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Many Americans are unaware that behind the scenes, the technical backbone of the financial system is decades out of date. Many, many years out of date. You know that Paul and others are straightening it out. Under this bill, the entire ancient system will be eligible for a 21st-century upgrade. Tokenization is the idea of using smart contracts or, you know, tokens on-chain to be able to represent, say, underlying security.
"Do you expect this is where financial services are is going? Are are the major banks and the brokers out there today moving increasingly toward tokenization?"
"Oh, absolutely. And it's the uh, the way the world will uh, be uh, you know, here in the, I mean, maybe not even in 10 years, maybe even a lot less time, maybe a couple of years from now."
The institution that is responsible for the clearing, settlement, and custody of almost all securities transactions in the United States, responsible for processing $3.7 quadrillion dollars annually, just got the green light from the Trump administration to completely rewire the US financial system, and they're going live in the second half of 2026. By the way, the number that I just said was $3.7 quadrillion dollars. And quadrillion is the number that you get after trillion. And trillion is the number that you get after billion. And I won't insult you by going any further than that.
So, the Depository Trust and Clearing Corporation, the DTCC, just got a no-action letter from the Securities and Exchange Commission, or essentially was just given the green light to update the financial system. But what is the DTCC? What do they do? What is a no-action letter, and what does this actually mean for you, and how can you position yourself to take advantage of what's coming?
First, what's the DTCC? All right, so we live in a world today where fiat currency is the standard, meaning money is no longer backed by any physical commodities, but instead by trust and by debt. And so, as a result, the supply of money is constantly expanding, and over time, the purchasing power of that money steadily declines. So, because of this, simply holding cash is almost guaranteed to lose value. So, it's become the default for investors and institutions and governments to invest. So, people move their money into stocks, bonds, and other financial instruments called securities in an attempt to preserve and grow their wealth. Securities are tradable financial assets, such as stocks, bonds, and derivatives, that represent ownership, debt, or some sort of contractual claim. And this is how companies and governments raise capital. And this is how investors participate in economic growth.
When you go out and you buy a security, whether it's a share of a stock or a bond, you aren't transacting directly with the issuer or the company or the person that's on the other side of the trade. These transactions flow through a complex network of intermediaries, such as brokers, exchanges, clearing firms, and custodians. And this is where the DTCC, the Depository Trust and Clearing Corporation, comes in. Because the DTCC sits at the center of the modern financial system. Its role is to clear, settle, and custody securities transactions. So, it makes sure that basically, when these exchanges happen through a brokerage, the buyer actually receives the asset, and the seller actually receives the money. So, without the DTCC, every trade would require direct trust of the other party. So, in short, the DTCC is the plumbing of the financial system. All right? It doesn't create money. It doesn't set prices, and it doesn't decide who wins or loses. It's just making modern investing possible by ensuring that ownership records are accurate, that trades are settled, and that, you know, the system doesn't collapse under its own complexity. And it does this to the tune of $3.7 quadrillion and rising in transaction volume every single year.
Now, the SEC is the Securities Law Enforcement Agency in the United States. When people, for instance, commit fraud or insider trading or some other, uh, securities law infraction, the SEC will come after them. They can bring civil enforcement actions. They can impose fines and penalties. They can force people to give back gains that they got from bad activities. And they can even issue trading bans or bar people from serving as officers or directors in companies. So, you don't want to play around with the SEC when you're in the money business. They can literally kick you out of the game. And if they see fit, they can also refer you to the Department of Justice for any criminal proceedings.
Now, before the Trump administration was in office, you had a very, very hostile SEC, as well as other government agencies, in terms of their relationship with blockchain technology. And this led to what was called Operation Chokepoint 2.0, I know where crypto companies and even the founders themselves were unfairly attacked by the SEC and were also literally being debanked by some of the most important financial institutions. Now, we have Trump's guy, Paul Atkins, at the helm of the SEC as the chair, and the tide has changed. So, we have a crypto task force, and they are working directly with the CFTC on the commodity side, and they're updating regulations left and right. And over the past week, they just issued a no-action letter to the most important player in all of finance, the DTCC.
Now, a no-action letter is just a formal response from a government agency staff saying that, hey, we won't file any enforcement action against you. And in this case, they said that they won't file any enforcement action against the DTCC for the tokenization of securities. Meaning that the DTCC can now issue and record securities transactions using blockchain technology. And this changes everything.
Okay, so not only did the DTCC just announce that they will go live with tokenized securities as early as Q3 2026, but they have also announced who they're doing it with, and that's with a blockchain network called the Canton network. Now, the DTCC has also in the past explicitly mentioned that its open tokenization model will facilitate the use of multiple token standards, embedded compliance, and multi-blockchain, blockchain, and multi-chain interoperability. Now, we know that the DTCC ran a pilot where it minted and issued what are called bond tokens, which are compatible with Chainlink's CCIP or cross-chain interoperability protocol.
Now, side note, and take this right here with a grain of salt. We also have the fact that July 4th, 2026, we have the celebration of America's 250th anniversary. And that celebration is actually being led by the former treasurer of the United States and who is now a board member at a company called Ripple, named Rosie Rios. There has been some speculation in the past about this celebration also including some potential issuance of a new kind of bond, whether it be some sort of a crypto-backed bond, like a bit bond, or just maybe something that's a longer-dated bond that hasn't been in existence before, like a 50 or 100-year US Treasury. Now, that's pure speculation, and when I try to find more information on that, I find that the source seems to be that I made it up. But back to the top.
So, the SEC's no-action letter actually comes on the back of the words of Larry Fink himself, warning of the coming tokenization of everything.
"You know, I do believe we're just at the beginning of the tokenization of all assets, from real estate, uh, to equities, to bonds, across the board."
"We believe the next step going forward will be the tokenization of financial assets. And that means every stock, every bond will have its own basically QIP. It'll be on one general ledger. Every investor, you and I, will have our own number, our own identification."
With the tokenization of everything comes the digitization of all assets and their records, which comes with the fact that, yeah, we get full transparency on one hand, but then on the other hand, this also means that there's a potential for total financial surveillance. As the chairman of the SEC, Paul Atkins, himself has warned of, public blockchains are more transparent than any legacy financial system ever built. Every movement of value is recorded on a ledger that anyone can inspect. Chain analytics firms are already exceptional at assisting law enforcement with linking on-chain activity to off-chain identities. In other words, pushed in the wrong direction, crypto could become the most powerful financial surveillance architecture ever invented.
In fact, I thought it might be worth pointing out that the head of the Bank for International Settlements, which is the Central Bank of Central Banks, born out of the need to have, uh, an entity responsible for reparations after World War I, actually came out and introduced a concept called the Finet a few years ago. And this is a system where tokenized assets could all exist on a unified ledger that would allow for tokenized securities transactions to be executed across borders in a unified system. Now, something worth keeping in mind here is that through international agreements, the Bank for International Settlements is an international organization and not a commercial bank. And, uh, because of that, the BIS, the Bank for International Settlements, has what's called sovereign immunity. And this means that, well, they don't have any laws or regulations that they are required to adhere to. And I'm not going to go super deep into all that today. But if you want to hear more about that plan with the Finet to tokenize everything and how you can benefit from that shift, let me know in the comments.
But what is happening here with the tokenization of everything is not all bad. Okay, this will improve the world of finance. It will also force, uh, financial institutions into greater levels of transparency, which should be a good thing. I'm just pointing out that there are some other realities of what's happening here and how I think you can prepare for it because we do have this technology that gives us amazing opportunities on one hand, but there's also the fact that we might be moving into a world where surveillance becomes a standard.
Now, in closing, none of what I'm going over here is financial advice, and you should not make any financial decisions based upon what I or anybody who's walking around in the park talking to a stick has to say. I personally have noticed two obvious potential opportunities worth looking at that present themselves when we look at this news about the DTCC receiving a no-action letter from the SEC. And the first is that they have told us that they are working with the Canton network to tokenize custodied US Treasury securities. I'm just going to leave that at that. The second thing is that we know that the DTCC is already working with Chainlink on interoperability solutions, and we know that there will be multiple blockchains that will be used in the tokenization of all assets in the future.
If all that stuff sounds foreign to you and you want to learn more about how to take advantage of these types of opportunities, then please make sure to like and subscribe, and I will continue to go deeper into the topics surrounding blockchain and distributed ledger technology. Now, with that said, let me know what did I miss? Also, what did I get wrong? And have I absolutely lost my mind? Let me know in the comments down below. It's Keith D. I'm here to talk everything money and markets. And if you got anything from this at all whatsoever, be sure to like and subscribe. And if you haven't already, you got to subscribe to my live show with Ben Levit. It's called Memes and Markets. We go live every Tuesday and Thursday at 12:00 p.m. Eastern, and we cover topics like this, as well as where financial markets intersect with culture. And you can find that at the first link in the description down below. So, be sure to subscribe to Memes and Markets. But until next time, peace. Yes.