Are TEs everything the crypto community wants? No! Nonetheless, we think TEs mark an inflection point for crypto's integration into the regulatory mainstream. As a result, this could unlock significant demand for blockchains like Ethereum (and other chains), potentially improving blockchain fundamentals in a material way.   

Read the source material here and let us know what you think. 

1) So, what happened? The DTC's forthcoming tokenization service got a No Action Letter (NAL) from the SEC.   

NALs are important because they protect behavior from SEC litigation, providing clarity that an operator may engage in new activity without fear that the SEC may go after them.  

2) As a former TradFi guy (CSFB, BlackRock), this DTC tokenization service means a lot.  

US TradFi relies upon the DTC to be the centralized ledger for transfer of securities (stocks, treasuries, etc.). They custody approximately $99 trillion worth of assets. For comparison, crypto’s total market cap is approximately $3 trillion, and "tokenized real-world assets" (RWAs) is maybe $35 billion (a rounding error in the grand scheme). How do we get this $99 trillion of assets onchain? Not without ‘The Street,’ and not without the DTC.  

3) The crypto community will not like various elements of the DTC tokenization service.  

Among other items, they won't like the reliance on "LedgerScan" as the ultimate source of truth for books and records vs. the actual blockchains. But when they dig into the details, they will like that this trial delivers what they had been asking for: real securities onchain. "Real," in that TradFi will trust that the token is, in effect, the security. And that trust = liquidity, which is the most important thing in markets. If crypto folks are honest, they’ll tell you that “tokenized RWAs” have not been successful yet, aside from stablecoins (which have been a monster success).    

4) The TradFi community will love how the DTC tokenization service works.  

Traditional book entry securities and tokenized entitlements are FUNGIBLE! This has been a clear area of contention. Thus far, most tokenized RWAs can be worse than an underlying

security in a few ways, including costs, governance rights… and the ability to freely swap from offline to online form.  

5) What exactly is a Tokenized Entitlement (TE)?  

A TE will be a token that represents a prior existing ownership stake in a security. At launch, owners will be able to ask the DTC to transform their book entry holdings in Russell 1000 stocks, US Treasuries, and major ETFs into TEs that are held in DTC-approved and -registered wallets. These wallets will be able to freely transfer these TEs to other DTC-approved wallets without having to involve the DTC. The DTC will just watch and record the action on LedgerScan across all TEs on all approved chains. 

6) Which chains are approved by the DTC? TBD.  

The DTC has set forth criteria for chain approval without yet having announced which chains make the cut today. They have referenced the potential for private and public blockchains. What is required at a high level:  

a) Reliability, resilience, and security. 

b) Compliant support.
c) Observability. 
d) Governance and consensus. 

Given the specific mention of ERC-3643 (i.e., "T-Rex Protocol"), we are currently assuming Ethereum and other EVM-compatible chains may make the cut. And Canton is likely a yes, given the announcement of a DTC MVP trial, here. 

7) HOLD ON… DTC gets an override key? Yes. Will crypto like this? No.

DTC plans to have a “root wallet” on each blockchain with keys that it can use to convert, transfer, mint, or burn any of the tokens, even without the private key for the Registered Wallet.   

8) What's next? Announcement of approved chains and trials/pilots in early 2026.  

Expect some tests with a few participants, a live blockchain, and real data with assets of limited value.  These projects would test the core functionality of the DTCC Tokenization Service (before launching the "Preliminary Base Version," which would launch in H2 2026.