On December 11, 2025, the SEC provided no-action relief to DTC to allow for the development of securities tokenization services. The no-action letter was issued three months after Nasdaq proposed amendments to its rules to enable the trading of digital assets, including tokenized securities (see HERE). Together, these changes provide significant steps towards the inevitable adoption of widespread tokenization of securities in the U.S. capital markets.
Background
DTC is a wholly owned subsidiary of the Depository Trust & Clearing Corporation (“DTCC”), a user-owned cooperative that provides custody, clearing, and settlement services to the global financial industry. DTC plays a critical role in the safekeeping of securities and the clearance and settlement of securities transactions. It facilitates the electronic recordkeeping, clearing and transfer of securities of substantially all equity securities in the U.S. As of 2025, DTC custodies over $100 trillion in securities and processes hundreds of millions of transactions annually.
Securities in the DTC system appear on transfer agent ledgers under the name Cede & Co.(“Cede”). Each individual brokerage firm DTC participant (“Participant”) maintains corresponding books representing their customers shareholder accounts for securities held in Cede. DTC records each Participant’s entitlement to the securities in an account on its centralized ledger system. To the extent a Participant is holding securities on behalf of a customer, the customer’s entitlement to such securities is recorded on the Participant’s books and records.
Article 8 of the Uniform Commercial Code (the “UCC”) is the commercial law framework that governs DTC’s custody of securities for Participants. Under Article 8, DTC is a “securities intermediary,” and each Participant’s rights to the securities held for it are “security entitlements.” A Participant is 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”). DTC currently records each Participant’s security entitlements via book-entry credits to the Participant’s Account at DTC.
As a securities intermediary, DTC is subject to certain duties including the duties to hold sufficient securities to satisfy entitlement holders’ security entitlements, to obtain payments or distributions on securities for entitlement holders, to exercise rights as directed by the entitlement holder, to transfer or redeem the securities as instructed by the entitlement holder, and to change the form of holdings of the securities as directed by the entitlement holder. In addition, the UCC makes clear that securities held by a securities intermediary for an entitlement holder do not form part of the securities intermediary’s estate upon the securities intermediary’s insolvency, but instead are the property of the entitlement holders.
For the past nine years, DTC has been exploring how it can utilize distributed ledger technology (“DLT”) in connection with its services and to improve such services including through mobility (i.e., the ability to transfer an asset across jurisdictions and time zones without regard to standard trading hours or holidays), decentralization (i.e., the ability for market participants to access their assets more directly), and programmability (i.e., the ability to use smart contracts to optimize transfers or allocations of assets). As a result, DTC has developed the DTCC Tokenization Services, that would allow Participants and/or their agents and designees, to instruct DTC to record their security entitlements to securities held by DTC using DLT.
DTC has created a preliminary version of the DTCC Tokenization Services to allow Participants to use and test the service in a controlled environment allowing for adjustments and refinement as necessary.
SEC No-Action Relief for DTCC Tokenization Services
The SEC has provided no-action relief to DTC to launch and use its DTCC Tokenization Services. Any DTC Participant is entitled to use the system except for those in which DTC has a U.S. tax withholding obligation, by registering an approved blockchain wallet.
A DTC Participant with a registered wallet can instruct DTC to tokenize their security entitlement to certain eligible securities currently credited to the DTC Participant’s Account the (“Tokenization Instruction”). Upon acceptance of a Tokenization Instruction, DTC will debit the securities from the DTC Participant’s Account and credit them to the Digital Omnibus Account, an account on DTC’s centralized ledger that reflects the sum of all Tokenized Entitlements held in all registered wallets. DTC will then use its Factory system, which is a software system maintained by DTC, to mint and deliver a token (“Token”) representing the DTC Participant’s security entitlement to the DTC Participant’s specific wallet. Tokens will be registered in the name of Cede the same as non-tokenized securities.
Any DTC Participant with a Token will be able to transfer such security entitlement directly to the registered wallet of another DTC Participant without being required to instruct DTC to effectuate such transfer. Any transfer of Tokens from one registered wallet to another registered wallet will be tracked by and visible to DTC.
Participants can also instruct DTC to convert the Token back to a book-entry security (de-tokenization). Upon acceptance of such instructions, DTC would burn the Token in the DTC Participant’s Registered Wallet, debit such securities from the Digital Omnibus Account, and credit those securities to the Participant’s Account.
The DTCC Tokenization Services has guardrails in place to ensure that Tokens are burned or converted to prevent double spends and other nefarious (or accidental) improper activity. Also, although DTC does not require the use of a particular blockchain, any blockchain used must be vetted and allow the ability to address any erroneous entries, lost tokens, malfeasance and the like. Further, any blockchain used must be reliable, resilient, secure, and subject to robust consensus and governance mechanisms. IN that regard, DTC will publish a list of approved public and private distributed ledgers.
To start, only securities in the Russell 1000 Index, U.S. Treasuries and ETF’s tracked by major indices will be allowed to be tokenized.
Not surprisingly, SEC Commissioner Hester M. Peirce issued a statement lauding this technological advancement.
The Author
Laura Anthony, Esq.
Founding Partner
Anthony, Linder & Cacomanolis
A Corporate and Securities Law Firm
Securities attorney Laura Anthony and her experienced legal team provide ongoing corporate counsel to small and mid-size private companies, public companies as well as private companies going public on the Nasdaq, NYSE American or over-the-counter market, such as the OTCQB and OTCQX. For more than two decades Anthony, Linder & Cacomanolis, PLLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker-dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions, securities token offerings and initial coin offerings, Regulation A/A+ offerings, as well as registration statements on Forms S-1, S-3, S-8 and merger registrations on Form S-4; compliance with the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers; applications to and compliance with the corporate governance requirements of securities exchanges including Nasdaq and NYSE American; general corporate; and general contract and business transactions. Ms. Anthony and her firm represent both target and acquiring companies in merger and acquisition transactions, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The ALC legal team assists Pubcos in complying with the requirements of federal and state securities laws and SROs such as FINRA for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the small-cap and middle market’s top source for industry news, and the producer and host of LawCast.com, Corporate Finance in Focus. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Ms. Anthony is a member of various professional organizations including the Crowdfunding Professional Association (CfPA), Palm Beach County Bar Association, the Florida Bar Association, the American Bar Association and the ABA committees on Federal Securities Regulations and Private Equity and Venture Capital. She is a supporter of several community charities including the American Red Cross for Palm Beach and Martin Counties, Susan Komen Foundation, Opportunity, Inc., New Hope Charities, the Society of the Four Arts, the Norton Museum of Art, Palm Beach County Zoo Society, the Kravis Center for the Performing Arts and several others.
Ms. Anthony is an honors graduate from Florida State University College of Law and has been practicing law since 1993.
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