In 1975, the Depository Trust Company was founded to address a crisis that the securities industry called the "paperwork crunch." Trading volume on the New York Stock Exchange had grown so fast that broker-dealers couldn't physically process the paper stock certificates fast enough. The back offices were drowning. The NYSE briefly closed on Wednesdays just to let the paperwork catch up.
The solution was centralized dematerialization: the DTC would hold all the actual shares, and broker-dealers would maintain electronic ledgers representing their clients' positions. A trade between two investors at different firms would be settled not by transferring physical certificates but by adjusting internal ledgers — a process that still takes two business days, known as T+2, because that's how long it took to reconcile those ledgers in 1975.
That is the system processing $2.5 quadrillion in annual transactions today. A system designed around the limitations of 1970s batch-processing computing, applied without fundamental structural change to the financial markets of 2026.
Tokenized securities don't improve this system. They make it irrelevant.
The Anachronisms Built Into Modern Markets
T+2 settlement is the most visible absurdity, but it's not the only one. The entire architecture of public equity markets is riddled with constraints that reflect the physical limitations of a paper-based era rather than any inherent property of financial instruments.
Consider market hours. U.S. equity markets open at 9:30 AM and close at 4:00 PM Eastern, Monday through Friday. This schedule was designed around the working hours of floor traders who needed to be physically present on an exchange floor. Those floor traders are largely gone — algorithmic systems handle the overwhelming majority of volume — but the hours remain. A company reporting earnings after the bell on a Thursday cannot see those earnings reflected in an official market price until the following morning. Investors respond to the news in the dark, paying bid-ask spreads on low-liquidity after-hours quotes, because the official market is closed.
Consider fractional shares. One share of Berkshire Hathaway Class A stock costs approximately $600,000. For most of its history, this made Berkshire inaccessible to ordinary investors. The SEC and major brokerages eventually developed fractional share programs as a workaround — but these programs don't actually give you a fractional share. They give you a contractual claim against your broker for economic exposure to a fraction of a share. You don't own the share; you own a promise. The distinction matters if your broker becomes insolvent.
Consider corporate actions. When a company pays a quarterly dividend, that dividend passes through the DTC, then to prime brokers, then to broker-dealers, then to custodians, then finally to individual investors — a chain of four or five intermediaries, each adding processing time, each taking a small cut of the float. The entire process takes three to five days. During that time, the dividend sits in institutional accounts earning overnight interest that belongs, economically, to the investor who owns the underlying share.
What a Tokenized Security Actually Changes
A tokenized security is a digital token recorded on a distributed ledger that represents a legal claim to an underlying financial instrument — a share, a bond, a fund unit. In the most direct implementations, the token doesn't represent the security; it is the security, with the ownership record maintained on-chain rather than at the DTC.
Settlement becomes atomic. When two parties agree to trade a tokenized share, the transfer happens in a single blockchain transaction: the buyer's payment token and the seller's security token swap simultaneously, with cryptographic finality, in seconds. There is no two-day window during which either party is exposed to counterparty default. There is no settlement failure. There is no central counterparty bearing systemic risk. The clearing function that currently requires the DTCC, its subsidiary NSCC, and the entire prime brokerage infrastructure simply ceases to be necessary.
The market becomes genuinely continuous. A tokenized security can trade at 2 AM on a Sunday as easily as at 10 AM on a Tuesday. There are no floor traders to go home. There are no batch-processing windows to wait for. The price of a security reflects new information the moment that information becomes public — not the following morning when the exchange opens.
Fractional ownership becomes native. A token can represent one millionth of a share with the same legal force as a token representing one full share. The concept of a minimum investment size disappears. The $600,000 Berkshire share becomes as accessible as a $5 purchase.
Dividends and corporate actions become programmable. A smart contract governing a tokenized share can automatically distribute dividends to all token holders the moment the issuer deposits funds — no intermediary chain, no float, no processing delay. Voting rights can be exercised directly by token holders through on-chain governance mechanisms, bypassing the custodian chain that currently suppresses beneficial owner participation in corporate governance.
The DTCC processes over $2.5 quadrillion in transactions annually and holds over $70 trillion in securities. The entire infrastructure exists to manage counterparty risk in a settlement system that tokenized markets eliminate by design. This is not a small addressable market for disruption.
The Person in Lagos Buying Apple Stock
Consider what the current system requires for someone in Lagos, Nigeria, to buy $100 of Apple stock. They need a brokerage account with a firm that accepts Nigerian customers — a short list, given KYC/AML compliance costs. That firm needs correspondent banking relationships with U.S. institutions. The investor needs a form of identity verification that maps to the requirements of U.S. broker-dealer registration. They need to meet minimum account thresholds. They need to convert naira to dollars through a currency exchange that likely charges 2–5% in spread. Then they can buy their shares — which will settle in T+2, subject to a broker who is operationally exposed to the DTCC's centralized risk.
With a tokenized Apple share on a permissioned blockchain: they need a smartphone, an internet connection, and a digital wallet with on-chain identity verification. The purchase executes instantly. Settlement is atomic. There is no minimum. The fractional token costs $5 if that's all they want to invest. There is no currency conversion intermediary — they can purchase with a dollar-denominated stablecoin acquired directly through a peer-to-peer exchange.
This is not a hypothetical. Franklin Templeton launched its tokenized money market fund on Stellar in 2021. BlackRock's BUIDL fund, the largest tokenized treasury product, crossed $500 million in assets under management within weeks of launch in 2024. WisdomTree has tokenized equity exposure products on Ethereum. The institutional infrastructure is being built now, and it will be used to serve retail investors within this decade.
The Regulatory Path Is Visible, If Not Clear
Securities regulation is the most significant barrier to mainstream tokenized equity markets, and it's worth being precise about what that barrier actually is. The SEC does not prohibit tokenized securities. It requires that they comply with existing registration, disclosure, and trading rules — the same rules that govern traditional securities. The question is not whether tokenized securities can be legal; they can. The question is whether the regulatory infrastructure can evolve fast enough to support the full set of efficiency gains that blockchain settlement enables.
The signals are cautiously encouraging. The European Union's DLT Pilot Regime, which came into full effect in 2023, allows regulated entities to operate tokenized securities infrastructure outside certain existing requirements on an experimental basis — a structured sandbox that generates the data regulators need to make informed decisions. The DTCC has published multiple white papers on distributed ledger technology and piloted its own blockchain settlement experiments. The SEC under the current administration has created a dedicated crypto task force explicitly tasked with developing workable regulatory frameworks rather than enforcing existing rules in maximally restrictive ways.
The trajectory is clear. The timeline is not. Institutions that depend on the current settlement infrastructure — prime brokers, custodians, clearing houses — are not sitting still. Some are building competing infrastructure. Others are lobbying. The outcome will reflect that competition as much as the underlying technology.
What Survives — and What Doesn't
Not all broker-dealer functions disappear in a world of tokenized securities. Research, portfolio construction, tax optimization, behavioral coaching — these are genuinely valuable services that institutional and sophisticated retail investors will continue to pay for. The firms that reorient around advice will find the addressable market for their services has grown, because global access means a larger pool of investors who benefit from guidance.
What disappears is execution as a profit center. The spread, the commission, the payment-for-order-flow arrangement, the management fee on a money market fund that is essentially a bank account — these extractive layers exist because the settlement infrastructure made disintermediation impossible. Remove the infrastructure dependency, and the extraction becomes indefensible.
The DTCC processed $2.5 quadrillion in 2023. The organization exists to manage counterparty risk that arises from the two-day lag between trade and settlement. When settlement is atomic, the counterparty risk disappears. And when the counterparty risk disappears, so does the DTCC's reason for existing.
The Market the Technology Makes Possible
The global equity market is, in its current form, a 1970s information system running on 2026 hardware. The plumbing — the settlement cycles, the market hours, the minimum sizes, the intermediary chain from issuer to investor — reflects constraints that have not existed for thirty years but persist because the infrastructure to replace them wasn't available and the incumbents who would lose from replacement are the same people who control the infrastructure.
Tokenized securities offer a different architecture: atomic settlement, continuous markets, native fractionalization, programmable corporate actions, and genuine global access. These are not marginal improvements to the existing system. They are a different system, built on different assumptions, serving a different and larger market.
The broker-dealer who executes your trades for a fee, the custodian who holds your shares in a segregated account, the clearing house that guarantees settlement — each of these institutions is solving a problem that the new architecture eliminates by design. The professionals who thrive in this transition will be those who understood, early, that their value was never in the execution. It was always in the judgment.