US SEC Authorizes DTCC to Offer Tokenization Services

Highlights:

• The US SEC has permitted DTCC to offer tokenization services targeting DTC-custodied assets.
• DTCC stated that the tokenization services will launch around the second half of 2026.
• The SEC’s NAL allows DTC to operate the services on pre-approved blockchains for three years. 

According to a December 11 press release, the Depository Trust & Clearing Corporation (DTCC) announced that its subsidiary, The Depository Trust Company (DTC), has received a No-Action Letter (NAL) from the US Securities and Exchange Commission (SEC). The letter authorizes DTC  to launch a tokenization service for real-world assets under strict oversight. DTC is expected to introduce this service around the second half of next year.

DTCC explained in the press release:

“Under the NAL, DTC will have the ability to tokenize real-world assets, with the digital version having all the same entitlements, investor protections and ownership rights as traditional assets.”

SEC Approves Specific Asset Classes for Initial Launch

The SEC’s letter permits DTC to operate the tokenization service for three years on pre-approved blockchains. This means DTC can create digital versions of real assets that are already in its custody. The digital version will carry the same rights, ownership, and investor protections as the original asset.

Meanwhile, only certain highly liquid and well-established assets will be included initially. They include companies in the Russell 1000 Index, exchange-traded funds (ETFs) that track large indices, and US treasuries, including bills, notes, and bonds.  This cautious approach eases oversight and reduces risks.

DTC plans to offer tokenization through its ComposerX platforms, connecting traditional and blockchain-based markets and allowing assets to move freely between them. Additionally, DTC has spent almost 10 years testing distributed ledger technology with participants, peers, and tech partners.

The series of experiments focused on how blockchain could improve asset transfers across borders, eliminating time zone limitations. They also aimed to enhance seamless user access to assets and programmability by allowing smart contracts to automate asset transfers. 

All these proposed improvements must follow the same protections that DTC already provides to institutions today. Under the SEC’s NAL, the tokenization service can run in a limited production environment, including across L1 and L2 networks. DTC added that more details on onboarding steps, wallet registration rules, and criteria for picking approved blockchain networks will be announced later. 

Top Executives React as SEC Authorizes Tokenization Services for DTCC

Frank La Salla, DTCC’s President & Chief Executive Officer (CEO), stated: “We welcome this opportunity to further enable and innovate for the industry, our participants and their clients. We look forward to partnering across the industry to tokenize real-world assets safely.”

Sharing a similar view, Brian Steele, DTCC’s Managing Director and President of Clearing & Securities Services, said the tokenization plan aims to offer secure and legally sound interoperable digital assets. Nadine Chakar, DTCC’s Managing Director and Head of Digital Assets, added that the goal is to build a fair and efficient digital asset ecosystem with the industry.

SEC Issues a Similar NAL to Fuse

Last month, the SEC issued a No-Action Letter to Fuse, a public blockchain, clearing it of possible enforcement actions over its FUSE token. On November 19, Fuse requested the regulatory body to review its token structure. The blockchain firm explained that the token supports a defined utility within its energy network.

In response, the SEC, through Jonathan Ingram, the Deputy Chief Counsel, confirmed that the regulatory body accepted the facts stated in the request. However, Fuse must strictly follow the structure outlined in its submission to the SEC.