The agency released an investor bulletin Friday (Dec. 12), titled “Crypto Asset Custody Basics for Retail Investors,” a plain-language explainer of how digital assets are held, accessed and lost. For retail investors, the most consequential risk in crypto ownership is not price swings but control.
Specifically, it is who controls the private keys that grant access to digital assets. Lose the keys, and the assets are effectively gone. Entrust them to someone else, and a new set of risks emerges.
On the enablement side, the agency issued a no-action letter to the Depository Trust Company, allowing it to pilot a blockchain-based system for tokenized securities entitlements, a statement that framed tokenization as a “trending” but regulated evolution of market structure.
By experimenting with tokenized entitlements, the DTC is exploring whether distributed ledgers can improve reconciliation, transparency and operational efficiency without dismantling the roles of transfer agents, clearinghouses or custodians. This approach also reflects a growing consensus among large financial institutions that the future of tokenization is likely to be permissioned, not permissionless, and integrated, not parallel, to existing systems.
Read also: Conditional Charters Pull Crypto Closer to Core of US Banking
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The SEC Sends a Signal, Not a Sea Change
For retail investors, the SEC’s custody bulletin walks readers through the basic custody models, including self-custody using personal wallets and third-party custody via exchanges or service providers. Each option comes with trade-offs. Self-custody offers autonomy and censorship resistance but places the entire burden of security on the user. Third-party custody may offer convenience and recovery options but introduces counterparty risk, including hacking, mismanagement or insolvency.
What is notable is not the novelty of these points, which most crypto-native users are already familiar with, but the SEC’s tone. The bulletin is educational rather than prescriptive. It does not tell investors which custody model to choose. Instead, it emphasizes that there is no risk-free option and that investors should understand what they are giving up in exchange for convenience or control. It marks a shift from the agency’s former role as crypto’s chief antagonist toward a position of education.
The SEC is effectively saying that if you choose to hold crypto, you are choosing a responsibility that traditional financial systems typically abstract away.
While the investor bulletin is directed at individuals managing their own assets, the DTC no-action letter operates at the opposite end of the market. It addresses how traditional, regulated securities might be represented and transferred using blockchain technology.
The DTC, a subsidiary of the Depository Trust and Clearing Corporation, sits at the center of U.S. securities settlement. Its pilot program proposes to tokenize securities entitlements, allowing certain transactions and recordkeeping functions to occur on a distributed ledger. Importantly, the pilot does not replace existing systems wholesale. It operates alongside them, with strict participation requirements and registered wallet addresses.
See also: Institutional-Grade Custody Remains Missing Link in Crypto’s Mainstream Breakthrough
Why Blockchain Tokenization Is Trending for Financial Institutions
It would be a mistake to interpret these developments as a wholesale embrace of crypto by the SEC. For financial institutions, the focus is on controlled experimentation. Rather than issuing broad rulemakings, the SEC is using tools like no-action letters to allow specific pilots under defined conditions. Tokenization does not remove securities from the scope of federal securities laws. The implication is that it is simply a different technological wrapper. This gives market infrastructure providers room to innovate without creating regulatory precedents that could be misapplied.
Tokenization has caught the attention of some of the world’s biggest and most systemically important financial institutions. News broke Monday (Dec. 15) that J.P. Morgan Chase is reportedly deepening its blockchain efforts with its first tokenized money market fund. The private “My OnChain Net Yield Fund” is supported by J.P. Morgan’s tokenization platform, Kinexys Digital Assets.
On Thursday (Dec. 11), the bank successfully arranged a U.S. commercial paper issuance on the Solana blockchain in a separate blockchain finance initiative, marking one of the earliest debt issuances ever executed on a public blockchain.
