UNDERSTANDING THE MONETIZATION, DISTINGUISHING IN ONE LANGUAGE THE DIFFERENCE BETWEEN THE DTCC MODEL AND THE DIRECT OWNERSHIP MODEL
Original title:DTCC isn't Tokenizing Shares, here is what's absolutely changing
@ingalvarezsol
Original by Peggy, Block Beats
THE DTCC-DRIVEN "CURRENCYIZATION" IS NOT A CHAINING OF SHARES, BUT RATHER A DIGITAL UPGRADING OF EQUITY IN SECURITIES, WITH THE CORE OBJECTIVE OF INCREASING THE EFFICIENCY AND SOLVENCY OF THE EXISTING MARKET SYSTEM. IN PARALLEL, THERE IS A MORE RADICAL PATH, BY WHICH STOCK OWNERSHIP ITSELF IS MONETIZED AND SELF-CUSTODY AND CHAIN-COMPILABILITY IS RESHAPED。
The two models are not opposing, but serve to stabilize scale and functional innovation. The paper attempts to clarify this distinction and to point out that the real change lies not in who replaces whom, but in the investors beginning to have the right to choose different ownership models。
Here is the full text:
Introduction: tokenization, not what you think
The United States Deposit and Settlement Corporation (DTCC) has obtained a no-action letter from the United States Securities and Exchange Commission (SEC) allowing it to begin monetizing its securities infrastructure. This is an important upgrade to the U.S. capital market’s “bottom pipeline”: the DTCC hosts approximately $99 trillion in equity assets and supports hundreds of billions of dollars in transactions each year。
however, the market reaction around this news revealed a clear gap between expectations and reality. it is not "stocks" that have been monetized, but security interests, a difference that determines the nature of almost all follow-up issues。
The current discussion around “decorative securities” is not that a single future is coming together, but that two different models are emerging simultaneously at different levels: one is within the existing indirect holding system, adapting the holding and flow of securities; the other is fundamentally reshaping — what holding a stock means。
Note: For ease of presentation, a distinction is no longer made between the DTC subsidiary of DTCC and its parent company, DTCC。
How does ownership of securities actually work today
In the open market in the United States, investors do not hold shares directly with listed companies. Stock ownership is placed in a chain of multiple intermediaries。
At the bottom, there is the issuer ' s shareholders ' register, which is usually maintained by a transfer agent. For almost all listed shares, only one name is normally recorded on the roster: Cede & Co., DTCC-designated notional holder. The aim is to avoid the need for issuers to maintain millions of individual shareholder records。
Next level, it's DTCC itself. It "freezes" the physical flow of these stocks in a centralized way. DTCC's direct participants, known as clearing brokers, represent retail brokers to end-users and are responsible for hosting and clearing settlements. DTCC records in the system: "How many shares are entitled to" for each participant。
At the top, it was the investor himself. Investors do not hold specific, differentiated shares, but rather a legally protected security interest — a claim that they have vis-à-vis brokers, who in turn hold corresponding interests in the DTCC system through the liquidation of brokers。
THIS TIME, IT WAS THE DTCC SYSTEM THAT MONETIZED THESE “EQUITYS”, NOT THE STOCKS THEMSELVES。
Such an upgrade would indeed enhance the efficiency of the system, but it would not address the fundamental constraints posed by the multilayered intermediary structure itself。
DTCC TOKENS ARE "RIGHT CLAIMS" AND DIRECT MODE TOKENS ARE "STOCKS THEMSELVES". BOTH ARE REFERRED TO AS “DIDENTIZATION”, BUT THE SOLUTION IS COMPLETELY DIFFERENT。
Why upgrade
THE UNITED STATES SECURITIES SYSTEM ITSELF IS QUITE ROBUST, BUT ITS STRUCTURE REMAINS CLEARLY LIMITED. SETTLEMENT RELIES ON PROCESSES THAT ARE TIME-DELAYED AND LIMITED BY WORKING HOURS; CORPORATE ACTIONS (E.G., SPLIT, SPLIT) AND RECONCILIATIONS CONTINUE TO BE DONE MAINLY THROUGH BATCH PROCESSING RATHER THAN SHARING STATUS. SINCE OWNERSHIP IS EMBEDDED IN A COMPLEX NETWORK OF INTERMEDIARIES — EACH WITH ITS OWN TECHNOLOGICAL UPGRADING RHYTHM — REAL-TIME ADAPTATION OF THE WORKFLOW IS ALMOST IMPOSSIBLE WITHOUT SIMULTANEOUS SUPPORT AT ALL LEVELS, AND DTCC IS THE KEY “LOCK” IN THE SYSTEM。
These design options also raise capital occupancy problems. A longer settlement cycle would require multi-billion dollar deposits between transaction and final settlement to manage risk. These optimization programmes were originally designed for the old world of " slow and costly capital transfers"。
If the settlement cycle is shortened or immediate settlement is achieved for voluntary participants, the capital required will be significantly reduced, with lower costs and increased market competition。
Some of these efficiency gains can be achieved by upgrading existing infrastructure; others — especially those involving direct ownership and the ability to innovate more quickly — require a completely new model。
DECORATE EXISTING SYSTEMS (DTCC MODEL)
In the DTCC path, the bottom security remains in a centralized hosting position and continues to be registered under Cede & Co. What really changed was the expression of an equity record: these were originally only "equity" in proprietary books and were given a "digital twin" currency on the chain of approved blocks。
THIS IS IMPORTANT BECAUSE IT HAS MODERNIZED WITHOUT SUBVERTING EXISTING MARKET STRUCTURES. DTCC COULD INTRODUCE 7X24 HOURS OF TRANSFER OF INTERESTS BETWEEN PARTICIPATING AGENCIES, REDUCE THE COST OF RECONCILIATION AND GRADUALLY MOVE THESE INTERESTS TOWARDS FASTER COLLATERAL MOBILITY AND AUTOMATED WORK FLOWS, WHILE STILL RETAINING THE EFFICIENCY ADVANTAGES OF CENTRALIZED SYSTEMS SUCH AS NETTING。
multilateral netting can reduce total transactions of trillions of dollars to a final settlement of only tens of billions of dollars. such efficiency forms the core of today ' s market structure, even though new ownership models are emerging。
But the boundaries of such systems are deliberately set. These tokens do not allow the holder to become a direct shareholder in the company. They remain permissible and revocable claims and are found in the same legal framework: They cannot be a free-assembly collateral in DeFi, they cannot bypass the DTC participating institutions, and they will not change the issuer ' s shareholder list。
In short, this approach is to optimize the systems that we have, while preserving the existing intermediary structures and the efficiency advantages they offer。
Decorate "ownership itself" (direct model)
The second model, which started where the DTCC model could not reach: it monetized the stock itself. Ownership is directly recorded on the issuer ' s shareholders ' register and maintained by the transfer agent. At the time of the transfer of the contemporary currency, the registered shareholders changed and Cede & Co. was no longer in the chain of ownership。
THIS UNLOCKS A SERIES OF STRUCTURALLY IMPOSSIBLE CAPABILITIES UNDER THE DTCC MODEL: SELF-CUSSION, DIRECT INVESTOR-ISSUER RELATIONS, POINT-TO-POINT TRANSFERS, AND PROGRAMMABILITY AND PORTFOLIOABILITY — INCLUDING COLLATERAL, BORROWING, AND MANY NEW FINANCIAL STRUCTURES THAT HAVE NOT YET BEEN INVENTED。
This model is not on paper. Galaxy Digital's shareholders can already monetize their shares through Superstate and hold them in chains and are directly reflected in the issuer's stock structure table. By early 2026, Securitize will have provided similar capabilities and, supported by a compliance voucher system, will have introduced 7x24-hour transactions。
Of course, the trade-off between this model is equally real. Once removed from the indirect holding system, liquidity would become fragmented and the efficiency of multilateral netting would disappear; brokerage services such as bonds, loans, etc. would need to be redesigned; and operational risks would be shifted more to the holders themselves than to intermediaries。
BUT IT IS THE DYNAMICS OF DIRECT OWNERSHIP THAT ALLOW INVESTORS TO CHOOSE WHETHER TO ACCEPT THESE TRADE-OFFS, RATHER THAN TO INHERIT THEM. WITHIN THE DTCC FRAMEWORK, THIS CHOICE OF SPACE IS ALMOST NON-EXISTENT - BECAUSE ANY INNOVATION ABOUT "EQUITY" MUST GO SEQUENTIALLY THROUGH A HIERARCHY OF PROCESSES OF GOVERNANCE, OPERATION AND REGULATION。
THERE ARE KEY DIFFERENCES BETWEEN THE TWO MODELS. DTCC MODELS ARE MUCH MORE COMPATIBLE AND SCALABLE WITH EXISTING SYSTEMS, WHILE DIRECT OWNERSHIP MODELS OPEN UP MORE SPACE FOR INNOVATIONS SUCH AS SELF-CUSSION。
Why are they not competing visions
DTCC MODELS AND DIRECT OWNERSHIP MODELS ARE NOT COMPETING ROUTES, AND THEY ADDRESS DIFFERENT ISSUES。
THE DTCC PATH IS AN UPGRADE OF THE EXISTING INDIRECT HOLDING SYSTEM, RETAINING THE CORE ADVANTAGES OF NETTING, LIQUIDITY CONCENTRATION AND SYSTEMIC STABILITY. IT IS AIMED AT INSTITUTIONAL PARTICIPANTS WHO NEED TO SCALE UP OPERATIONS, SETTLEMENT CERTAINTY AND REGULATORY CONTINUITY。
The direct ownership model meets another category of needs: self-cussion, programmable assets, and chain composition. It serves investors and issuers who wish to acquire new functions, not just "more efficient conduits"。
Even if direct ownership were likely to reshape market structures in the future, the transition would necessarily be a multi-year process, requiring simultaneous advancement in technology, regulation and liquidity migration; it could not happen quickly. The rules of liquidation, the conduct of issuers, the readiness of participants and global interoperability are advancing at a much slower pace than the technology itself。
Thus, there is a more realistic prospect of a parallel: on the one hand, modernization of infrastructure and on the other hand, innovation at the ownership level. Today, neither side can replace the other in fulfilling its mission。
What does this mean for different market participants
These two monetization pathways have different impacts on market participants at different levels。
Retail investors
FOR RETAIL USERS, THE UPGRADING OF DTCC IS ALMOST UNSURE. RETAIL BROKERS ALREADY SHIELD USERS FROM MOST FRICTIONS (E.G., BROKEN SHARES, IMMEDIATE PURCHASING POWER, WEEKEND TRANSACTIONS), WHICH WILL CONTINUE TO BE PROVIDED BY BROKERS。
The real change is the direct ownership model: self-cussion, point-to-point transfer, instant settlement, and the possibility of using stocks as collateral on the chain. Stock exchanges have now begun to appear through platforms and wallets, but most of them are still in the form of “sealed/map”. In the future, these tokens are likely to become real shares directly on the roster rather than synthetic layers。
Institutional investors
INSTITUTIONS WILL BE THE LARGEST BENEFICIARIES OF DTCC MONETIZATION. ITS OPERATIONS ARE HIGHLY DEPENDENT ON COLLATERAL FLOW, SECURITIES LENDING, ETF FLOWS AND MULTIPLE RECONCILIATIONS - IN THESE AREAS, THE MONETIZATION OF “EQUITY” CAN SIGNIFICANTLY REDUCE OPERATING COSTS AND INCREASE SPEED。
Direct ownership, in turn, attracts a greater number of institutions, in particular those trading at the opportunity to pursue programmable collateral and settlement advantages. However, as a result of the fragmentation of mobility, wider adoption will be gradual from the market edge。
Brokers and clearing agencies
BROKERS ARE AT THE CENTRE OF CHANGE. UNDER THE DTCC MODEL, ITS ROLE IS FURTHER STRENGTHENED, BUT INNOVATION IS BROUGHT CLOSER TO IT: CLEARING AGENTS THAT TAKE THE LEAD IN ADOPTING A MONETIZATION INTEREST CAN BE DIFFERENTIATED, AND VERTICALLY INTEGRATED INSTITUTIONS CAN BUILD NEW PRODUCTS DIRECTLY。
In the direct ownership model, brokers were not " removed " , but remodelled. Licences and compliance are still necessary, but a group of primary chain intermediaries will emerge to compete with traditional institutions for users who value the nature of direct ownership。
Conclusion: The real winner is the right to choose
The future of tokenized securities lies not in the triumph of one model, but in how the two models evolve in parallel and connect。
The monetization of equity will continue to modernize the core of the public market; direct ownership will grow on the margins of more programming, self-cussion and new financial structures. The switch between the two will be smoother。
The end result is a broader market interface: with faster and cheaper tracks and new tracks for new behaviours that cannot be supported by existing systems. Both paths generate winners and losers, but as long as the path of direct ownership exists, investors are the ultimate winners — gaining better infrastructure in competition and having the right to choose freely between different models。
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