What Does DTCC's Tokenization Really Mean? The Two Futures of U.S. Stock Ownership

When the SEC greenlighted DTCC to tokenize securities on December 11, 2025, the crypto industry erupted with celebration. $99 trillion in custodial assets heading to blockchain—it seemed like a watershed moment for securities tokenization. But buried in the regulatory documentation was a detail that rewrote the entire narrative: DTCC isn’t tokenizing actual stocks. It’s tokenizing “security entitlements”—contractual claims on those stocks. This distinction matters far more than it appears. It reveals two completely different visions for the future of stock ownership, and the real game being played between them.

The Hidden Truth: Who Actually Owns Your U.S. Stocks?

Here’s something that might shock you: when you check your brokerage account and see “100 shares of Apple,” you don’t actually own those shares. Neither do millions of other retail investors. This isn’t new. It’s been the reality of the U.S. stock market since the 1970s.

Before that, stock trading relied on physical certificates. A buyer and seller would exchange paper, sign endorsements, and mail them to transfer agents for registration. This system worked until the late 1960s, when trading volumes exploded from 3-4 million shares daily to over 10 million. Wall Street’s back offices were drowning in paperwork. Brokerage firms lost, forged, and misplaced millions of certificates. It was chaos—what the industry called the “Paperwork Crisis.”

The solution was the Depository Trust Company (DTC). Instead of moving physical certificates, all shares were centralized in one vault. Transactions became digital ledger entries. To make this work, DTC created a nominee holder: Cede & Co. This single organization registered all the shares in its name. By 1998, official data revealed that Cede & Co. held legal ownership of 83% of all U.S. public stocks.

What this means: When you “own” 100 Apple shares through your brokerage, Apple’s official shareholder register lists Cede & Co.—not you. What you actually hold is a contractual claim. You claim the economic benefits from your brokerage, which claims from a clearing broker, which claims from DTCC. It’s a chain of rights, not direct property ownership. This system has worked for 50 years, enabling trillions in daily transactions. But it permanently severed investors from the securities they nominally owned.

DTCC’s Path: Making the System Faster, Not Replacing It

Against this backdrop, DTCC’s tokenization move becomes clear. The company isn’t dismantling the existing architecture. It’s upgrading it.

Under DTCC’s approved plan, tokenized “security entitlement tokens” will circulate on an SEC-approved blockchain. But these tokens still represent contractual claims, not direct ownership. The underlying shares remain registered under Cede & Co. The intermediary structure stays intact. DTCC participation is limited to a few hundred institutions—clearinghouses and major banks. Retail investors cannot directly use this service. This is infrastructure optimization, not structural transformation.

DTCC’s application documents outlined the concrete benefits:

Collateral Liquidity: In today’s system, moving securities between accounts triggers a settlement delay. Capital sits frozen. Tokenization enables near-instantaneous transfers between institutional participants, releasing billions in trapped capital.

Reconciliation at Scale: Currently, DTCC, clearing brokers, and retail brokers maintain separate ledgers, requiring extensive daily reconciliation work. Blockchain creates a single shared ledger—a single source of truth.

Future Innovation Paths: DTCC suggested that tokenized equity might someday settle in stablecoins or integrate with various protocols. But each step requires additional regulatory approval.

What DTCC explicitly does NOT do: These tokens won’t enter the DeFi ecosystem. They won’t bypass existing participants. They won’t change who’s on the shareholder register. DTCC isn’t trying to disrupt anyone—this is intentional. The centralized clearing system provides an enormous advantage: multilateral netting. With trillions in daily transactions, after netting through the NSCC (National Securities Clearing Corporation), only tens of billions actually need to be moved. This efficiency only works at scale, through centralized architecture.

As the operator of systemically critical financial infrastructure, DTCC’s primary mandate is stability, not disruption. Tokenization means: faster processing, better transparency, improved capital efficiency—within the existing framework.

The Alternative Route: Direct Ownership Through Blockchain

While DTCC carefully upgraded its system, a different model began taking shape.

In September 2025, Galaxy Digital made an announcement: it became the first Nasdaq-listed company to tokenize its SEC-registered shares on a public blockchain (Solana). Through partnership with Superstate, Galaxy’s Class A common shares are now tradeable as tokens. The critical difference: these tokens represent actual shares—not claims to shares. Superstate, acting as a registered transfer agent, updates Galaxy’s official shareholder register in real-time as tokens transfer on-chain. Token holders now appear directly on the company’s register. Cede & Co. is bypassed entirely.

This is genuine direct ownership. Investors hold property rights, not contractual rights.

A month later, Securitize announced it would launch a tokenized stock service with “fully on-chain compliant trading” starting in Q1 2026. Unlike synthetic tokenized stocks relying on derivatives or offshore structures, Securitize emphasized that its tokens represent “real, regulated stocks: issued on-chain and recorded directly on the issuer’s shareholder register.”

Securitize went further: it doesn’t just enable direct holding—it enables direct trading. During normal U.S. stock market hours, token prices anchor to the National Best Bid and Offer (NBBO). After hours, prices float dynamically based on on-chain supply and demand through automated market makers (AMMs). This creates a theoretical 24/7 trading window.

This path treats blockchain as a native infrastructure layer for securities, not as an add-on to existing systems. It removes intermediary dependencies entirely.

Why These Two Paths Will Coexist: Understanding the Real Trade-offs

This isn’t a debate over technology. It’s a collision between two institutional logics with genuine trade-offs on both sides.

The DTCC Approach accepts the existing system’s fundamental value: centralized clearing efficiency, proven regulatory frameworks, and mature risk management. Blockchain makes it faster and more transparent, but intermediaries persist—just with different accounting methods. The settlement efficiency gains from multilateral netting are genuine and massive. Moving away from centralized clearing would increase capital requirements significantly. But investors must accept that Cede & Co. remains the legal owner.

The Direct Ownership Approach argues: why accept intermediary dependence when blockchain provides immutable ownership records? Why let Cede & Co. hold your shares? Investors gain real autonomy—self-custody, peer-to-peer transfers, DeFi composability, 24/7 trading. But this comes at a cost. Liquidity fragments. Netting efficiency disappears. Capital requirements rise. Most critically: investors now bear operational risks themselves. Lost private keys, stolen wallets, custody mistakes—these were traditionally insurable, intermediary-managed risks. Direct ownership transfers them to individuals.

The SEC explicitly signaled openness to both. Commissioner Hester Peirce stated on December 11: “The DTCC’s tokenized model is promising, but other market participants are exploring different paths. Some issuers have already begun tokenizing their own securities, which could make it easier for investors to hold and trade securities directly, rather than through intermediaries.” Translation: the regulator won’t force a choice. The market will decide.

The Disruption Game: How Financial Intermediaries Must Adapt

This fork in the road forces existing intermediaries to confront uncomfortable questions:

For Clearing Brokers and Custodians: If tokenized security entitlements can transfer directly between participants in the DTCC ecosystem, do your custody fees, transfer fees, and reconciliation fees still make sense? The first-mover advantage is real. But in the long run, DTCC tokenization services may become standardized commodities.

For Retail Brokers: Your business model is solidified under DTCC’s approach—retail investors still must access markets through you. Direct tokenization threatens this. If investors can hold SEC-registered shares themselves and trade on compliant blockchain exchanges, what’s your value proposition? The answer: services blockchain cannot replace. Tax planning, compliance consulting, portfolio management, investor protection guarantees. High-value services, not smart contracts.

For Transfer Agents: This is a historic pivot point. Transfer agents—traditionally anonymous back-office operations maintaining shareholder registers—become critical infrastructure in direct ownership models. The transfer agent controls the entry point into the system. It’s no coincidence that Superstate and Securitize both hold SEC-registered transfer agent licenses. Controlling shareholder register updates means controlling direct ownership infrastructure.

For Asset Managers: Watch composability disruption. If tokenized shares work as collateral for on-chain lending, traditional margin financing shrinks. If 24/7 AMM trading eliminates T+1 settlement arbitrage windows, trading desk profit models break. These changes won’t happen overnight, but asset managers need stress-testing against scenarios where settlement efficiency—a core business assumption—no longer applies.

The Convergence Point: Investors Finally Get a Real Choice

Financial infrastructure transformation takes decades. The Paperwork Crisis spawned the DTC in 1973. Cede & Co. took over 20 years to control 83% of U.S. stocks. SWIFT, founded the same year as DTC, is still restructuring. Both paths will expand in their respective territories initially.

DTCC tokenization will penetrate institutional wholesale markets first—collateral management, securities lending, ETF creation-redemption. These are settlement-efficiency-sensitive applications. Direct ownership models will enter from the periphery: crypto-native users, small cap issuers, regulatory sandbox jurisdictions.

Over time, the curves may converge. When tokenized equity circulation reaches critical mass and direct holding’s regulatory framework matures, investors may face a genuine choice for the first time in 50 years. Option A: accept DTCC system efficiency, multilateral netting benefits, centralized clearing’s institutional protection—but remain dependent on intermediaries. Option B: exit to direct on-chain custody, manage private keys yourself, trade 24/7, integrate with blockchain finance—but lose netting efficiency and insurance.

The ability to choose between these models itself represents transformation. Since 1973, ordinary investors never had this option. Stocks moved into Cede & Co.'s hands automatically. The intermediary chain was the only path. Today, Cede & Co. still holds most U.S. public shares. That may not change for decades. But a second path exists now.

For the first time, what tokenization really means is this: investors get to decide which vision of ownership fits their needs. That choice—not the technology itself—is the revolution.