DTCC, Wall Street’s post-trade powerhouse, tests tokenized markets with industry heavy hitters

The Depository Trust and Clearing Corporation on Wednesday will complete a set of financial transactions using digital versions, or “tokenized,” of assets held at The Depository Trust Company, the company announced.

The day-long event, first reported by The Wall Street Journal, will include more than 25 firms across the traditional finance and digital assets industries. To kick off the day, JPMorgan converted the Invesco QQQ Trust (QQQ) into a tokenized asset. Goldman Sachs, BlackRock, Vanguard and the New York Stock Exchange are among the other participating firms, a DTCC spokesperson confirmed.

“Today is the beginning of a long journey where we will demonstrate that the old and the new can live together, [and] that the technology enables a lot of opportunities for our participants worldwide,” Nadine Chakar, global head of DTCC Digital Assets, said in a video statement published Wednesday morning. “We’re going to prove the value of tokenization and hopefully build the foundation that would lead to a scalable launch come October.”

Tokenization usually refers to the process of issuing digital representations on a blockchain network of publicly traded securities, real world assets or any other form of value. The often-touted benefits of blockchain technology include lower costs, faster settlement times, greater transparency about ownership and performance and programmable terms — as well as increased accessibility for retail investors and global reach.

The DTCC is the central post-trade organization in the U.S. financial system that processes, settles and safeguards most stock and bond transactions. Its subsidiaries processed $4.7 quadrillion worth of securities transactions last year.

The financial industry has debated tokenization for years without widespread implementation. In that time, competing tokenization specialists from the crypto industry such as Ondo and Securitize have burst onto the scene, threatening legacy clearing infrastructure through high-profile partnerships with giants including BlackRock.

“DTCC is bridging TradFi and DeFi so that capital markets is built on the same infrastructure that has underpinned global financial markets for decades,” Brian Steele, DTCC’s president of clearing  and securities services, said in a statement. “Through the DTCC Tokenization service, we have the opportunity for increased efficiency, deeper liquidity and new ways to move and use assets.”

DTCC’s trial run is a tangible step toward adoption, though it remains an early phase. Wednesday’s event is meant to demonstrate how tokenized assets can operate across collateral, repo, equities, margin and asset transfers by leveraging the existing financial infrastructure.

Shares of Microsoft, Circle Internet Group, Invesco QQQ Trust, State Street SPDR S&P 500 ETF Trust (SPY) and iShares 0-3 Month Treasury Bond ETF (SGOV), as well as Treasurys of different maturities are expected to be tokenized during the demonstration.