The U.S. Securities and Exchange Commission on May 28 granted Paxos Securities Settlement Company (PSSC) temporary registration as a clearing agency under Section 17A of the Securities Exchange Act of 1934. PSSC is the first and only blockchain-native firm authorized to clear and settle U.S. equi...
"Paxos' clearing agency registration is the result of seven years of work with the SEC, beginning with our No-Action Letter in 2019 and the settlement pilot we operated with some of the world's largest and most sophisticated financial institutions." — Charles Cascarilla, CEO, Paxos
The U.S. Securities and Exchange Commission on May 28 granted Paxos Securities Settlement Company (PSSC) temporary registration as a clearing agency under Section 17A of the Securities Exchange Act of 1934. PSSC is the first and only blockchain-native firm authorized to clear and settle U.S. equity transactions as a central securities depository. The registration, valid for 18 months, permits same-day (T+0) delivery-versus-payment settlement of eligible securities on a private permissioned ledger.
The approval lands one week after a separate development at the opposite end of the market: the Depository Trust & Clearing Corporation (DTCC), which custodies $114 trillion in assets and processes roughly $3.8 quadrillion in securities annually, confirmed a July 2026 pilot for tokenized securities on distributed ledger technology, with a full commercial launch in October. More than 50 financial institutions — including BlackRock, Goldman Sachs, JPMorgan, Morgan Stanley, and Bank of America — are participating. On May 27, DTCC also announced it would extend tokenized asset connectivity to the Stellar public blockchain in the first half of 2027.
These two events, arriving within days of each other, mark the point at which blockchain-based settlement moves from proof-of-concept to regulated financial infrastructure in the world's largest capital market.
The SEC's May 28 order is the culmination of a regulatory engagement that began in 2019 with a No-Action Letter. Starting in February 2020, Paxos operated a live pilot clearing and settling U.S. equities on blockchain rails under that no-action relief, with participation from major global financial institutions. Cascarilla called the registration "the most important regulatory milestone in our history."
The registration was published in the Federal Register on May 29, 2026, under docket number 34-105562. It grants PSSC temporary status as a clearing agency with an exemption from Sections 17A(b)(3)(A) and 17A(b)(3)(F) of the Exchange Act. The temporary period is 18 months.
PSSC operates on a private permissioned blockchain — not a public chain. It tokenizes both the securities and the cash leg of each transaction on the Paxos ledger, enabling bilateral delivery-versus-payment (DvP) settlement. During the temporary registration period, the system supports bilateral netting between counterparties. Multilateral netting — the mechanism that allows dozens of firms to offset trades against each other simultaneously, as DTCC does today — is planned for a future phase.
The operational launch is targeted for no earlier than March 2027, according to reporting from WatersTechnology and Ledger Insights.
The registration authorizes PSSC to act as a central securities depository and to clear and settle transactions in eligible securities. The system records ownership and settles trades on the permissioned blockchain, enabling same-day T+0 settlement.
Several constraints apply. The registration is temporary, not permanent. PSSC must operate under ongoing SEC oversight, with reporting obligations attached. The system currently supports only bilateral settlement; the multilateral netting capabilities that underpin large-scale market efficiency are not yet available. The eligible securities universe has not been publicly specified in detail, though the pilot phase involved U.S. equities.
Penalty regimes for non-compliance with clearing agency obligations are significant. The SEC retains authority to modify or revoke the registration at any time.
For context, the current U.S. settlement standard is T+1, implemented in May 2024. The SEC estimated at the time that moving from T+2 to T+1 cut the volatility component of clearinghouse margin requirements by up to 41% in extreme scenarios. A further move to T+0 would theoretically eliminate settlement-window counterparty risk entirely, though it introduces new operational requirements around real-time liquidity and trade matching.
While Paxos arrives as a challenger, DTCC is moving blockchain technology inside its existing monopoly infrastructure. On December 11, 2025, the SEC's Division of Trading and Markets issued a No-Action Letter permitting DTC to conduct a three-year voluntary tokenization pilot for DTC-custodied assets.
The pilot covers a defined set of highly liquid securities: U.S. Treasury securities, Russell 1000 equities, and selected index-tracking ETFs. Under the program, participating DTC members may elect to have their security entitlements recorded on distributed ledger technology rather than exclusively on DTC's centralized ledger.
Key operational details:
The dual-track approach — Canon Network for institutional permissioned use, Stellar for public chain interoperability — reflects DTCC's stated "multi-chain strategy." Tokenized assets will carry the same investor protections, corporate actions reporting, and entitlements as their traditional counterparts.
The economic case for blockchain-based settlement rests on three quantifiable factors: margin reduction, capital liberation, and operational cost compression.
Margin requirements. DTCC estimated that the U.S. move from T+2 to T+1 freed over $20 billion in margin requirements. The SEC noted margin volatility components could drop by 41% in stress scenarios. A move to T+0 would reduce the settlement risk window to near-zero, though the precise margin savings depend on netting efficiency and real-time liquidity availability.
Trapped collateral. In the current model, capital sits in clearing accounts to cover potential settlement failures during the 24-hour T+1 window. Instantaneous settlement releases this capital for redeployment. For broker-dealers managing billions in client assets, even marginal improvements in capital velocity translate to measurable return-on-equity gains.
Operational overhead. Legacy post-trade infrastructure involves reconciliation across multiple intermediaries — clearinghouses, custodians, transfer agents, and depositories. Blockchain-based settlement collapses these functions into a single ledger, reducing reconciliation failures, exception handling, and manual intervention. The cost savings are difficult to quantify at the system level, but individual firms participating in Paxos's pilot reported improved operational efficiency and reduced costs, according to Paxos's SEC filing.
However, the economic picture is not uniformly positive. Blockchain settlement requires new infrastructure investment — node operation, smart contract auditing, cybersecurity, and integration with legacy systems. Firms must maintain parallel capabilities during the transition period. Regulatory compliance costs, including enhanced reporting and ongoing SEC oversight, add to the expense.
The subsidy question also applies. To date, Paxos has operated under venture-backed economics. The company's clearing pilot was sustained through external capital, not clearing-fee revenue. Whether PSSC can generate sufficient fee income to operate as a self-sustaining clearing agency — without the implicit subsidy of DTCC's network effects and monopoly position — remains unproven.
Bilateral vs. multilateral netting. PSSC currently supports only bilateral netting. DTCC's National Securities Clearing Corporation (NSCC) nets approximately 98% of equity trades multilaterally, dramatically reducing the number of actual securities movements required. Without multilateral netting, PSSC would require significantly more liquidity and collateral per transaction than the incumbent system. This is the single largest structural gap between the blockchain challenger and the legacy monopoly.
Eligible securities scope. The DTCC pilot covers a defined universe of highly liquid assets — Russell 1000 stocks, Treasuries, and major ETFs. Paxos's eligible securities set has not been publicly detailed beyond "U.S. equities." Neither system addresses the long tail of less liquid securities, fixed income, or derivatives clearing.
Interoperability. DTCC's multi-chain strategy (Canton Network plus Stellar) anticipates a world of interconnected blockchain rails. Paxos operates on a single private ledger. As tokenized securities proliferate across multiple chains and platforms, cross-chain settlement interoperability becomes a systemic requirement that neither party has fully solved.
Regulatory durability. Both approvals are explicitly temporary. PSSC's registration lasts 18 months. DTCC's pilot No-Action Letter expires after three years. Permanent clearing agency status or permanent tokenization authority will require separate SEC action, likely involving public comment periods and additional conditions.
DeFi exclusion. Neither development has any direct bearing on decentralized finance. Both systems operate within permissioned, regulated frameworks. Public chain connectivity (via Stellar for DTCC) is limited to asset representation, not to permissionless trading or settlement. The gap between regulated blockchain settlement and DeFi's permissionless ethos remains wide.
The last week of May 2026 produced the clearest signal yet that blockchain-based settlement is transitioning from experimental to operational in U.S. capital markets. The simultaneous arrival of a blockchain-native challenger (Paxos) and a legacy incumbent's blockchain adaptation (DTCC) creates a competitive dynamic that did not exist six months ago.
The market structure implications are significant but bounded. Paxos offers a new settlement pathway for broker-dealers willing to adopt blockchain rails, but its bilateral-only netting and temporary license limit near-term scalability. DTCC's tokenization pilot preserves the incumbent's network effects while adding blockchain-based record-keeping as an optional layer, but explicitly prohibits tokenized assets from carrying settlement or collateral value during the pilot.
The question is no longer whether blockchain technology will be used in securities settlement. It is whether the economic benefits — lower margin requirements, faster capital turnover, reduced reconciliation overhead — are sufficient to justify the infrastructure transition costs. The data from these two programs, expected to accumulate through 2027 and 2028, will provide the first empirical answers. Until then, both approvals should be understood as regulatory experiments, not as confirmation that the post-trade landscape has permanently changed.