Two Futures of Security Tokenization: DTCC Model or Direct Ownership, with Investor Proactivity as the Turning Point

Introduction: The Pitfalls of the Term “Tokenization”

Recently, news broke that the US DTCC (Depository Trust & Clearing Corporation) is beginning to tokenize securities infrastructure. Given the scale of this giant managing approximately $99 trillion in assets, the financial industry anticipated a major transformation.

However, in reality, despite the same term “tokenization,” there are two entirely different paths being referred to. Without understanding this distinction, discussions can lead to confusion due to the gap between expectations and reality.

The key distinction is as follows: DTCC’s tokenization involves “rights claims,” whereas the other model involves “the securities themselves.” This difference largely determines the nature of nearly all subsequent issues.

Current Securities Ownership Structure: The Reality of Multi-Layered Systems

What does it mean for investors to “own” shares in the US public markets? In fact, investors do not directly hold shares in listed companies.

The structure is as follows:

At the bottom layer is the company’s shareholder register. Managed by transfer agents, this register records only one name for almost all listed shares: Cede & Co.. This is the nominee holder designated by DTCC. Companies adopt this system to avoid the burden of maintaining records for millions of individual shareholders.

In the middle layer is DTCC itself. DTCC centrally manages the actual circulation of these securities by “freezing” their transfer. DTCC’s records only reflect “the rights of each participant to acquire a certain amount of shares,” i.e., rights claims.

At the top layer are the investors. Investors do not hold specific, distinguishable shares but rather legally protected securities entitlements. These are claims against brokers, representing an indirect ownership structure.

In other words, in the current system, the actual shares remain in the name of Cede & Co., and investors only “own” them indirectly through rights claims.

The DTCC Model: A Path Toward Modernizing the Existing System

DTCC’s tokenization involves changing this rights-claim record format. Originally, “rights” existed in a proprietary ledger, but now they will exist as “digital twin” tokens on an approved blockchain.

The key point is that the underlying securities remain under centralized control and are still registered in the name of Cede & Co. What changes are:

• Rights can be transferred 24/7
• Counterparty reconciliation costs are reduced
• Collateral liquidity becomes faster, and workflows are automated

The strength of this model is maintaining the efficiency of cross-border net settlement. The mechanism that compresses trillions of dollars of total transaction activity into hundreds of billions of dollars in final settlement is central to the current market structure, and this DTCC model preserves that.

However, there are important limitations. These tokens:

• Do not make holders direct shareholders of the company
• Are permissioned and remain as revocable rights claims
• Cannot serve as freely composable collateral in DeFi
• Do not alter the company’s shareholder register

In short, the DTCC model is an approach that optimizes the existing system while fully preserving the current intermediary structure and its efficient benefits.

Direct Ownership Model: Rebuilding Ownership Itself

The second model begins in a domain that the DTCC model cannot address: tokenizing the securities themselves.

In this approach:

• Ownership is directly recorded in the issuer’s shareholder register
• When tokens are transferred, the shareholder on the register changes accordingly
• Cede & Co. is removed from the ownership chain

This unlocks a series of capabilities that are structurally impossible under the DTCC model:

• Self-custody: investors hold private keys and manage assets themselves
• Direct relationships: no intermediaries between investors and companies
• Peer-to-peer transfers: transactions without permission
• Programmability and composability: combining collateral, lending, and new financial structures not yet invented

This model is not just theoretical; it is already being implemented. Galaxy Digital’s shareholders are tokenizing their shares via Superstate, holding them on the blockchain, and directly reflecting them in the issuer’s share register. By early 2026, Securitize plans to offer similar capabilities, enabling 24/7 trading supported by compliant securities firms.

Of course, this model also has trade-offs:

• Liquidity may fragment
• Cross-border net settlement efficiency may diminish
• Collateral and broker services need re-engineering
• Operational risks shift to the holders themselves

However, the greatest benefit for investors is agency. Investors gain the ability to actively evaluate options and decide whether to prioritize the freedom of direct ownership or the stability of the DTCC system.

Why These Two Models Are Not in Competition

These two paths of tokenization are not mutually exclusive but address different problems.

The issues solved by the DTCC model:

• Improving existing system efficiency
• Ensuring scalable operations
• Settlement certainty and regulatory continuity
• Meeting institutional participant needs

The issues addressed by the direct ownership model:

• Self-custody and asset management freedom
• Realizing programmable assets
• Chain-based composability
• Enabling new financial structures

Importantly, this transition will be a gradual process over several years. It requires simultaneous progress in technology, regulation, liquidity migration, and market readiness. Settlement rules, corporate actions, participant preparedness, and global interoperability will lag behind the technological developments.

Therefore, a more realistic outlook is coexistence. One will focus on infrastructure modernization, the other on ownership-level innovation. They are complementary; one cannot fully replace the other.

Impact on Market Participants: Who Will Change

Retail Investors

For retail users, the DTCC upgrade will be barely noticeable. Retail brokers already absorb friction (odd lots, instant purchases, weekend trading), and the experience depends on the broker.

The real change comes from the direct ownership model: self-custody, peer-to-peer transfers, instant settlement, and the ability to use shares as on-chain collateral. Currently, this is beginning as a pilot on some platforms and wallets, but in the future, it could become actual shares on the register.

Institutional Investors

Institutions are likely to be the biggest beneficiaries of DTCC tokenization. Their operations rely heavily on collateral circulation, securities lending, ETF fund flows, and inter-party reconciliations. Tokenized rights in these areas will significantly reduce operational costs and increase speed.

The direct ownership approach is especially attractive to opportunistic trading firms seeking programmable collateral and settlement benefits. However, due to liquidity fragmentation, broader adoption will likely expand gradually from the periphery of the market.

Brokers and Clearinghouses

Brokers are at the heart of the transformation. Under the DTCC model, their role is further strengthened. Clearing brokers adopting tokenized rights will differentiate themselves, and vertically integrated firms can build new products directly.

In the direct ownership model, brokers are not “eliminated” but restructured. Licensing and compliance remain necessary, but a series of native on-chain intermediaries will emerge and compete.

Conclusion: Agency Is the True Value

The future of tokenized securities is not about one model winning but both evolving in parallel and interconnected.

Rights tokenization continues to modernize the core of public markets, while direct ownership grows in areas emphasizing programmability and self-custody. The switching between these two will become increasingly seamless, ultimately forming a broader market interface.

Existing tracks will become faster and cheaper, while new tracks will emerge to support behaviors that current systems cannot.

The ultimate winners are not a specific model but the investors themselves. As long as the path of direct ownership exists, investors will have the active right to choose freely among different models. Gaining better infrastructure through competition and selecting the optimal system for their needs is the true significance of this financial revolution.