Key Takeaways:
- Tokenization offers significant opportunities for modernizing U.S. capital markets, but its benefits must be realized responsibly by building on existing legal and regulatory frameworks.
- Interoperability is essential to prevent fragmentation and ensure market infrastructure can scale as tokenization advances in a way that promotes efficiency, resilience, and liquidity.
- DTCC’s approach emphasizes building on the existing legal and regulatory framework while facilitating competition, innovation, and choice through responsible collaborative efforts.
As global financial markets shift from experimentation to execution, tokenization is emerging as a powerful tool to modernize capital markets. At a recent hearing before the U.S. House Committee on Financial Services, Christian Sabella, DTCC Managing Director and Deputy General Counsel, outlined a clear and pragmatic view: tokenization offers meaningful opportunity, but only if it builds on the legal and regulatory frameworks that underpin today’s financial system.
Read Christian Sabella’s full written testimony
The hearing, “Tokenization and the Future of Securities: Modernizing Our Capital Markets,” marked an important moment not only for policymakers, but for the industry as a whole. At its core, Sabella’s message was straightforward. Tokenization represents a significant opportunity, but realizing its benefits responsibly requires building on the strengths of the existing legal and regulatory frameworks rather than dismantling it.
DTCC’s Role: Innovation at Market Scale
For more than 50 years, DTCC has served as critical market infrastructure, helping safeguard stability, liquidity and efficiency across clearing, settlement, custody and data services. Through its clearing agency subsidiaries, including DTC, NSCC and FICC, DTCC processes transactions at unparalleled scale while interoperating with markets under some of the most rigorous regulatory and risk management standards in the world. That role, Sabella emphasized, is particularly critical as markets explore tokenization. Lasting market evolution has never come from technology alone. It depends on coordinated industry action, effective and common standards, and interoperable infrastructure at scale. Tokenization is no exception.
Click here to learn more about how DTCC is Transforming Finance Through Secure Tokenization
Tokenization has the potential to streamline post-trade processes, improve asset mobility, and unlock new efficiencies through shared, programmable data. But with great opportunity also comes great responsibility. Sabella cautioned against approaches that seek to bypass existing legal and regulatory frameworks. Tokenized securities must continue to represent the same economic and legal rights investors rely on today, and innovation should strengthen, not erode, those protections.
Interoperability: The Make-or-Break Issue
Interoperability emerged as a central theme of the testimony. Today’s markets function efficiently because decades of coordination have enabled assets and data to move efficiently across institutions and borders. Market infrastructures like those operated by DTCC are fundamental to that reality. Tokenization efforts that develop in isolated or proprietary environments risk fragmenting liquidity and increasing cost. DTCC’s view is that tokenization must prioritize open standards, industry coordination. and infrastructure-level solutions that connect new digital environments with existing market systems and promote meaningful interoperability.
Revisiting Holding Models Without Rewriting the Rules
Tokenization is also prompting renewed discussion around how securities are issued and held. DTCC sees this discussion as an opportunity to enhance those models, and the ability of markets to utilize those models, as opposed to reducing choice or efficiency. Regardless of how tokenization is applied in any model, features such as multilateral netting remain essential to market stability and efficiency and should remain as a key benefit available for resilient market functioning. Sabella noted that the advent of tokenization will most likely lead to a hybrid evolution, where different assets leverage different models based on their characteristics and liquidity profiles.
The DTCC Tokenization Service: Bridging Today and Tomorrow
DTCC’s approach is already moving from theory to practice. Following the approval by SEC staff of a December 2025 no-action request, DTC is preparing to launch a preliminary tokenization service using DTCC Digital Assets technology. Expected to go live in the second half of 2026, the service will allow certain securities positions held at DTC to be recorded on distributed ledger technology alongside DTC’s existing centralized ledger. Participation will be voluntary, protocol-agnostic, and focused on security, resilience, and market integrity.
Leading With Purpose
Sabella’s testimony underscored two guiding principles of DTCC’s approach to tokenization: innovation must serve the public good, and technology should strengthen capital formation, promote fair and orderly markets, and ensure investor protection. Under this approach, innovative technology becomes a catalyst for resilience rather than disruption.
Tokenization offers an opportunity for DTCC to carry its mission forward. Done right, it can help integrate innovative technology with proven market infrastructure, ensuring U.S. markets remain the most liquid, efficient and dynamic in the world.