SEC's 2-Year Blockchain Plan: The $12.6T Opportunity You Missed

SEC's 2-Year Blockchain Plan: Unlocking the $12.6 Trillion Opportunity in Traditional Finance

SEC Chair Paul Atkins recently stated his expectation that US financial markets will move “on-chain” within the next two years. This declaration, coming from the architect of “Project Crypto,” the SEC’s initiative to enable tokenized market infrastructure, is more than just a prediction – it’s a potential policy directive with massive implications. But what does “on-chain” truly mean when applied to the staggering $67.7 trillion in public equities, $30.3 trillion in Treasuries, and the $12.6 trillion daily repo market? And, crucially, which segments are poised to move first? Understanding the nuances of this shift is critical for investors, institutions, and anyone involved in the future of finance.

Decoding "On-Chain": A Four-Layer Framework

The transition to “on-chain” isn’t a singular event; it’s a complex, multi-layered process. It’s vital to move beyond the idealized vision of fully composable DeFi markets and recognize the pragmatic steps that will realistically unfold. We can break down this evolution into four distinct layers, each representing a different level of blockchain integration.

Layer One: Tokenization – Digital Wrappers for Traditional Assets

This initial layer involves issuing tokens that represent ownership of underlying securities. However, the core infrastructure remains traditional. Think of it as digitizing share certificates. Atkins explicitly frames this as smart contracts representing securities, not creating entirely new asset classes. This layer focuses on representation, not fundamental change to settlement processes.

Layer Two: Record of Entitlement & Transfer – Blockchain-Based Ownership

Here, the “who owns what” ledger is recorded on a blockchain, offering increased transparency and efficiency. However, settlement still occurs through existing clearinghouses like the DTCC. The SEC’s recent no-action letter on December 11th authorizing the DTCC to issue “Tokenized Entitlements” via approved blockchains exemplifies this layer. Crucially, this initial implementation is limited to registered wallets, with Cede & Co. retaining legal ownership and no initial collateral assigned. This means on-chain custody and 24/7 transfer are possible, but without immediately replacing existing netting processes.

Layer Three: On-Chain Settlement – The Cash Leg and DvP

This layer requires settlement to occur directly on-chain, utilizing stablecoins, tokenized deposits, or wholesale Central Bank Digital Currencies (CBDCs). Atkins discussed Delivery-versus-Payment (DvP) and the potential for T+0 settlement, acknowledging the central role of netting in current clearinghouse design. Real-time gross settlement fundamentally alters liquidity needs, margin models, and intraday credit lines – a far more complex undertaking than a simple software upgrade. This is where significant infrastructure changes are required.

Layer Four: Full Lifecycle Automation – The Ultimate Vision

This final layer encompasses the complete lifecycle of a security, including corporate actions, voting, disclosures, collateral posting, and margin calls, all executed via smart contracts. This touches upon governance, legal finality, tax treatment, and transfer restrictions. It’s the most ambitious stage and furthest from current SEC authority and market structure incentives. This is the true “holy grail” of on-chain finance, but also the most distant.

Sizing the Opportunity: A $12.6 Trillion Landscape

The potential benefits of on-chain adoption are enormous, even with incremental progress. Small percentage gains in massive markets translate to substantial value. Let’s examine the addressable universe:

• US Public Equities: $67.7 trillion market cap (SIFMA, 2025). 1% tokenization = $677 billion.
• Treasuries: $30.3 trillion outstanding volume (Q3 2025). Average daily trading volume of $1.047 trillion.
• Repo Market: A staggering $12.6 trillion in daily exposures (Office of Financial Research, Q3 2025). 2% tokenization = $252 billion.
• Corporate Bonds: $11.5 trillion outstanding, $27.6 billion daily trading volume.
• Agency Mortgage-Backed Securities: $351.2 billion daily trading volume (2025).
• Money Market Funds: $7.8 trillion in assets (early January 2026).
• Mutual Funds & ETFs: $31.3 trillion and $13.17 trillion respectively.

The repo market, in particular, presents a compelling use case. Tokenization’s promise of de-risking settlement and improving collateral mobility is most readily apparent in this space. Even a small shift – 0.5% to 2% – could represent $63 billion to $252 billion in daily transactions, offering significant operational and transparency benefits.

What Moves First: A Ladder of Regulatory Friction

Not all on-chain adoption faces the same hurdles. The path of least resistance begins with assets behaving like cash and progresses towards more complex, regulated areas. Here’s a likely progression:

1. Tokenized Cash Products & Short-Dated Bills: Already happening, with increasing adoption.
2. Tokenized Treasuries: Currently at $9.25 billion (RWA.xyz), poised for significant growth with expanded distribution channels. A 5-20x expansion over two years, reaching $40-180 billion, is plausible.
3. Collateral Mobility in Repo Markets: Tokenization of repo exposures could reduce settlement risk and operational overhead.
4. Permissioned Transfer of Securities Entitlements: The DTCC pilot program is a crucial step, allowing for 24/7 movement and programmable transfer logic.
5. Equities Settlement & Netting Redesign: Moving to T+0 or real-time gross settlement is complex, requiring significant changes to liquidity and margin requirements.
6. Private Credit & Private Markets: Slower to standardize due to transfer restrictions and complex deal terms.
7. Real-World Registries (e.g., Property Deeds): The slowest to adopt due to legal and administrative complexities.

The Reality of On-Chain Adoption: Permissioned vs. Public

Most tokenized securities will initially be “on-chain” in a permissioned sense, not fully open to the public. The DTCC’s pilot program, even on public blockchains, utilizes registered wallets and allowlisted participants. This aligns with Atkins’ vision of increased transparency and operational efficiency, but doesn’t necessarily equate to open, permissionless DeFi. The DeFi-addressable wedge is largest where the asset already functions like cash, such as tokenized bills and money market fund shares.

Stablecoins, with a $308 billion supply, provide a crucial bridging layer, enabling delivery-versus-payment without requiring a wholesale CBDC. Before stocks move on-chain, dollars already have.

Looking Ahead: Tracking the On-Chain Revolution

Atkins’ timeline focuses on the middle layers of on-chain integration – layer two entitlements and layer three experiments with specific asset classes and counterparties. Even 1% adoption across Treasuries, money market funds, and equities entitlements could represent over $1 trillion in on-chain representation.

The US isn’t alone in this pursuit. The UK’s Digital Securities Sandbox, Hong Kong’s digital green bonds, and the EU’s DLT Pilot Regime demonstrate a global commitment to modernizing market infrastructure.

Key metrics to watch include:

• DTCC’s quarterly reports on tokenized entitlements (value, transfers, wallets, chains).
• Repo transparency data from the Office of Financial Research.
• Assets under management in tokenized Treasuries and money market funds.
• Stablecoin supply as a proxy for settlement capacity.

These numbers will ultimately reveal whether Atkins’ vision of a market “on-chain in a couple of years” was a realistic policy goal or simply an aspiration. The next two years will be pivotal in shaping the future of finance.

Mentioned in this article

BlackRock Franklin Templeton Paul Atkins