SEC’s “Two Years to On-Chain” Prediction: Tokenized Reconstruction of the DTCC Clearing System

Original author: @BlazingKevin_, the Researcher at Movemaker

SEC Chairman Paul Atkins pointed out that the entire U.S. financial market, including stocks, fixed income, government bonds, and real estate, may fully migrate to blockchain technology architecture supporting cryptocurrencies within the next two years. This can be considered the most significant structural change in the U.S. financial system since the advent of electronic trading in the 1970s.

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

The "Project Crypto" initiative promoted by Atkins is not a unilateral action by the SEC; it is built on systematic cooperation across legislative, regulatory, and private sectors. Achieving the full on-chain migration of the U.S. financial market, which is valued at over $50 trillion (including stocks, bonds, government bonds, private credit, real estate, etc.), requires multiple institutions to clarify their roles and contributions.

1.1 Government Departments Involved in Comprehensive Assetization

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 tokenized infrastructure without violating core investor protection principles.

The GENIUS Act addresses the Cash Leg issue necessary for on-chain trading and collateral by creating compliant, fully-reserved stablecoins and clearly transferring regulatory authority to banking regulators.

The CLARITY Act clarifies the jurisdiction between the SEC and CFTC, specifically targeting crypto-native platforms and creating a definition of "maturity," enabling institutions to clearly know under which regulatory framework their digital assets (such as bitcoin) operate, while also providing crypto-native platforms with a pathway to register as federally regulated intermediaries ("broker/dealers").

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

This cross-departmental collaboration is a prerequisite for the full on-chain migration of the U.S. financial market, laying a solid foundation for the subsequent large-scale deployment by giants such as BlackRock and JPMorgan, as well as the integration of core infrastructures like DTCC.

2.2 Collaboration Among Traditional Financial Giants

In the blueprint for collaboration among U.S. traditional financial giants, each institution's deepening layout reflects more specific strategic focuses and technical details. BlackRock was the first to issue a tokenized U.S. Treasury fund on a public chain (Ethereum), establishing its foundational position as an asset manager bringing traditional financial returns into the public chain ecosystem.

After JPMorgan rebranded its blockchain business as Kinexys, it enabled banks to complete atomic swaps of tokenized collateral and cash within hours instead of days, significantly optimizing liquidity management. At the same time, its pilot of JPMD on the Base chain is seen as a strategic step toward broader public blockchain ecosystems, aiming for stronger interoperability.

Finally, the specific breakthrough of the Depository Trust & Clearing Corporation (DTCC) was achieved by its subsidiary, the Depository Trust Company (DTC). As the world's most important trading infrastructure provider, its SEC "no-action letter" allows it to connect the traditional CUSIP system with new tokenized infrastructure, thus officially launching a mainstream asset tokenization pilot, including Russell 1000 constituents, in a controlled environment.

2. Financial Environment and Impact Analysis After Comprehensive Tokenization

The core goal of asset tokenization is to break the "island effect" and "time constraints" of traditional finance, creating a global, programmable, and around-the-clock financial system.

2.1 Major Improvements in the Financial Environment: Leaps in Efficiency and Performance

Tokenization will bring efficiency and performance advantages that are hard to match in traditional financial systems:

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

Improvement: Blockchain can achieve near real-time (T+0) or even second-level settlement and delivery, in stark contrast to the T+1 or T+2 settlement cycles typically required in traditional financial markets. UBS's digital bond issued on SDX demonstrated T+0 settlement capability, and the European Investment Bank's digital bond issuance reduced settlement time from five days to one day.

Pain Points Addressed: Greatly reduces counterparty credit risk and operational risk caused by settlement delays. For time-sensitive transactions such as repos and derivatives margining, improved settlement speed is crucial.

2.1.2 Revolution in Capital Efficiency and Liquidity Release:

Improvement: Achieves "atomic delivery," where assets and payments occur simultaneously in a single, indivisible transaction. At the same time, tokenization can release "dormant capital" currently locked in settlement waiting periods or inefficient processes. For example, programmable collateral management can release over $100 billion of trapped capital annually.

Pain Points Addressed: Eliminates principal risk in traditional "delivery versus payment" operations. Reduces the need for high-margin buffers at clearinghouses. Meanwhile, tokenized money market funds (TMMFs) can be transferred directly as collateral, retaining yields and avoiding liquidity friction and yield loss from redeeming cash and reinvesting in traditional systems.

2.1.3 Enhanced Transparency and Auditability:

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

Pain Points Addressed: Completely solves the inefficiency of data silos, multiple bookkeeping, and manual reconciliation in traditional finance. Provides regulators with an unprecedented "God's view," enabling real-time, penetrating supervision and effective monitoring of systemic risks.

2.1.4 24/7/365 Global Market Access:

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

Pain Points Addressed: Overcomes time lags and geographical restrictions in traditional cross-border payments and liquidity management, especially benefiting multinational companies' cash management.

2.2 Participants Most Affected

The changes brought by tokenization are disruptive and have the greatest impact on the following types of market participants:

Main Challenges and Risks:

• Trade-off Between Liquidity and Net Settlement: DTCC currently achieves tremendous capital efficiency by netting millions of transactions, reducing the actual amount of cash and securities that need to be transferred by 98%. Atomic settlement (T+0) is essentially real-time gross settlement (RTGS), which may result in the loss of net settlement efficiency. The market needs to find a hybrid solution between speed and capital efficiency, such as intraday repos.
• Privacy Paradox: Institutional finance relies on transaction privacy, while public chains (such as Ethereum) are transparent. Large institutions cannot execute large trades on public chains without being "front-run." Solutions include privacy-preserving technologies such as zero-knowledge proofs or operating on permissioned chains (such as JPMorgan's Kinexys).
• Amplification of Systemic Risk: 24/7 markets eliminate the "cooling-off period" of traditional markets. Algorithmic trading and automated margin calls (via smart contracts) may trigger large-scale chain liquidations under market stress, amplifying systemic risk, similar to the liquidity pressures in the UK's LDI crisis in 2022.

2.3 Core Value of Tokenized Funds (TMMF)

The tokenization of money market funds (MMFs) is the most representative case in the growth of RWA. TMMFs are particularly attractive as collateral:

• Yield Retention: Unlike non-interest-bearing cash, TMMFs as collateral can continue to earn returns until actually used, reducing the opportunity cost of "collateral drag."
• High Liquidity and Composability: TMMFs combine the regulatory familiarity and security of traditional MMFs with the instant settlement and programmability brought by DLT. For example, BlackRock's BUIDL fund solves the T+1 redemption pain point of traditional MMFs through Circle's USDC instant redemption channel, achieving 24/7 instant liquidity.

3. The Role of DTCC/DTC in the Tokenization Process

DTCC and DTC are indispensable core systemic institutions in the U.S. financial infrastructure. DTC holds massive assets, covering the vast majority of stock registration, transfer, and custody in the U.S. capital market. DTCC and DTC are regarded as the "central warehouse" and "central ledger" of the U.S. stock market. The involvement of DTCC is fundamentally key to ensuring 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. As of 2025, DTC's assets under custody reached $100.3 trillion, covering 1.44 million securities issuances, dominating the vast majority of stock registration, transfer, and confirmation in the U.S. capital market.
• Tokenization Bridge and Compliance Assurance: The involvement of DTCC represents the official recognition of digital assets by traditional financial infrastructure. Its core responsibility is to act as a trust bridge between the traditional CUSIP system and emerging tokenized infrastructure. DTCC promises that tokenized assets will maintain the same high level of security, robustness, legal rights, and investor protection as their traditional forms.
• Liquidity Integration: DTCC's strategic goal is to achieve 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-Action Letter

In December 2025, DTCC's subsidiary DTC obtained a milestone no-action letter from the U.S. SEC, which is the legal basis for its large-scale advancement of tokenization business.

3.3 Impact of DTC Tokenization

The approval of DTC NAL is considered a milestone for tokenization, with its impact mainly reflected in:

• Certainty of Official Tokens: DTC's tokenization means that officially endorsed tokenized stocks in the U.S. are coming. In the future, project parties conducting U.S. stock tokenization may directly access DTC's official asset tokens instead of building their own asset on-chain infrastructure.
• Market Structure Integration: Tokenization will promote the U.S. stock market toward a "CEX + DTC custodial trust company" model. Exchanges such as Nasdaq may directly play the role of CEX, while DTC manages token contracts and allows withdrawals, achieving complete liquidity integration.
• Enhanced Collateral Liquidity: DTC's tokenization service will support enhanced collateral liquidity, enabling 24/7 access and asset programmability. DTCC has been exploring the use of DLT technology to optimize collateral management for nearly a decade.
• Elimination of Market Fragmentation: Tokenized stocks will no longer be a digital type separated from traditional assets, but will be fully integrated into the general ledger of the traditional capital market.

About Movemaker

Movemaker is the first official community organization authorized by the Aptos Foundation and 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 region, Movemaker is committed to building a diverse, open, and prosperous Aptos ecosystem by connecting developers, users, capital, and numerous ecosystem partners.