When SEC Chair Paul Atkins announced in December that he expects US financial markets to transition "on-chain" within a couple of years, it wasn't just a casual forecast. Coming from the architect of "Project Crypto," the Commission's formal initiative to facilitate tokenized market infrastructure, this statement carries significant weight, blending prophecy with potential policy direction. However, understanding what "on-chain" truly signifies for markets spanning $67.7 trillion in public equities, $30.3 trillion in Treasuries, and a staggering $12.6 trillion in daily repo exposures requires a precise definition. The reality is far more layered and complex than a simple migration to decentralized finance (DeFi) endpoints.
Defining "On-Chain": A Four-Layer Stack
The journey to fully "on-chain" financial markets isn't a monolithic leap, but rather a progression through distinct stages. The crucial distinction lies between basic tokenized representations and comprehensive lifecycle automation. This four-layer framework helps us understand what is genuinely plausible within Atkins' two-year timeframe versus what might take decades to fully realize:
- Layer One: Issuance and Representation. This initial stage involves a digital token merely acting as a stand-in for an underlying security, while the existing, traditional financial plumbing remains largely untouched. Think of it as digitized share certificates. Atkins explicitly frames tokenization here as smart contracts representing securities that continue to operate under established SEC regulations, rather than creating entirely new asset classes.
- Layer Two: Record-of-Entitlement and Transfer. Here, the core ledger determining "who owns what" moves onto a blockchain. While ownership records are updated digitally and can be transferred more efficiently, the actual settlement process still occurs through incumbent clearinghouses. A significant step in this direction was the DTCC's December 11 no-action letter from the SEC Trading & Markets, which authorized The Depository Trust Company to issue "Tokenized Entitlements" to participants via approved blockchains. Importantly, this applies only to registered wallets, Cede & Co. retains legal ownership, and no initial collateral or settlement value is assigned. This innovation enables on-chain custody and 24/7 transfers without immediately disrupting the NSCC's netting systems.
- Layer Three: On-Chain Settlement with an On-Chain Cash Leg. This more advanced stage involves delivery-versus-payment (DvP) using native blockchain assets like stablecoins, tokenized deposits, or wholesale central bank digital currency (CBDC). Atkins has discussed the theoretical possibility of T+0 settlement but also acknowledged the fundamental role of netting in clearinghouse design. Implementing real-time gross settlement fundamentally alters liquidity needs, margin models, and intraday credit lines, making it a far more complex challenge than a simple software upgrade.
- Layer Four: Full Lifecycle On-Chain Solution. This represents the ultimate state, where all aspects of a security's lifecycle, including corporate actions, voting, disclosures, collateral posting, and margin calls, are entirely executed and managed via smart contracts. This final stage delves into governance, legal finality, tax treatment, and transfer restrictions, placing it furthest from current SEC authority and market incentives.
Atkins' two-year projection aligns most closely with the advancements in Layers Two and Three, rather than a full-scale migration to entirely composable DeFi markets.
The Enormous Prize: Sizing the Addressable Universe
Even modest adoption percentages in colossal markets translate into immense opportunities. The sheer scale of US financial assets underscores this:
- Public Equities: The US public equity market cap stood at $67.7 trillion at the end of 2025. Daily trading averaged 17.6 billion shares, with an estimated daily trading value around $798 billion. Even 1% of the equity market cap converted to tokenized entitlements would be $677 billion.
- Treasuries: This market reached $30.3 trillion in outstanding volume by Q3 2025, with an average daily trading volume of $1.047 trillion.
- The Repo Market: This is arguably the most significant opportunity. The Office of Financial Research estimates average daily repo exposures of an astounding $12.6 trillion in Q3 2025, encompassing cleared, tri-party, and bilateral arrangements. If tokenization can deliver on its promise of de-risking settlement and enhancing collateral mobility, repo is where the value proposition truly shines. Just 2% of daily repo exposure equates to $252 billion, a plausible early wedge for institutions seeking operational and transparency improvements.
- Corporate Credit and Securitized Products: Corporate bonds outstanding total $11.5 trillion, with an average daily trading volume of $27.6 billion. Agency mortgage-backed securities traded $351.2 billion per day in 2025, with non-agency MBS and asset-backed securities adding another $3.74 billion daily. These markets, with their existing custody chains and clearing infrastructure, are ripe for tokenization's streamlining benefits.
- Fund Shares: Money market funds hold $7.8 trillion in assets, mutual funds $31.3 trillion, and ETFs $13.17 trillion. Tokenized fund shares offer an easier entry point as they primarily involve the product wrapper layer, avoiding complex clearinghouse rearchitectures. Franklin Templeton's FOBXX already positions itself as an on-chain money fund, and BlackRock's BUIDL fund reached nearly $3 billion in assets last year, demonstrating the viability of tokenized Treasuries.
"Tokenized Treasuries tracked by RWA.xyz total $9.25 billion, making them a leading on-chain real-world asset category."
Real estate, while a massive asset class, presents a bifurcated challenge. Owner-occupied US housing had a market value of $46.09 trillion in Q3 2025, but county deed registries are unlikely to tokenize at scale in two years due to the slower pace of property law and administrative changes. However, the financialized segment, including REITs, mortgage securities, and securitized real estate exposure, already exists within securities infrastructure and can move on-chain sooner.
Navigating the Path: A Ladder of Regulatory Friction
Not all on-chain adoption will face the same level of resistance. The path of least resistance typically begins with products that mimic cash and gradually moves toward more complex assets or systems tied to local government administration:
- Tokenized Cash Products and Short-Dated Bills: These are already gaining traction. Tokenized Treasuries, at $9.25 billion, represent meaningful scale among real-world assets on-chain. If distribution expands through broker-dealer and custody channels, a five-to-twenty-fold expansion to $40 billion-$180 billion over two years is plausible, especially as stablecoin settlement infrastructure matures.
- Collateral Mobility: The $12.6 trillion daily repo footprint makes it the most compelling target for tokenization's delivery-versus-payment advantages. Even a modest shift of 0.5% to 2% of repo exposures to on-chain representation could mean $63 billion to $252 billion in transactions where tokenized collateral significantly reduces settlement risk and operational overhead.
- Permissioned Transfer of Mainstream Securities Entitlements: The DTCC's pilot, authorizing tokenized entitlements for Russell 1000 equities, Treasuries, and major-index ETFs held in registered wallets on approved blockchains, is a crucial step. If institutions embrace this as an operational upgrade (e.g., 24/7 movement, programmable transfer logic, improved transparency), 0.1% to 1% of the US equity market cap could become "on-chain eligible entitlements" within two years, representing $67.7 billion to $677 billion in tokenized claims.
- Equities Settlement and Netting Redesign: This sits higher on the friction ladder. Moving to T+0 or real-time gross settlement would necessitate profound changes to liquidity requirements, margin calculations, and intraday credit exposure. Central counterparty clearing relies on netting to drastically reduce required cash movements, and eliminating it would demand new intraday liquidity sources or a limited application of gross settlement.
- Private Credit and Private Markets: While substantial ($1.7 trillion to $2.28 trillion), these markets are characterized by transfer restrictions, servicing complexity, and bespoke deal terms that hinder standardization. Tokenization can aid fractional ownership and secondary liquidity, but regulatory clarity regarding exemptions and custody models is still developing.
- Real-World Registries: Tokenizing a property deed does not circumvent local recording statutes or title insurance requirements. Even if financial exposure moves on-chain through securitization, the legal infrastructure governing property ownership will evolve far more slowly.
Beyond the Hype: Realistic Scale and Institutional Focus
It's important to recognize that most tokenized securities will be "on-chain" but not necessarily open to the general public. The DTCC's pilot, for instance, operates with a permissioned model even on public blockchains, featuring registered wallets, allowlisted participants, and institutional custody. This still delivers the transparency and operational efficiency Atkins described; it just doesn't mean "anyone can provide liquidity."
The DeFi-addressable segment is most significant where the underlying asset already behaves like cash. Tokenized bills and money market fund shares are already functioning as collateral within crypto market infrastructure, with BlackRock's BUIDL serving as a prominent example. Stablecoins, with a collective supply of $308 billion, act as a crucial bridging layer, providing the on-chain settlement asset base that makes delivery-versus-payment feasible without an immediate wholesale CBDC. Essentially, before stocks move on-chain, dollars have already paved the way.
To quantify this, if tokenized Treasuries and money market fund products reach $100 billion to $200 billion, and 20% to 50% can be posted into permissioned or semi-permissioned smart contracts, this implies a plausible on-chain collateral base of $20 billion to $100 billion. This scale is sufficient to significantly impact repo workflows, margin posting, and institutional DeFi.
What This Means in Practice
While SEC Chair Atkins didn't lay out a detailed roadmap, the foundational elements for his two-year vision are clearly visible. The SEC's no-action letter to DTCC in December 2025 for piloting tokenized entitlements, the ongoing scaling of tokenized Treasuries and money market funds, and the robust stablecoin supply providing an on-chain cash layer all point to a tangible progression. The vast daily flows of the repo market, significantly dwarfing equities, stand out as the most compelling target for tokenization's risk-reduction and collateral mobility benefits.
The two-year timeline is not about every security migrating to public blockchains like Ethereum. Instead, it's about achieving critical mass within the middle layers of tokenization: Layer Two entitlements living on-chain but settling through established infrastructure, and Layer Three experiments where on-chain delivery-versus-payment occurs for specific asset classes and counterparties. Even at a modest 1% adoption across Treasuries, money market funds, and equity entitlements, we're looking at over a trillion dollars in on-chain representation. Furthermore, the US isn't alone in this endeavor; the UK, for example, has already opened its own Digital Securities Sandbox, signaling a global shift.
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