SEC approves DTCC to conduct securities tokenization pilot, marking the first blockchain authorization for a U.S. market infrastructure

Source: PortaldoBitcoin Original Title: SEC Gives Green Light for Tokenized Stocks in the US Original Link: The U.S. Securities and Exchange Commission (SEC) has approved a three-year pilot program for the clearing agency responsible for nearly all stock trading in the United States to record specific securities on a designated blockchain. This marks the first time that U.S. market infrastructure has been authorized to operate a blockchain-based registration system.

This implies implicit approval for certain stocks and securities to be tokenized and traded on the blockchain.

In a no-action letter issued on Thursday (11th), the SEC stated that if a depositary trust company (a clearing subsidiary of DTCC) creates and destroys blockchain-based tokens representing the securities it holds, it will not take enforcement action.

In other words, the SEC permits clearing agencies to create and revoke tokens on the blockchain that reflect the securities they hold, with the pilot expected to start in the second half of next year.

This measure exempts several normally applicable requirements, including SEC rules on the reliability and security of central market infrastructure, Form 19b-4, and specific standards for clearing agencies.

“Through blockchain, DTCC seeks to connect traditional finance (TradFi) and decentralized finance (DeFi), advancing a more resilient, inclusive, and efficient global financial system,” DTCC stated in a declaration.

Within the framework of the program, DTCC participants can choose to convert their ledger-recorded rights into blockchain-based “tokenized rights.”

DTCC is required to submit quarterly reports detailing the number of participants, the value of tokenized rights, the blockchain used or rejected, disruption information, number of registered wallets, and any cases where the company exercises its revocation rights.

Eligible securities in the pilot include Russell 1000 constituent stocks, U.S. Treasuries, and major ETFs tracking indices.

How It Works

When participants apply for tokenization, DTCC deducts the securities from its central registry and credits them into a new digital omnibus account. Subsequently, it creates corresponding tokens in a blockchain wallet controlled by the participant.

Tokenization services can reduce reconciliation requirements and enable rights transfers outside of standard market hours, while maintaining necessary protections for the country’s securities infrastructure.

Tokens can reside on public or privately approved blockchains, provided the network meets DTCC’s technical standards.

While records may be open, the system operates in a permissioned environment. Tokens can only move between DTCC “registered” wallets, which the company maintains a “root wallet” for, allowing for reversals or corrections in case of errors or misconduct.

DTCC indicated that it will subsequently publish a list of supported networks, showing that the regulatory environment applies to the company’s custody and control processes rather than prescribing specific types of blockchain architecture.