Written by: @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 a 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-Sector Collaboration Framework and Practical Contributions
The "Project Crypto" initiative promoted by Atkins is not a unilateral action by the SEC; it is built on systematic cooperation across legislation, regulation, and the private sector. Achieving a comprehensive on-chain transition for the U.S. financial market, valued at over $50 trillion (including stocks, bonds, government debt, private credit, real estate, etc.), requires multiple institutions to clarify their roles and contributions.
1.1 Government Departments Involved in Comprehensive Asset Tokenization
It should be noted that the "Project Crypto" and "Innovation Exemption" mechanisms acknowledge the incompatibility of blockchain technology with 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 institutions to conduct on-chain transactions and collateral by creating compliant, fully reserved-backed stablecoins and explicitly transferring regulatory authority to banking regulators.
The CLARITY Act delineates the jurisdiction between the SEC and CFTC, clearly targeting crypto-native platforms and creating a "mature" definition, enabling institutions to know under which regulatory framework their digital assets (such as Bitcoin) operate, while providing a pathway for crypto-native platforms to register as federal regulatory intermediaries ("broker-dealers").
Established in 1973, the OCC 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 traders.
This cross-sector collaboration is a prerequisite for the U.S. financial market to achieve a comprehensive on-chain transition, laying a solid foundation for subsequent large-scale deployments by giants like BlackRock and JPMorgan, as well as the integration of core infrastructures like DTCC.
1.2 Collaboration Among Traditional Financial Giants
In the collaboration blueprint of traditional financial giants in the U.S., the deepening layout of various institutions reflects more specific strategic focuses and technical details. BlackRock became the first to issue a tokenized U.S. Treasury bond fund on a public blockchain (Ethereum), establishing its cornerstone position as an asset manager bringing traditional financial returns into the public blockchain ecosystem.
After renaming its blockchain business to Kinexys, JPMorgan allows banks to complete atomic swaps of tokenized collateral and cash within hours instead of days, significantly optimizing liquidity management. Additionally, its pilot initiative of JPMD on the Base chain is seen as a strategic step towards extending into a broader public blockchain ecosystem, aiming for stronger interoperability.
Finally, the specific breakthrough of the Depository Trust & Clearing Corporation (DTCC) was achieved through its subsidiary, the Depository Trust Company (DTC). As a crucial global trading infrastructure provider, its SEC "no-action letter" enables it to connect the traditional CUSIP system with the new tokenized infrastructure, officially launching a pilot for mainstream asset tokenization, 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 "silo effect" and "time constraints" of traditional finance, creating a global, programmable, and always-on financial system.
2.1 Significant Enhancements in Financial Environment: Leap in Efficiency and Performance
Tokenization will bring efficiency and performance advantages that traditional financial systems cannot match:
2.1.1 Leap in Settlement Speed (T+1/T+2 to T+0/Seconds):
Enhancement: Blockchain can achieve near real-time (T+0) or even second-level settlements and deliveries, contrasting sharply with the T+1 or T+2 settlement cycles typically required in traditional financial markets. UBS's issuance of digital bonds on SDX demonstrated T+0 settlement capabilities, while the European Investment Bank's digital bond issuance reduced settlement time from five days to one.
Pain Point Resolved: It significantly reduces counterparty credit risk and operational risk caused by settlement delays. For time-sensitive transactions like repos and derivatives margin, the improvement in settlement speed is crucial.
2.1.2 Revolution in Capital Efficiency and Liquidity Release:
Enhancement: Achieving "atomic settlement," where assets and payments occur simultaneously in a single, indivisible transaction. Additionally, tokenization can release "sleeping capital" currently locked in settlement waiting periods or inefficient processes. For example, programmable collateral management can free up over $100 billion in trapped capital annually.
Pain Point Resolved: It eliminates principal risk in traditional "delivery versus payment" operations. It reduces the need for high margin buffers at clearinghouses. Meanwhile, tokenized money market funds (TMMFs) can be transferred as collateral directly, retaining yields and avoiding liquidity friction and yield loss associated with redeeming cash and reinvesting in traditional systems.
2.1.3 Enhanced Transparency and Auditability:
Enhancement: Distributed ledgers provide a single, immutable authoritative record of ownership, with all transaction histories being public and verifiable. Smart contracts can automatically execute compliance checks and corporate actions (such as dividends).
Pain Point Resolved: It thoroughly addresses inefficiencies in traditional finance, such as data silos, multiple bookkeeping, and manual reconciliations. It provides regulators with an unprecedented "God's eye view," enabling real-time, penetrative oversight and effective monitoring of systemic risks.
2.1.4 24/7/365 Global Market Access:
Enhancement: Markets are no longer limited by traditional banking hours, time zones, or holidays. Tokenization facilitates smoother cross-border transactions, allowing assets to be transferred peer-to-peer globally.
Pain Point Resolved: It overcomes delays and geographic limitations in traditional cross-border payments and liquidity management, particularly benefiting cash management for multinational corporations.
2.2 Most Affected Participants
The transformation brought about by tokenization is disruptive, having the most significant impact on the following categories of market participants:
Main Challenges and Risks:
Liquidity and Net Settlement Trade-off: DTCC currently reduces the actual cash and securities that need to be transferred by 98% through net settlement of millions of transactions, achieving significant capital efficiency. Atomic settlement (T+0) is essentially real-time gross settlement (RTGS), which may lead to a loss of net settlement efficiency, requiring the market to find hybrid solutions between speed and capital efficiency, such as intraday repos.
Privacy Paradox: Institutional finance relies on transaction privacy, while public chains (like Ethereum) are transparent. Large institutions cannot execute large trades on public chains without being "front-run." Solutions include adopting privacy-preserving technologies like zero-knowledge proofs or operating on permissioned chains (like JPMorgan's Kinexys).
Amplification of Systemic Risk: A 24/7 market eliminates the "cooling-off period" of traditional markets. Algorithmic trading and automated margin calls (via smart contracts) could trigger large-scale chain liquidations under market stress, amplifying systemic risk, similar to the liquidity pressures seen in the 2022 UK LDI crisis.
2.3 Core Value of Tokenized Money Market 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:
Retained Earnings: Unlike non-interest-bearing cash, TMMFs can continuously earn yields as collateral until actually used, reducing the opportunity cost of "collateral drag."
High Liquidity and Composability: TMMFs combine the regulatory familiarity and safety of traditional MMFs with the instant settlement and programmability brought by DLT. For example, BlackRock's BUIDL fund addresses the traditional MMF redemption pain point of T+1 through Circle's USDC instant redemption channel, achieving 24/7 instant liquidity.
3. Role of DTCC/DTC in the Tokenization Process
DTCC and DTC are indispensable core systemic institutions in U.S. financial infrastructure. The asset scale managed by DTC is enormous, covering the vast majority of stock registrations, transfers, and custodianship in the U.S. capital markets. DTCC and DTC are regarded as the "master warehouse" and "master ledger" of the U.S. stock market. DTCC's involvement is crucial to fundamentally ensuring the compliance, security, and legal validity of the tokenization process.
3.1 Core Role and Responsibilities of DTC
Identity and Scale: DTC is responsible for central securities custody, clearing, and asset services. By 2025, DTC's asset scale is expected to reach $100.3 trillion, covering 1.44 million securities issuances and dominating the registration, transfer, and confirmation of the vast majority of stocks in the U.S. capital markets.
Tokenization Bridge and Compliance Assurance: DTCC's involvement represents the official recognition of traditional financial infrastructure for digital assets. Its core responsibility is to act as a trust bridge between the traditional CUSIP system and the emerging tokenized infrastructure. DTCC commits that tokenized assets will maintain the same high levels 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 the 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, DTC, a subsidiary of DTCC, received a landmark no-action letter from the U.S. SEC, which serves as the legal basis for its large-scale promotion of tokenization business.
3.3 Impact of DTC Tokenization
The approval of DTC NAL is considered a milestone in tokenization, with its impact primarily reflected in:
Certainty of Official Tokens: DTC's tokenization signifies that U.S. officially endorsed tokenized stocks are on the horizon. Future projects for tokenizing U.S. stocks may directly access DTC's official asset tokens rather than building their own asset on-chain infrastructure.
Market Structure Integration: Tokenization will drive the U.S. stock market towards a model of "CEX + DTC Custodial Trust Companies." Exchanges like 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 services 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: Stock tokens are no longer a digital type that is separate from traditional assets but are fully integrated into the general ledger of traditional capital markets.
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