Tokenizing Securities in America: Two Visions Clash Over the Future of Stock Ownership

In December 2025, the Securities and Exchange Commission granted the Depository Trust Company (DTCC) a “No-Action Letter,” authorizing it to begin tokenizing custodied securities on blockchain infrastructure. The announcement sent ripples through Wall Street and the crypto industry alike—$99 trillion in assets poised for blockchain integration. Yet beneath this triumphant headline lies a more complex reality: the SEC approval masks a fundamental split in how the financial world envisions the tokenization of equity ownership. The distinction between what DTCC is actually tokenizing and what blockchain-native platforms are building reveals two competing futures for securities markets.

The Hidden Architecture: Why You’ve Never Really Owned Your Stocks

To grasp the significance of this moment, we must confront an uncomfortable truth about American stock markets. Despite seeing “100 shares of Apple” listed in a brokerage account, investors have never held direct legal ownership of their stocks. This wasn’t always the case.

Before 1973, stock ownership involved physical certificates that changed hands with every transaction. Sellers endorsed certificates, buyers received them by mail, and transfer agents registered the ownership changes manually. When trading volumes exploded in the late 1960s—jumping from 3-4 million shares daily to over 10 million—the entire system seized up. Brokerage back-offices overflowed with millions of unprocessed certificates, losses and forgeries proliferated, and Wall Street faced existential crisis. The industry termed this period the “Paperwork Crisis.”

The Depository Trust Company emerged as the solution. Instead of moving physical certificates, DTC centralized all shares in one vault and recorded transactions digitally. To implement this, DTC created a nominee entity called Cede & Co., registering virtually all U.S. corporate shares under this legal fiction. By 1998, official data confirmed Cede & Co.'s name appeared on corporate registers as the owner of 83% of all publicly traded U.S. shares.

What investors actually possess is not ownership but a contractual claim—a “securities interest.” You have the right to economic benefits from those 100 Apple shares, which your broker has the right to claim from a clearing broker, who claims from the DTCC, who claims from Cede & Co. It is ownership through a tower of intermediaries, each layer extracting rent and risk.

DTCC’s Path: Upgrading the Fortress, Preserving the Architecture

With this historical context, DTCC’s tokenization becomes intelligible as an evolutionary, not revolutionary, move. According to the SEC’s authorization and DTCC’s public filings, tokenization applies only to “securities interests held by DTC participants”—primarily clearinghouses and large financial institutions. Retail investors cannot directly access DTCC’s tokenization. The tokenized “equity interest tokens” will circulate on DTCC-approved blockchains, but they will continue to represent contractual claims, not direct ownership. The underlying shares remain registered under Cede & Co. This is infrastructure optimization, not architectural transformation.

DTCC identifies concrete efficiency gains from tokenization:

Collateral Liquidity: In traditional settlement, securities moving between accounts must wait for the T+2 settlement cycle. Tokenization enables near-instantaneous transfers, releasing capital locked in settlement periods.

Reconciliation Efficiency: Currently, DTCC, clearing brokers, and retail brokers maintain separate ledgers requiring daily reconciliation. Blockchain creates a single shared source of truth, reducing operational overhead.

Future-Proofing: DTCC hints that equity tokens could eventually carry embedded settlement value or receive dividend distributions in stablecoins—though these innovations await further regulatory approval.

Critically, DTCC has explicitly stated that these tokens will not migrate into the DeFi ecosystem, will not circumvent existing market participants, and will not alter the shareholder register. No revolution intended.

This cautious approach reflects institutional wisdom. Multilateral netting—the DTCC’s secret weapon—processes trillions in daily transactions while requiring only tens of billions in actual cash settlement. This clearing efficiency is achievable only within a centralized architecture. As systemically critical infrastructure, DTCC’s mission prioritizes stability over disruption. Tokenization serves this mission: faster, more transparent clearing without dismantling the machinery.

Direct Ownership: Building Parallel Infrastructure from Scratch

While DTCC carefully engineers incremental upgrades, a parallel vision is crystallizing among blockchain-native platforms.

In September 2025, Galaxy Digital became the first NASDAQ-listed company to tokenize SEC-registered equity on a major public blockchain (Solana). The pivotal difference: these tokens represent actual shares, not claims to shares. When Galaxy tokens transfer on-chain, Superstate—an SEC-registered transfer agent—updates the corporate shareholder register in real time. Token holders appear directly on Galaxy’s official registry, with Cede & Co. completely absent from this chain. This is genuine direct ownership: investors possess property rights rather than layered contractual entitlements.

Securitize extended this model further in December 2025, announcing fully on-chain compliant trading for real securities. Unlike synthetic tokenized stocks reliant on SPVs or derivative structures, Securitize’s tokens represent actual regulated shares issued on-chain and recorded directly in corporate registers. Securitize enables not merely on-chain holding but on-chain trading: during U.S. market hours, prices anchor to the NBBO; during market closures, Automated Market Makers set prices based on live supply and demand, theoretically enabling 24/7 trading windows.

This path treats blockchain not as an add-on to existing infrastructure but as a native layer for securities settlement—a fundamentally different architectural vision.

The Trade-off Landscape: Efficiency Against Autonomy

These are not merely technical choices but expressions of competing institutional logics. Each path optimizes for different values.

The DTCC Model Prioritizes System Efficiency: Multilateral netting concentrates risk mitigation at a single trusted entity. Institutional participants benefit from economies of scale, mature regulatory frameworks, and familiar operating models. The cost: investors remain permanently dependent on intermediaries. Shareholder voting, proposals, and issuer communications all require navigating multiple layers of claims, not direct shareholder status.

Direct Ownership Prioritizes Investor Autonomy: Self-custody, peer-to-peer transfers, and composability with DeFi protocols empower individual control. The cost is significant: dispersed liquidity and eliminated netting efficiency mean substantially higher capital requirements. Investors must now bear operational risks—lost private keys, wallet compromise, token management—once shouldered by institutional custodians.

Notably, the SEC has endorsed both experiments. SEC Commissioner Hester Peirce explicitly stated in December: “The DTCC’s tokenized equity model represents progress, but other market participants are pursuing different paths. Some issuers have already begun tokenizing securities, enabling direct investor holding and trading rather than intermediated access.” The regulatory signal is clear: this is not an either-or competition but a market selection process.

When Incumbents Face Obsolescence: Intermediaries in the Crossfire

The collision between these paths creates acute existential pressures for traditional financial intermediaries.

Clearinghouses and Custodians: They must assess whether DTCC tokenization enhances their value or commoditizes their services. Those adopting the technology first may capture differentiation; those arriving late face margin compression as tokenized rights become fungible across institutions.

Retail Brokerages: DTCC tokenization preserves their current position—retail clients still access markets exclusively through brokers. However, widespread direct-holding models hollow out this moat. If investors can hold SEC-registered shares directly and trade on compliant on-chain exchanges, what justifies the broker’s role? Perhaps only high-value services: tax optimization, regulatory compliance consulting, sophisticated portfolio management. Purely execution and custody services face obsolescence.

Transfer Agents: Conversely, transfer agents experience a historic elevation. In traditional systems, they are invisible back-office functions maintaining shareholder registers. In direct-holding models, they become critical infrastructure—the sole entity with authority to update official registers. Superstate and Securitize both hold SEC transfer-agent licenses precisely because controlling shareholder register access controls entry into the direct-holding system.

Asset Managers: Tokenized shares enabling DeFi collateralization disrupt traditional margin financing. 24/7 on-chain trading erases T+1 arbitrage cycles. Asset managers must anticipate whether their business models depend on assumptions about settlement efficiency that tokenization might render obsolete.

The Long Arc: Coexistence, Not Conquest

Financial infrastructure transforms slowly. The 1973 Paperwork Crisis spawned the indirect holding system, but decades elapsed before Cede & Co.'s legal grip solidified across American equity markets. SWIFT, also founded in 1973 to address cross-border payment chaos, is still undergoing structural revision.

In the near term, both paths will develop within their respective domains. DTCC’s institutional-grade tokenization will penetrate wholesale markets most sensitive to settlement efficiency: collateral management, securities lending, ETF creation-redemption cycles. Direct-holding models will enter from the periphery: crypto-native users, small issuers, regulatory sandboxes testing novel frameworks.

The meaningful question concerns the long term: will these two curves converge or coexist indefinitely? Once direct-holding circulation reaches sufficient scale and regulatory frameworks mature, investors may encounter genuine choice for the first time since 1973. They could enjoy centralized DTCC settlement efficiency while maintaining an option to exit toward on-chain self-custody and reclaim direct shareholder status.

The very existence of this choice—however distant—represents a structural shift. For half a century, purchasing stocks through a brokerage automatically enrolled investors in an indirect holding system administered by Cede & Co. The system was not chosen; it was inevitable. Today, Cede & Co. still holds the overwhelming majority of U.S. public equity. This proportion may eventually decline, or it may persist indefinitely. But the monopoly on the path forward is finally broken. Choice itself is the innovation.