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Key Takeaways
- Stablecoins and tokenized deposits are emerging as the key on-chain rails for institutional settlement.
- Institutional pilots are testing stablecoins and tokenized deposits as fast, programmable settlement rails.
- On-chain settlement is shifting focus from tokenized assets to the cash leg, with stablecoins leading the way.
- Stablecoins and tokenized bank money are becoming central to post-trade settlement infrastructure.
Wall Street’s shift to on-chain operations is moving beyond buzzwords and into practical settlement design.
Tokenization projects are often promoted as “faster assets,” promising quicker trading and settlement.
However, for these tokenized instruments to work efficiently, the cash leg has to match the speed, finality, and compliance of the on-chain assets.
That’s where stablecoins, along with their close cousin, tokenized bank deposits, are stepping in to take on a new role as the backbone of institutional settlement rails.
Market Infrastructure Is Moving First
The clearest signal is coming from market infrastructure itself.
In December 2025, the Depository Trust & Clearing Corporation (DTCC) said its subsidiary, the Depository Trust Company (DTC), received the Securities and Exchange Commission (SEC) no-action relief to offer a tokenization service for real-world, DTC-custodied assets in a controlled production environment.
DTC expects to begin rolling out the service in the second half of 2026, with the no-action relief running for three years.
The second signal is regulatory.
On Mar. 2, 2026, the Office of the Comptroller of the Currency (OCC) published a notice of proposed rulemaking to implement the GENIUS Act framework for “payment stablecoins” by entities under its jurisdiction, with comments expected 60 days after Federal Register publication (due May 1, 2026).
In other words, the post-trade utility is building the tokenized asset leg, and the bank supervisor is sketching the stablecoin rulebook.
Those moves are not the same story, but they rhyme.
Settlement Is the Boring Word That Controls Everything
In market plumbing, “settlement” is when trades become real: ownership and cash are exchanged with finality.
Traditional finance achieves that through a layered stack—custody, clearing, messaging, correspondent banking, cut-off times, and batch processing.
t functions, but it does not always support on-collar mobility or programmable transfer logic.
Tokenization shifts the architecture.
The ledger becomes a shared coordination surface.
Assets can be transferred more continuously.
Corporate actions, restrictions, and disclosures can be encoded. Post-trade processes can be automated.
But there is a catch that keeps resurfacing in every institutional pilot. A tokenized asset does not settle without a settlement asset.
In crypto, stablecoins filled that role by default.
In mainstream markets, settlement assets are typically forms of bank money—commercial bank deposits and central bank money—wrapped in compliance, supervision, and operational resilience.
That is why the on-chain debate is increasingly less about “tokenized securities” and more about “tokenized money.”
The Bank for International Settlements (BIS) has noted that much of official-sector tokenization work has focused on settling tokenized assets in central bank money.
DTCC’s Tokenization Push: From Theory to Controlled Production
DTCC’s move is a post-trade narrative.
Its Dec. 11 release frames the tokenization service as an SEC no-action-authorized program to tokenize “real-world, DTC-custodied assets” in a controlled production environment, with DTC expecting rollout in the second half of 2026.
The SEC no-action letter request provides the operational details. DTC participants would register one or more “Registered Wallets” on an approved blockchain to hold tokens corresponding to “tokenized entitlements,” with participation voluntary and bounded by eligibility constraints.
SEC Commissioner Hester Peirce described the program as a pilot that “marks a significant incremental step in moving markets on-chain,” with DTC software tracking transfers for its official books and records.
This matters for the “stablecoins as settlement rail” thesis because it clarifies what “moving markets on-chain” looks like in institutional reality.
Incremental, constrained at the participant layer, and still anchored in existing legal and record-keeping structures.
In that setup, the cash leg becomes the next engineering constraint.
Tokenized Treasuries and On-Chain Repo: Where the Cash Leg Stops Being Abstract
The “cash leg” becomes visible the moment you talk about repo.
Repo is the market’s daily oxygen: borrowing cash against high-quality collateral (often government bonds), sometimes intraday.
Faster collateral mobility can reduce trapped liquidity and frictions, but only if cash can move with comparable speed and controls.
DTCC’s Dec. 17 announcement with Digital Asset and the Canton Network is a clear example of that direction.
DTCC said it plans to enable a subset of U.S. Treasury securities custodied at DTC to be minted on Canton, with an MVP targeted for the first half of 2026.
The Canton ecosystem is also showing the repo use case in motion.
A Feb. 24, 2026, press release from Digital Asset describes the completion of a fourth set of transactions on Canton.
This includes the first cross-border intraday repo using tokenized gilts and the first cross-currency intraday repo using tokenized gilts against non-GBP tokenized deposits.
Crucially, the cash leg here is not “a stablecoin” in the retail sense.
The release cites LSEG’s DiSH Cash, describing commercial bank deposits held on its ledger and positioning DiSH as a “trusted third-party cash leg” for digital asset transactions.
That distinction matters. A lot of “stablecoin settlement” narratives collapse three different settlement assets into one bucket:
- Fiat-backed stablecoins (typically non-bank issuers, sometimes bank-affiliated);
- Tokenized bank deposits or deposit tokens (commercial bank money, tokenized);
- Tokenized central bank money (e.g., wholesale CBDC).
Institutional pilots are increasingly testing deposit-token-like settlement assets.
This is because they can inherit bank compliance and prudential frameworks while gaining programmability.
The stablecoin thesis still holds, but it becomes broader: on-chain settlement rails are likely to be plural, not a single winner-take-all token.
The U.S. Is Trying to Make Stablecoins Behave Like Payment Infrastructure
If stablecoins are going to function as the cash leg for tokenized markets, supervisors want them to behave like payments infrastructure, not like yield wrappers.
The OCC’s Mar. 2, 2026 GENIUS Act implementing proposal maps directly onto “settlement rail” requirements:
- Timely redemption defined. The OCC proposes defining “timely” as redeeming a payment stablecoin no later than 2 business days following the date of the requested redemption, framed as an outer limit.
- Stress-mode extension rules. The proposal provides for a non-discretionary extension of the redemption period to 7 calendar days if redemption requests exceed 10% of outstanding issuance value in a single 24-hour period, applying to outstanding and subsequent requests once the threshold is met.
- Reserve liquidity and interest-rate risk constraints (safe harbor concepts). The proposal discusses a safe harbor design including a minimum “daily liquidity” requirement (10% example tied to demand deposits or funds at a Federal Reserve Bank) and a weighted-average-maturity concept (20-day example) to constrain interest-rate exposure.
- Yield prohibition and anti-evasion logic. The GENIUS framework focuses on payment and settlement use rather than “interest-bearing stablecoin accounts.” The OCC proposal outlines measures to stop yield from being paid directly or indirectly to stablecoin holders.
Stablecoins face a straightforward tradeoff: as they approach infrastructure status, regulators treat them more like infrastructure—enforcing redemption performance, reserve discipline, and product design constraints.
A Jurisdictional Rulebook Is Forming
Hong Kong’s stablecoin issuer licensing regime has been in force since Aug. 1, 2025, under the Stablecoins Ordinance.
Hong Kong Monetary Authority (HKMA) Chief Executive Eddie Yue said the regulator expects to issue its first batch of issuer licenses in March 2026, with only a “very small number” initially.
Europe has taken a different route: MiCA defines stablecoin-like instruments through asset-referenced tokens (ARTs) and e-money tokens (EMTs) under an EU-wide authorization and supervision perimeter.
The U.K. has carved out a systemic stablecoin lane.
The Bank of England launched a consultation on a proposed regulatory regime for sterling-denominated systemic stablecoins.
It described use cases that include retail payments and wholesale settlement.
The rulemaking is being paired with live testing. Revolut will trial a pound stablecoin in an FCA sandbox alongside other firms.
Singapore has already set out a framework for single-currency stablecoins pegged to SGD or G10 currencies, issued in Singapore.
The macro point is that regulators are treating stablecoins as more than crypto plumbing.
In early March 2026, an ECB study warned that expanding stablecoin use in the euro zone could undermine monetary policy effectiveness and disrupt bank funding dynamics—one reason Europe is pushing for robust regulation.
Tokenization Advances, but “Cash on Chain” Remains Politically Loaded
Even as stablecoins gain utility, central bank institutions have been blunt about what stablecoins fail to provide as “money.”
The BIS has argued that stablecoins fall short as “sound money” on properties like singleness (everyone accepting money at par) and elasticity (the ability to expand safely under stress).
The bank has compared issuer-tagged stablecoin money to historical private banknotes.
The International Organization of Securities Commissions (IOSCO), meanwhile, has warned that tokenization’s benefits are not guaranteed and can introduce new risks or amplify old ones.
This is especially around clarity of rights, operational dependencies, and settlement arrangements when on-chain assets interface with off-chain rails.
That skepticism helps explain why tokenized deposits and central bank settlement experiments are evolving in parallel with stablecoin rulemaking.
Regulators may accept stablecoins as part of the settlement mix, but many would prefer settlement assets that look like supervised bank money or central bank money.
What To Watch Next
If “Wall Street is moving on-chain” becomes real, market structure questions will define the next phase.
- Which settlement asset becomes dominant in which use case? Retail remittances and crypto trading may continue to default to fiat-backed stablecoins. Meanwhile collateral workflows may lean toward tokenized deposits or permissioned cash networks.
- How strict do redemption and reserve rules get in practice?
In the U.S., the OCC’s redemption definitions, stress extensions, and reserve constraints will determine how regulators allow “cash-like” payment stablecoins.
- Whether tokenized markets scale without fragmenting into silos.
>DTCC’s approach—controlled production, pre-approved blockchains, registered wallets—may be a template. Still, it also raises the interoperability question. Do tokenized assets and settlement assets move across networks without recreating the same old frictions in new form?
Pilots, regulation, and post-trade integration are turning tokenization into a market structure.
Stablecoins and tokenized deposits increasingly sit at the center of that structure as settlement assets for tokenized bonds, Treasuries, and repo-style collateral workflows.
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PhD, researcher and writer exploring AI, blockchain, and the philosophy of tech, with a focus on DeScAI, governance, and trust.
