On December 11, 2025, the U.S. Depository Trust Company (DTCC) received a "No-Action Letter" from the SEC, authorizing it to tokenize its custodied securities assets on the blockchain. The news was met with jubilation from the industry, becoming a focal point of attention—$99 trillion in custodied assets were about to be put on the blockchain, finally opening the floodgates for U.S. stock tokenization. However, a closer look at the document reveals a crucial detail: DTCC tokenizes "security entitlements," not the stocks themselves. This distinction might sound like a legal jargon exercise. However, in reality, it reveals two drastically different paths in the field of security tokenization, and the ongoing power struggle between two forces behind these paths. I. Who are the true holders of US stocks? To understand this struggle, we need to first understand a counterintuitive fact: In the US public market, investors have never truly "owned" stocks. Before 1973, stock trading relied on the circulation of physical certificates. After a transaction was completed, the buyer and seller would exchange physical stock certificates, sign and endorse them, and then mail them to a transfer agent for registration changes. This process was still feasible in an era of low trading volume. However, in the late 1960s, the average daily trading volume of US stocks surged from three to four million shares to over ten million shares, bringing the entire system to the brink of collapse. Brokerage firms' back-offices were overflowing with millions of stock certificates awaiting processing, with loss, theft, and forgery rampant. Wall Street called this period the "Paperwork Crisis." The Direct Trading Commission (DTC) was the solution born out of this crisis. Its core idea was simple: **centralize all stock certificates in one place, and record transactions digitally in ledgers, eliminating the need to physically move the certificates.** To achieve this, the DTC established a holding agency called Cede & Co., which registered almost all listed company stocks under Cede & Co.'s name. Official data disclosed in 1998 showed that Cede & Co. held legal ownership of 83% of the publicly traded shares in the United States. What does this mean? When you see "holding 100 shares of Apple" in your brokerage account, the shareholder register lists Cede & Co. as Apple's shareholder. You are holding a contractual claim called a "securities interest"—you have the right to claim the economic benefits from those 100 shares from your brokerage, which in turn has the right to claim from the clearinghouse, which in turn has the right to claim from the DTCC. This is a nested chain of rights, not direct property rights. This "indirect holding system" has been operating for over fifty years. It eliminated the paper crisis and supported the daily clearing of trillions of dollars in transactions, but at the cost of permanently separating investors from their securities holdings through an intermediary. II. DTCC's Choice: Upgrading the Pipeline, Retaining the Structure Understanding this background clarifies the boundaries of DTCC's tokenization. According to the SEC's disclaimer and DTCC's public statements, its tokenization service targets "securities interests held by participants at the DTC." Participants refer to clearinghouses and banks that directly connect with DTCC—currently, only a few hundred institutions in the United States possess this qualification. Ordinary investors cannot directly use DTCC's tokenized services. The tokenized "security equity tokens" will circulate on a DTCC-approved blockchain, but these tokens still represent contractual claims to the underlying assets, not direct ownership. The underlying shares remain registered under Cede & Co., and this remains unchanged. This is an infrastructure upgrade, not an architectural restructuring. Its goal is to improve the efficiency of the existing system, not to replace it. DTCC explicitly listed several potential benefits in its application documents: First, collateral liquidity: In the traditional model, the movement of securities between different accounts requires waiting for a settlement cycle, locking up funds. With tokenization, participants can achieve near real-time transfer of equity, releasing frozen capital. Second, simplified reconciliation: In the current system, DTCC, clearinghouses, and retail brokers each maintain independent ledgers, requiring a significant amount of reconciliation work daily. On-chain records can serve as a shared "single source of truth." Third, paving the way for future innovation: The DTCC document mentions that equity tokens may be allowed to have settlement value in the future, or dividends may be paid in stablecoins. However, these require additional regulatory approval. It is important to emphasize that the DTCC explicitly states that these tokens will not enter the DeFi ecosystem, will not bypass existing participants, and will not change the issuer's shareholder register. In other words, it does not intend to disrupt anyone, and this choice has its rationale. Multilateral netting is a core advantage of the current securities clearing system. The daily trading volume of trillions of dollars in the market, after netting by the NSCC, ultimately only requires the movement of tens of billions of dollars to complete the settlement. This efficiency can only be achieved under a centralized architecture. As a systemically important financial infrastructure, the primary responsibility of the DTCC is to maintain stability, not to pursue innovation. III. Direct Holding: From Tokens to Stocks Themselves While the DTCC is cautiously upgrading, another path has begun to emerge. On September 3, 2025, Galaxy Digital announced that it had become the first Nasdaq-listed company to tokenize SEC-registered equity on a mainstream public blockchain. Through a partnership with Superstate, Galaxy's Class A common stock can now be held and transferred in token form on the Solana blockchain. The key difference is that these tokens represent actual shares, not claims to those shares. Superstate, as an SEC-registered transfer agent, updates the issuer's shareholder register in real time as tokens are transferred on-chain. Token holders' names appear directly on Galaxy's shareholder register—unlike Cede & Co., which is not on this chain. This is true "direct holding." Investors acquire property rights, not contractual claims. In December 2025, Securitize announced the launch of its tokenized stock service, offering "fully on-chain compliant trading," in the first quarter of 2026. Unlike many "synthetic tokenized stocks" on the market that rely on derivative structures, SPV packaging, or offshore architectures, Securitize emphasizes that its tokens will be "real, regulated stocks: issued on-chain and directly recorded in the issuer's shareholder register." Securitize's model goes a step further: it not only supports on-chain holding but also on-chain trading. During US stock market opening hours, prices are anchored to the National Best Price (NBBO); during market closures, prices are dynamically set by Automated Market Makers (AMMs) based on on-chain supply and demand. This theoretically translates to a 24/7 trading window. This path represents another vision: treating blockchain as a native layer of securities infrastructure, rather than an add-on layer to existing systems. IV. Two Paths, Two Futures This is not a debate over technological routes, but a contest between two institutional logics. The DTCC path represents a gradual improvement, acknowledging the rationality of the existing system—the efficiency of multilateral net settlement, the risk mitigation of central counterparties, and the maturity of the regulatory framework—simply using blockchain technology to make this machine operate faster and more transparent. The role of intermediaries will not disappear; it will simply be replaced by a different method of record-keeping. The direct holding path represents a structural change—questioning the necessity of the indirect holding system itself: since blockchain can provide immutable ownership records, why are layers of nested intermediaries still needed? Why would investors relinquish ownership to Cede & Co. if they can safeguard their assets themselves? Both paths have their trade-offs. Direct holding brings autonomy: self-custody, peer-to-peer transfers, and composability with DeFi protocols. However, the cost is dispersed liquidity and loss of netting efficiency. If every transaction is fully settled on-chain without a central clearinghouse, capital requirements will increase significantly. Furthermore, direct holding means investors bear more operational risks—loss of private keys, stolen wallets—risks traditionally covered by intermediaries are now transferred to the individual. Indirect holding preserves system efficiency: the economies of scale of centralized clearing, a mature regulatory compliance framework, and an operating model familiar to institutional investors. However, the cost is that investors can only exercise their rights through intermediaries. Shareholder proposals, voting, and direct communication with issuers—rights that theoretically belong to shareholders—require multiple layers of intermediaries in practice. It is worth noting that the SEC remains open to both paths. In his statement on December 11 regarding the DTCC's disclaimer, Commissioner Hester Peirce clearly stated: "The DTCC's tokenized equity model is a promising step in this journey, but other market participants are exploring different experimental 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." The regulator's signal is clear: this is not an either-or choice, but rather letting the market decide which model is more suitable for which type of need. V. Defensive Strategies for Financial Intermediaries Faced with this path game, how should existing financial intermediaries respond? First, clearing brokers and custodians need to consider the following questions: Under the DTCC model, are you indispensable or replaceable? If tokenized rights can be directly transferred between participants, will the custody fees, transfer fees, and reconciliation fees originally charged by clearing brokers still have a basis? Institutions that are the first to adopt DTCC tokenization services may gain a differentiated competitive advantage, but in the long run, this service itself may be standardized and commoditized. Second, retail brokerages face more complex challenges: Under the DTCC model, their role is solidified—ordinary investors still can only access the market through brokerages. However, the proliferation of the direct holding model will erode this moat. If investors can self-custody SEC-registered stocks and trade them on compliant on-chain exchanges, what is the value of retail brokerages? The answer may lie in their services: compliance consulting, tax planning, portfolio management—high-value-added functions that cannot be replaced by smart contracts. Third, the role of transfer agents may undergo a historic upgrade: In the traditional system, transfer agents are a low-profile back-office function, primarily responsible for maintaining the shareholder register. However, in the direct holding model, transfer agents become a crucial link between the issuer and investors. It is no coincidence that Superstate and Securitize both hold SEC-registered transfer agent licenses. Controlling the right to update the shareholder register means controlling the entry point into the direct holding system. Fourth, asset managers need to pay attention to the competitive pressure brought about by composability: If tokenized stocks can be used as collateral for on-chain lending protocols, traditional margin financing will be impacted. If investors can trade 24/7 and settle instantly on AMMs, the arbitrage opportunity for funds tied up in the T+1 settlement cycle will disappear. These changes will not happen overnight, but asset management institutions need to assess in advance the degree to which their business models depend on the assumptions of settlement efficiency. Sixth, the intersection of two curves: The transformation of financial infrastructure is never completed overnight. The paper crisis of the 1970s gave rise to an indirect holding system, but it took more than two decades for this system to truly solidify, from the establishment of the DTC to Cede & Co. holding 83% of US stocks. SWIFT, also founded in 1973, is still undergoing restructuring in cross-border payments. Two paths will grow in their respective territories in the short term: DTCC's institutional-grade services will first penetrate collateral management, securities lending, and ETF creation and redemption—the wholesale markets most sensitive to settlement efficiency. The direct holding model enters the market from the periphery: native crypto users, small issuers, and regulatory sandboxes in specific jurisdictions. In the long run, the two curves may converge. When the circulation of tokenized equity is large enough, and when the regulatory framework for direct holding is mature enough, investors may gain true choice for the first time—enjoying the efficiency of net settlement within the DTCC system, or exiting to on-chain self-custody and regaining direct control of their assets. The very existence of this choice is a change in itself. Since 1973, ordinary investors have never truly had this option: The moment a stock is purchased into an account, it automatically enters an indirect holding system, Cede & Co. becomes the legal holder, and the investor becomes the beneficiary at the end of the equity chain. This is not a choice, but the only path. Cede & Co. still holds the vast majority of publicly traded U.S. shares. This proportion may begin to loosen, or it may remain so for a long time. But fifty years later, another path has finally been paved.
Anais
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