New SEC Guidance Provides Regulatory Pathway for DTC Securities Tokenization Services

The SEC staff issued a no-action letter on December 11, 2025 to the Depository Trust Company (DTC), a subsidiary of the Depository Trust & Clearing Corporation (DTCC) granting relief under certain provisions of the federal securities laws for a three-year period to permit DTC to offer a tokenization service with respect to certain DTC custodied assets (DTCC Tokenization Services). Given the scope of DTC in the US securities market, the no-action letter represents a notable development in the path to the tokenization of securities within the US markets.

DTC is a registered clearing agency under Section 17A of the Securities Exchange Act of 1934, as amended (Exchange Act), a central securities depository, and a systematically important financial market utility. In its request for no-action relief, DTCC, on behalf of DTC, sought assurance that the US Securities and Exchange Commission (SEC) staff in the Division of Trading and Markets (the Staff) would not recommend enforcement action if DTC were to develop and operate the DTCC Tokenization Services, beginning with a limited pilot version (the Preliminary Base Version). The Preliminary Base Version allows DTC Participants to elect to have their security entitlements to DTC-held securities recorded and transferred using distributed ledger technology, rather than exclusively through DTC’s traditional centralized book-entry ledger.

The proposal does not alter the existing indirect holding model or the legal characterization of securities interests under Article 8 of the Uniform Commercial Code (UCC). Securities would remain registered in the name of Cede & Co., and DTC Participants would continue to hold security entitlements against DTC as securities intermediary. The tokens themselves are not the securities and are not security entitlements. Rather, the tokens serve as an alternative method for instructing DTC to record and transfer the security entitlements on DTC’s official books and records.

SCOPE OF THE NO-ACTION RELIEF

The Staff agreed not to recommend enforcement action against DTC for violations of the following provisions of the Exchange Act, solely in connection with the operation of the Preliminary Base Version of the DTCC Tokenization Services:

• Regulation Systems Compliance and Integrity
• Section 19(b) of the Exchange Act and Rule 19b-4 thereunder
• Exchange Act Rules 17Ad-22(e) and 17Ad-25(i) and (j)

The relief is limited to DTC, applies only to the Preliminary Base Version of the DTCC Tokenization Services, and extends for a three-year period from the date DTC launches operation of the Preliminary Base Version. The Staff’s position is further conditioned upon DTC’s continued compliance with the representations, limitations, and controls described in its request letter.

KEY FEATURES OF THE TOKENIZATION SERVICES

Under the Preliminary Base Version of the DTCC Tokenization Services:

• Eligible securities are limited to highly liquid assets, including securities in the Russell 1000 Index, certain exchange-traded funds tracking major security indices, and US Treasury bills, notes, and bonds (the Subject Securities).
• Participation is voluntary and limited to DTC Participants.
• A participating DTC Participant must register one or more wallet addresses for an approved blockchain wallet (each, a Registered Wallet) with DTC for the purpose of holding tokens associated with the security entitlements.
• Tokenization occurs after DTC debits the Subject Securities from a DTC Participant’s book-entry account at DTC and credits them to a Digital Omnibus Account, a single omnibus account maintained by DTC on its centralized ledger that reflects the sum of all tokens held in all Registered Wallets.
• Tokens are associated with a DTC Participant’s security entitlements to the Subject Securities that have been moved from the DTC Participant’s book-entry account at DTC to the Digital Omnibus Account. While securities themselves are credited to the Digital Omnibus Account, the corresponding tokens may be transferred between Registered Wallets without further instruction to DTC. A DTC Participant may move securities back to its book-entry account by instructing DTC to de-tokenize the position, at which point the token is burned and the securities are re-credited to the DTC Participant’s book-entry account.
• Transfers of tokens between Registered Wallets may occur 24/7, and DTC will monitor and record such transfers through LedgerScan, an off-chain system that scans approved blockchains and records token movements and Registered Wallet holdings in near real time. After taking into account the recording of the tokens or their transfer, LedgerScan constitutes DTC’s official books and records.
• Tokens do not receive any collateral or settlement value for DTC risk management purposes.
• DTC retains administrative control over the tokens, including the ability to mint, burn, or forcibly transfer tokens in limited circumstances to address erroneous entries, lost tokens, or malfeasance.
• DTC Participants remain subject to applicable anti-money laundering and Know Your Customer compliance obligations, and DTC will independently perform Office of Foreign Assets Control (OFAC) sanctions screening on each Registered Wallet before permitting its use in the DTCC Tokenization Services.

REGULATORY AND OPERATIONAL SAFEGUARDS

The Staff’s no-action position relies on a series of safeguards designed to limit systemic risk and protect investors, including the following:

• Strict eligibility criteria for securities, participants, supported blockchains, and tokenization protocols
• Separation of tokenization systems (i.e., LedgerScan and Factory) from DTC’s core clearance and settlement systems
• Ongoing anti-money laundering/Know Your Customer requirements for DTC Participants and OFAC screening of Registered Wallets
• Detailed quarterly reporting obligations to the Staff regarding participation levels, asset volumes, systems performance, and governance matters
• Transparency commitments, including public disclosure of supported blockchains, prescribed technology standards, and fees

TAKEAWAYS

The no-action letter represents a notable, but carefully circumscribed, development in the regulatory treatment of securities tokenization in the United States. The relief provides a defined and supervised framework for DTC to evaluate the use of blockchain-based recordkeeping for traditional securities within the existing clearing agency infrastructure, while preserving established legal constructs under the federal securities laws and Article 8 of the UCC.

At the same time, the no-action letter should be viewed as narrow and highly fact-specific. The relief applies only to DTC, the Preliminary Base Version of the DTCC Tokenization Services, and for a limited three-year period, and it is expressly conditioned on DTC’s continued adherence to the representations, limitations, and controls described in its request. The no-action letter does not establish a general regulatory framework for tokenized securities, nor does it provide relief to other market participants seeking to implement similar services.

The availability of the Preliminary Base Version of the DTCC Tokenization Services is limited to DTC Participants, which are primarily large financial institutions, such as US broker-dealers and banks, that hold securities at DTC to facilitate clearing, settlement and custody. Public companies that are the issuers of securities held at DTC are generally not DTC Participants and, therefore, will not be able to unilaterally request that entitlements to their securities be tokenized under the program. Moreover, the consent of issuers is not required for DTC Participants to issue tokens associated with security entitlements. As such, the Preliminary Base Version is not akin to direct registration, which allows shareholders to hold shares directly in their own name, rather than through a broker, and provides an issuer with increased transparency with respect to its investors.

From a shareholder perspective, the Preliminary Base Version is expected to provide increased optionality in how beneficial interests are held and transferred, including enhanced mobility of positions between eligible intermediaries, improved transparency into position movements, and the potential for future programmability of interests in securities. Importantly, these potential benefits are achieved without altering investors’ legal rights or the Article 8 security entitlement structure, and without displacing DTC’s role as central securities depository and securities intermediary.

Market participants considering tokenization or other distributed ledger technology-enabled securities initiatives should continue to assess carefully the interaction among the federal securities laws, clearing agency regulation, and state commercial law principles, including Article 8 of the UCC. As programs evolve beyond pilot phases or seek to expand functionality, additional SEC engagement, rulemaking, or exemptive relief may be required.