Home Technology DTCC Raises the Stakes for Tokenization
Author: Andrew Singer | Photos: Shutterstock
A major push by DTCC could accelerate adoption, but costs and technical hurdles remain.
Tokenization of real-world assets, such as treasury bonds, commodities, or equities, is still in its infancy but is growing rapidly. The value of these tokenized assets globally is roughly $400 billion today, but it could explode to $5.5 trillion by 2030 , according to the Citi Institute.
Supporters of on-chain assets received a further boost last week when Depository Trust & Clearing Corporation, or DTCC, announced a new tokenization service , a development especially noteworthy given that the user-owned, industry-operated financial market infrastructure company has more than $100 trillion in assets under custody.
“Yesterday was a huge day for DTCC. We just got $30 trillion on-chain,” CEO Frank La Salla told attendees at the Link: NYC conference on Oct. 29. “I think we will get gradual initial adoption” on the tokenization front. “But ultimately it will begin to accelerate and ramp up.”
The $30 trillion represents the market value of 34 securities eligible for tokenization through DTCC’s new service, not the value of assets already tokenized.
But numbers alone may not tell the whole story. “After you tokenize something, there has to be utility,” said Sergey Nazarov, co-founder and CEO of Chainlink, a digital infrastructure provider, speaking at the conference. The on-chain (i.e., blockchain-based) version of a financial asset must offer advantages over its traditional counterpart.
DTCC CEO Frank La Salla acknowledged these challenges in his comments at the conference. He cited several product areas where tokenization could have an almost immediate impact, given the global need for liquidity and capital: collateral and repo.
“There’s a real demand for dollar liquidity in Asia,” La Salla told a packed house. This demand arises even on weekends, when U.S. markets are closed. “With blockchain technology, you can have collateral on-chain, perfected”—i.e., a legal process that protects one’s ability to take ownership of collateral in the event of default—“and provide that liquidity, totally collateralized, before New York even awakens. That’s very powerful.”
The repo market offers opportunities, too. Securities typically must be pre-positioned before they are available for repo, and that pre-positioning requires additional collateral, La Salla explained. “On the blockchain, you can do that instantaneously the same day. We have had member firms tell us: ‘If you operationalize this, it could save us 20-30% on the balance sheet.’ That is enormous.”
DTCC worked with the SEC for 18 to 24 months to secure the “ no action letter ” needed for its tokenization program, La Salla said. The company insisted that tokenized securities retain the same legal rights as their traditional counterparts. “We felt that was what issuers wanted, and what investors wanted.”
In his view, the tokenized security would be the “digital twin” of the underlying asset. Nazarov, who moderated the panel, said that many tokenized assets carry fewer legal entitlements than off-chain assets, so DTCC’s insistence on this point was a positive adjustment.
Interoperability remains another obstacle. Solving the challenge “will be critical,” La Salla said. Without common technical standards, blockchains such as Ethereum and Solana struggle to communicate.
Mark Nichols, co-president of…