On December 11, 2025, the U.S. Securities and Exchange Commission (the “SEC”) issued no-action relief1(the “DTC Letter”) to The Depository Trust Company (“DTC”) permitting for three years the operation of a pilot version (the “Pilot Program”) of DTC’s securities tokenization program (the “DTCC2 Tokenization Services”). This development marks an early step toward fulfilling SEC Chair Paul Atkins’s vision of a new era in which tokenization becomes the foundation of financial infrastructure whereby any security that can be tokenized ultimately will be tokenized.3
DTC Pilot Program
General
The DTC Letter states that DTC can provide DTC participants and their customers the ability to elect to have their security entitlements recorded using distributed ledger technology (“Tokenized Entitlements”) as opposed to solely through a centralized book-entry ledger (the “Book-Entry Ledger”).
In order to hold securities entitlements in tokenized form, a DTC participant4 (“Participant”) must register one or more digital wallets (each, a “Registered Wallet”) with DTC. DTC will then perform screening to ensure compliance with applicable laws, including anti-money laundering laws.
Once registered, the Participant will be able to request that eligible securities currently held in the Participant’s name in the Book-Entry Ledger be converted to Tokenized Entitlements held in their Registered Wallet(s). The Pilot Program limits the securities that are eligible securities to a limited, but quite substantial field:
(1) securities in the Russell 1000 Index at the time the Pilot Program launches as well as any additions to the index thereafter and notwithstanding the subsequent removal of any securities from the index,
(2) U.S. Treasury securities (i.e., bills, bonds, and notes), and
(3) ETFs that track major indices, such as the S&P 500 index and Nasdaq-100 index provided that such securities are eligible for tokenization.
These securities were selected for the Pilot Program because the size and depth of their current trading markets are such that Tokenized Entitlements in these securities are unlikely to have much influence on their trading markets, and any errors arising in the operation of the Pilot Program are unlikely to affect the markets for these securities. After experience with the Pilot Program is gained, DTC expects to expand the universe of eligible securities further.
Process
Upon receiving a valid tokenization request, DTC will debit the securities held in the Participant’s name on the Book-Entry Ledger and credit the securities to a “DTC Omnibus Account,” which is separate from the Book-Entry Ledger and holds all securities that are tokenized. The DTC Letter represents that the use of the DTC Omnibus Account is needed to forestall “double counting” errors involving tokenized securities, and the Digital Omnibus Account ensures that only Tokenized Entitlements can represent ownership of the tokenized securities since those securities have been removed from the Book-Entry Ledger. At all times a security is represented by a Tokenized Entitlement, the registered ownership of the tokenized securities will be DTC’s nominee, Cede & Co.
Immediately upon the crediting of the securities to the DTC Omnibus Account, the Participant’s Registered Wallet receives a newly minted token utilizing a blockchain requested by the Participant and approved by DTC. This new token is the Tokenized Entitlement representing free and clear ownership of the referenced security in accordance with Articles 8 and 9 of the Uniform Commercial Code.
A Participant, or its customer, will be able to transfer tokens held in their Registered Wallet directly to another Participant’s Registered Wallet without any involvement by DTC. Thus, DTCC Tokenization Services will enable securities transactions to be executed and simultaneously settled 24 hours a day, 7 days a week.
DTCC Tokenization Services uses surveillance tracking software to observe all transfers of tokens on all accepted blockchains (“Transfer Tracking”). Transfer Tracking makes a record of changes in Tokenized Entitlements in real-time. This Transfer Tracking accomplishes a number of functions that a regulated clearing and settlement agency, such as DTC, must have. Among other things, Transfer Tracking allows DTC to reverse token transfers that occurred in error and make distributions such as dividend payments to appropriate accounts as of the appropriate dates. Transfer Tracking will have limited ability to instruct DTC’s existing Book-Entry Ledger aside from moving Tokenized Entitlements to or from the DTC Omnibus Account and making cash payments (e.g., a dividend payment) to Participant’s tokens.
DTCC Tokenization Services also allow the de-tokenization of a security held as a Tokenized Entitlement in a Registered Wallet. A Participant, or its customer, may instruct DTC to credit any securities represented by Tokenized Entitlements back to the Participant’s Book-Entry Ledger account. Upon acceptance of such instruction, DTC will “burn” the tokens representing the security in the Participant’s Registered Wallet, debit such securities from the DTC Omnibus Account, and credit those securities to the Participant’s name in the Book-Entry Ledger. The securities entitlement will then be recorded wholly by DTC’s centralized Book-Entry Ledger.
Choice of Blockchain
The Pilot Program does not prescribe a specific blockchain or tokenization protocol. Instead, DTC will establish objective, neutral, and publicly available “Technology Standards” for both blockchains and protocols. DTC states these standards are intended to ensure that: (A) tokens are only transferable to Registered Wallets; (B) tokens are maintained on blockchains that are resilient, secure, and subject to robust governance; and (C) all tokens are subject to protocols that support distribution control and transaction reversibility.1 DTC specifically mentioned the ERC 3643 protocol as being one potential use-case as it allows compliance features to be encoded directly into a token.
During the operation of the Pilot Program, DTC will publicly disclose:
the technology standards applicable to the service (including blockchain and tokenization protocols);
a list of approved blockchains; and
any fees or charges imposed by DTCC in connection with the service.
Takeaways
The Pilot Program represents a major step in the tokenization of securities efforts in the U.S. Until now, the impact of tokenizing real world assets was limited to a trading, listing and custody environment other than that utilized by the “traditional” finance system. The involvement of DTC and the SEC has the potential to remove any credibility stigma that may have been attached to anything involving blockchain, and the efficiency gains from using blockchain technology may drive adoption at a significant pace, notwithstanding some initial costs incurred by Participants in adopting internal processes to deal with aspects unique to blockchain (such as seamless, instantaneous and potential round the clock movement of securities). The SEC noted that the Pilot Program provides DTC Participants the ability to utilize the benefits of blockchain and tokenization technology, including mobility, decentralization, and programmability. The SEC also set out requirements for quarterly reporting to the Staff containing certain disclosure benchmarks.
The relief is scheduled to expire three years after the Pilot Program’s launch, which is anticipated in the second half of 2026.
The SEC release and link to the full DTC Letter can be found here.
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1 The DTC Letter, which is comprised of DTC’s requesting letter and the SEC’s response granting relief, noted that the Staff would not recommend SEC enforcement action against DTC under: (i) Reg SCI; (ii) Section 19(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 19b-4 thereunder; and (iii) Exchange Act Rules 17Ad-22(e) and 17Ad-25(i) and (j) in relation to DTC’s operation of DTCC Tokenization Services.
2 “DTCC” refers to the Depository Trust and Clearing Corporation, which is the parent company of DTC. DTC is a wholly owned subsidiary of DTCC.
3 Werner, Y. (2025, July 18). Paul Atkins backs tokenized future with new SEC vision. CoinCentral. Retrieved from https://coincentral.com/paul-atkins-backs-tokenized-future-with-new-sec-vision/
4 The No Action Letter defines “Participant” as an “entitlement holder” (i.e., the “person identified in the records of a securities intermediary as the person having a security entitlement against the securities intermediary”). Any Participant must be a DTC participant.
5 Under these standards, DTC will maintain the technological capability to transfer any tokens to address “Conditions Requiring Reversal,” which include erroneous entries, lost tokens, or malfeasance. DTC has stated that these standards are designed to allow for investor choice without compromising the safeguarding of securities.