SEC's "Two-Year On-Chain" Prediction: Tokenization Restructuring of the DTCC Clearing System

Author: @BlazingKevin_ , Researcher at Movemaker

SEC Chairman Paul Atkinson pointed out that the entire US financial market, including stocks, fixed income, government bonds, and real estate, may migrate entirely onto blockchain technology infrastructure supporting cryptocurrencies within the next two years. This can be considered the most significant structural change in the US financial system since electronic trading emerged in the 1970s.

1. Comprehensive On-Chain Cross-Department Collaboration Framework and Actual Contributions

The “Project Crypto” initiative promoted by Atkinson is not a unilateral action by the SEC; it is built on systematic cooperation across legislation, regulation, and the private sector. Achieving full on-chain integration of the US financial markets, valued at over $50 trillion (including stocks, bonds, government bonds, private credit, real estate, etc.), requires multiple institutions to clarify roles and contributions.

1.1 Government Departments Involved in Comprehensive Asset Tokenization

It should be noted that “Project Crypto” and the “Innovation Exemption” mechanism acknowledge the incompatibility between blockchain technology and existing financial regulations, providing a controlled experimental environment that allows traditional financial institutions (TradFi) to explore and implement tokenization infrastructure without violating core investor protection principles.

The GENIUS Act creates compliant, fully reserve-backed stablecoins, explicitly transferring regulatory authority to banking regulators, addressing the Cash Leg issue necessary for institutions to conduct on-chain transactions and collateralization.

The CLARITY Act delineates jurisdiction between the SEC and CFTC, establishing a clear definition of “mature” for crypto-native platforms, enabling institutions to understand under which regulatory framework their digital assets (such as Bitcoin) operate, and providing pathways for crypto-native platforms to register as federal regulatory intermediaries (“Broker/Dealer”).

OCC, established in 1973, provides clearing and settlement services specifically for options, futures, and securities lending transactions, promoting market stability and integrity. The CFTC is the primary regulator of futures markets and futures merchants.

This cross-departmental collaboration is a prerequisite for the US financial markets to achieve full on-chain integration, laying a solid foundation for subsequent large-scale deployment by giants like BlackRock, JPMorgan Chase, and the integration of core infrastructure such as DTCC.

2.2 Collaboration Among Traditional Financial Giants

In the blueprint of cooperation among US traditional financial giants, the deepening deployment of each institution reflects more specific strategic focuses and technical details. BlackRock is the first to issue a tokenized US Treasury bond fund on a public chain (Ethereum), establishing its position as an asset manager bringing traditional financial yields into the public chain ecosystem.

JPMorgan Chase renamed its blockchain business to Kinexys, allowing banks to perform atomic swaps of tokenized collateral and cash within hours rather than days, significantly optimizing liquidity management; meanwhile, its pilot of JPMD on the Base chain is viewed as a strategic step extending into a broader public blockchain ecosystem, aiming for stronger interoperability.

Finally, the specific breakthrough by the Custodian Trust and Clearing Corporation (DTCC) was achieved by its subsidiary, the Depository Trust Company (DTC). As the most important global transaction infrastructure provider, its SEC “No Objection Letter” enables it to connect the traditional CUSIP system with new token infrastructure, officially initiating mainstream asset tokenization pilots, including Russell 1000 components, in a controlled environment.

2. Full Tokenization and Its Impact on the Financial Environment

The core goal of asset tokenization is to break the “island effect” and “time constraints” of traditional finance, creating a global, programmable, 24/7 financial system.

2.1 Major Enhancements in the Financial Environment: Efficiency and Performance Leap

Tokenization will bring efficiency and performance advantages that traditional financial systems cannot match:

2.1.1 Leap in Settlement Speed (T+1/T+2 to T+0/Seconds):

Enhancement: Blockchain can achieve near real-time (T+0) or even second-level settlement and delivery, contrasting sharply with the T+1 or T+2 settlement cycles typically required by traditional financial markets. UBS’s digital bonds issued on SDX demonstrate T+0 settlement capability, and the European Investment Bank’s digital bond issuance also shortened settlement time from five days to one.

Pain points addressed: Greatly reduces counterparty credit risk and operational risk caused by settlement delays. For time-sensitive transactions like repos and derivatives margin, faster settlement is crucial.

2.1.2 Revolution in Capital Efficiency and Liquidity Release:

Enhancement: Achieves “atomic delivery,” where assets and payments occur simultaneously within a single, indivisible transaction. Additionally, through tokenization, it can release “sleeping capital” currently locked in settlement waiting periods or inefficient processes. For example, programmable collateral management can free over $100 billion annually in trapped capital.

Pain points addressed: Eliminates principal risk in traditional “deliver first, pay later” operations. Reduces the need for high collateral buffers at clearinghouses. Meanwhile, tokenized money market funds (TMMFs) can be transferred directly as collateral, retaining yields and avoiding liquidity friction and yield loss associated with redemption and reinvestment in traditional systems.

2.1.3 Enhanced Transparency and Auditability:

Enhancement: Distributed ledgers provide a single, immutable authoritative record of ownership, with all transaction histories open and verifiable. Smart contracts can automatically execute compliance checks and corporate actions (such as dividends).

Pain points addressed: Fully resolves inefficiencies caused by data silos, multiple bookkeeping, and manual reconciliation in traditional finance. Provides regulators with an unprecedented “God’s eye view,” enabling real-time, transparent supervision and effective systemic risk monitoring.

2.1.4 24/7/365 Global Market Access:

Enhancement: Markets are no longer limited by traditional banking hours, time zones, or holidays. Tokenization facilitates smoother cross-border transactions, allowing assets to be transferred peer-to-peer globally.

Pain points addressed: Overcomes delays and regional restrictions in traditional cross-border payments and liquidity management, especially benefiting multinational cash management.

2.2 Most Affected Participants

The transformation brought by tokenization is disruptive, with the greatest impact on the following market participants:

Major Challenges and Risks:

Liquidity and Net Settlement Trade-offs: DTCC currently reduces the actual cash and securities transfer needed by netting millions of transactions by 98%, achieving significant capital efficiency. Atomic settlement (T+0) is essentially real-time gross settlement (RTGS), which may lead to a loss of netting efficiency, requiring the market to find hybrid solutions between speed and capital efficiency, such as intraday repos.

Privacy Paradox: Institutional finance relies on transaction privacy, while public blockchains (like Ethereum) are transparent. Large institutions cannot execute large trades on public chains without “front-running.” Solutions include privacy-preserving technologies like zero-knowledge proofs or operating on permissioned chains (e.g., JPMorgan’s Kinexys).

Amplification of Systemic Risks: 24/7 markets eliminate the traditional “cooling-off” periods. Algorithmic trading and automated margin calls (via smart contracts) may trigger large-scale chain reactions under market stress, amplifying systemic risk, similar to liquidity pressures during the 2022 UK LDI crisis.

2.3 Core Value of Tokenized Funds (TMMF)

Tokenization of Money Market Funds (MMFs) is one of the most representative cases of RWA growth. TMMFs are especially attractive as collateral:

Retained Yields: Unlike non-interest-bearing cash, TMMFs can generate ongoing yields as collateral until actually used, reducing opportunity costs of “collateral drag.”

High Liquidity and Composability: TMMFs combine the regulatory familiarity and safety of traditional MMFs with the instant settlement and programmability of DLT. For example, BlackRock’s BUIDL fund uses Circle’s USDC instant redemption channel, solving the T+1 redemption pain point of traditional MMFs and enabling 24/7 instant liquidity.

3. Role of DTCC/DTC in the Tokenization Process

DTCC and DTC are indispensable core systemic institutions in the US financial infrastructure. DTC manages a vast asset scale, covering most stock registration, transfer, and custody in the US capital markets. DTCC and DTC are regarded as the “central warehouse” and “general ledger” of the US stock market. DTCC’s involvement is crucial to fundamentally ensure the compliance, security, and legal validity of the tokenization process.

3.1 Core Roles and Responsibilities of DTC

Identity and Scale: DTC is responsible for central securities custody, clearing, and asset services. By 2025, DTC will manage assets worth $100.3 trillion, covering 1.44 million securities issues, dominating the registration, transfer, and confirmation of most US stocks.

Tokenization Bridge and Compliance Assurance: DTCC’s involvement signifies official recognition of digital assets by traditional financial infrastructure. Its core responsibility is to serve as a trust bridge between the traditional CUSIP system and emerging token infrastructure. DTCC commits that post-tokenization assets will maintain the same high security, robustness, legal rights, and investor protections as traditional forms.

Liquidity Integration: DTCC’s strategic goal is to realize a single liquidity pool between TradFi (traditional finance) and DeFi (decentralized finance) ecosystems through its ComposerX platform suite.

3.2 DTC Tokenization Process and SEC No Objection Letter

In December 2025, DTCC’s subsidiary DTC obtained a milestone No Objection Letter from the US SEC, providing the legal foundation for its large-scale promotion of tokenization services.

3.3 Impact of DTC Tokenization

The approval of DTC NAL is regarded as a milestone in tokenization, with main impacts including:

Official Token Certainty: DTC’s tokenization indicates that US government-backed tokenized stocks are imminent. Future US stock tokenization projects may directly connect to DTC’s official asset tokens instead of building their own on-chain infrastructure.

Market Structure Integration: Tokenization will promote the development of the US stock market towards a “CEX + DTC custody trust” model. Exchanges like Nasdaq may directly act as CEXs, with DTC managing token contracts and enabling withdrawals, fully unlocking liquidity.

Enhanced Collateral Liquidity: DTC’s tokenization services will support increased collateral liquidity, enabling 24/7 access and asset programmability. DTCC has been exploring DLT technology to optimize collateral management for nearly a decade.

Elimination of Market Fragmentation: Stock tokens will no longer be isolated digital assets separate from traditional assets but will be fully integrated into the traditional capital market’s ledger.

About Movemaker:

Movemaker is the first official community organization authorized by the Aptos Foundation, jointly initiated by Ankaa and BlockBooster, focusing on promoting the construction and development of the Aptos ecosystem in the Chinese-speaking region. As the official representative of Aptos in the Chinese-speaking community, Movemaker is dedicated to connecting developers, users, capital, and numerous ecosystem partners to build a diverse, open, and prosperous Aptos ecosystem.

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