to go on-chain, and the gate to tokenized US equities has finally opened.

But a close reading of the document reveals a key detail: DTCC is tokenizing “security entitlements,” not the stocks themselves.

This distinction may sound like legal technicality.

In reality, it exposes two very different paths in the field of securities tokenization, and behind these paths, two forces are engaged in a game.

1. Who is the true owner of US stocks?

Understanding this game requires first grasping an counterintuitive fact: in the US public markets, investors have never truly “owned” stocks.

Before 1973, stock trading relied on physical certificates. After a trade, buyers and sellers exchanged physical stock certificates, signed and endorsed, then mailed to the transfer agent for registration. This process was manageable when trading volumes were low.

But by the late 1960s, the average daily trading volume of US stocks soared from a few million shares to over ten million, nearly collapsing the entire system. Broker-dealers faced backlog of hundreds of thousands of stock certificates—lost, stolen, forged. Wall Street called this period the “Paperwork Crisis.”

DTC was born as a solution to this crisis. Its core idea was simple: centralize all stock certificates in one place, and for future trades, record only digital entries on the books, no physical movement.

To do this, DTC established a nominee called Cede & Co., which registered almost all listed companies’ stocks in its name.

Official disclosures in 1998 showed that Cede & Co. held legal ownership of 83% of all issued publicly traded US stocks.

What does this mean? When you see “100 shares of Apple” in your brokerage account, the shareholder register lists Cede & Co. as the owner.

What you hold is a contractual claim called “security entitlement”—the right to claim economic benefits from the stock. The broker has the right to assert this claim against the clearing broker, which in turn can claim from DTCC. This is a layered chain of rights, not direct ownership.

This “indirect holding system” has operated for over fifty years. It eliminated the paperwork crisis, supported daily settlement of trillions of dollars, but at the cost of permanently separating investors from the securities they hold through an intermediary layer.

2. DTCC’s choice: upgrade infrastructure, keep the architecture

With this background, the scope of DTCC’s tokenization becomes clear.

According to the SEC No-Action Letter and DTCC’s public statements, its tokenization service targets “securities entitlements held by Participants at DTC.” Participants are clearing brokers and banks directly connected to DTCC—only a few hundred institutions in the US currently qualify.

Ordinary investors cannot directly access DTCC’s tokenization service.

The tokenized “security entitlement tokens” will circulate on a blockchain approved by DTCC, but these tokens still represent contractual claims on the underlying assets, not direct ownership. The underlying stocks remain registered in Cede & Co.'s name; this remains unchanged.

This is an infrastructure upgrade, not a structural overhaul. Its goal is to improve efficiency within the existing system, not to replace it. DTCC explicitly lists several potential benefits:

First, collateral liquidity: in the traditional model, securities move between accounts with settlement cycles, locking up capital. Tokenization allows near real-time transfer of rights among participants, freeing frozen capital.

Second, reconciliation simplification: currently, DTCC, clearing brokers, and retail brokers maintain separate ledgers, requiring extensive daily reconciliation. On-chain records can serve as a shared “single source of truth.”

Third, paving the way for future innovation: DTCC mentions that in the future, rights tokens might have settlement value or dividends could be issued in stablecoins. But these require additional regulatory approval.

It’s important to note that DTCC explicitly states these tokens will not enter DeFi ecosystems, will not bypass existing participants, and will not alter the shareholder register of issuers.

In other words, it does not intend to disrupt anyone; this choice is rational.

Multilateral netting is a core advantage of the current securities clearing system. Daily market transactions worth trillions of dollars, after netting by NSCC, require only hundreds of billions to settle. Such efficiency is only achievable in a centralized architecture.

As a systemically important financial infrastructure, DTCC’s primary responsibility is to maintain stability, not to pursue innovation.

3. The direct ownership camp: from tokens to stocks themselves

While DTCC proceeds cautiously, another path has already begun to grow.

On September 3, 2025, Galaxy Digital announced it became the first Nasdaq-listed company to tokenize SEC-registered equity on a mainstream public blockchain. In partnership with Superstate, Galaxy’s Class A common stock can now be held and transferred as tokens on the Solana blockchain.

The key difference: these tokens represent actual stocks, not just claims on stocks. Superstate, as an SEC-registered transfer agent, updates the shareholder register in real-time when tokens are transferred on-chain.

The token holder’s name appears directly on Galaxy’s shareholder register—Cede & Co. is not involved.

This is genuine “direct ownership.” Investors hold not a contractual claim but a property right.

In December 2025, Securitize announced it will launch a “fully on-chain compliant trading” tokenized stock service in Q1 2026. Unlike many “synthetic tokens” relying on derivatives, SPVs, or offshore structures, Securitize emphasizes its tokens will be “real, regulated stocks: issued on-chain and directly recorded in the issuer’s shareholder register.”

Securitize’s approach goes further: it supports not only on-chain holding but also on-chain trading.

During US stock market hours, prices are anchored to the best bid and offer (NBBO); after hours, an automated market maker (AMM) dynamically prices based on on-chain supply and demand. This implies a theoretical 24/7 trading window.

This path envisions blockchain as the native layer of securities infrastructure, not just an add-on to existing systems.

4. Two paths, two futures

This is not merely a technical debate but a contest of institutional logics.

DTCC’s path represents incremental improvement, acknowledging the rationality of the current system—efficiency of multilateral netting, risk mitigation via central counterparties, mature regulatory frameworks—using blockchain to make this machinery faster and more transparent.

Intermediaries’ roles do not disappear; they are just re-credited with a different bookkeeping method.

The direct ownership path signifies a structural revolution—questioning the necessity of the indirect system itself: if blockchain can provide immutable ownership records, why still layer multiple intermediaries? If investors can self-custody assets, why transfer ownership to Cede & Co.?

Each path involves trade-offs.

(Translation by Chuk Okpalugo)

Direct ownership offers autonomy: self-custody, peer-to-peer transfers, composability with DeFi protocols. But it comes with liquidity fragmentation and loss of netting efficiency. If every transaction requires full on-chain settlement without a central clearinghouse netting, capital lock-up increases significantly.

Moreover, direct ownership shifts operational risks to investors—loss of private keys, wallet hacks—risks traditionally borne by intermediaries.

Indirect ownership preserves system efficiency: economies of scale in centralized clearing, mature regulatory compliance, familiar institutional workflows. But the cost is that investors can only exercise rights through intermediaries. Shareholder proposals, voting, direct communication with issuers—these rights, in theory, belonging to shareholders, require passing through multiple layers of intermediaries in practice.

It’s noteworthy that the SEC remains open to both paths.

In its December 11 statement on the DTCC No-Action Letter, Commissioner Hester Peirce explicitly said: “DTC’s model of tokenized securities rights is a promising step in this journey, but other market participants are exploring different experimental paths… Some issuers have already begun tokenizing their securities, which could make it easier for investors to hold and trade securities directly, rather than through intermediaries.”

The regulatory signal is clear: this is not an either/or choice but a market-driven decision on which model better suits different needs.

5. Defensive strategies for financial intermediaries

How should existing financial intermediaries respond to this path competition?

First, clearing brokers and custodians should consider:

In the DTCC model, are you indispensable or replaceable? If security rights can be transferred directly among participants, do the traditional custody, transfer, and reconciliation fees still have a basis? Early adopters of DTCC’s tokenization may gain a competitive edge, but in the long run, such services could become standardized and commoditized.

Second, retail brokers face more complex challenges:

In the DTCC model, their role is reinforced—retail investors still access markets via brokers. But widespread direct ownership could erode this moat. If investors can self-custody SEC-registered stocks and trade on compliant on-chain exchanges, what value do retail brokers provide? The answer may lie in services: compliance consulting, tax planning, portfolio management—high-value functions that cannot be replaced by smart contracts.

Third, transfer agents may see a historic upgrade:

In the traditional system, transfer agents are low-profile back-office functions maintaining shareholder registers. Under direct ownership, they become key connectors between issuers and investors. Superstate and Securitize both hold SEC-registered transfer agent licenses—no coincidence. Control over shareholder register updates means control over the entry point of the direct ownership system.

Fourth, asset managers need to watch for competition from composability:

If tokenized stocks can serve as collateral in on-chain lending protocols, traditional secured financing could be impacted. If investors can trade 24/7 on AMMs with instant settlement, the capital tied up during T+1 settlement cycles could vanish. These changes won’t happen overnight, but asset managers should evaluate how dependent their models are on settlement efficiency assumptions.

6. The convergence of two curves

Transforming financial infrastructure is never instant. The 1970s paperwork crisis led to the indirect holding system, but it took over twenty years from DTC’s founding to Cede & Co. holding 83% of US stocks. SWIFT was also founded in 1973, and cross-border payments are still being restructured.

In the short term, both paths will develop within their domains:

DTCC’s institutional services will first penetrate collateral management, securities lending, ETF issuance and redemption—areas most sensitive to settlement efficiency.

The direct ownership model will start at the margins: native crypto users, small issuers, regulatory sandboxes in specific jurisdictions.

Long-term, these paths may converge. When the circulation of tokenized rights becomes large enough, and the regulatory framework for direct ownership matures, investors may finally have a real choice—to enjoy the efficiency of netting within the DTCC system or to exit to self-custody on-chain, regaining direct control over assets.

The existence of this choice itself is transformative.

Since 1973, ordinary investors have never truly had this option: the moment they buy stocks, they automatically enter the indirect system, with Cede & Co. as the legal owner, and investors as beneficiaries at the end of the rights chain. This is not a choice but the only path.

Cede & Co. still registers the majority of US public stocks. This proportion may begin to shift or remain stable for a long time. But after fifty years, another route is finally paved.