The Repeal of SAB 121: A Harbinger for Dematerialization and the Digital Revolution in Capital Markets

We’ve been on a path to dematerialization since the 90s—here are the top 7 examples that the digital revolution is underway.

By Jay Biancamano
Head of Tokenization & Digital Assets, Platonic

Remember the days when stock certificates were physical, and you could literally hold a piece of paper to prove your investment? Yeah, that was a hassle. Thankfully, we’ve moved on. Dematerialization—aka swapping paper certificates for digital records—kicked off in the late 20th century, changing the game for U.S. financial markets. And now, with the repeal of SAB 121, we’re about to level up into the age of digitization.

Here’s a quick look at how the ’90s revolutionized trading, and how blockchain (the fancy new kid on the block) is taking it even further.

1. Efficiency & Speed: From snail’s pace to speed of light

Before: Investors had to physically hold and transfer certificates. Imagine the time it took to mail paper certificates around. Not exactly instant gratification.
After: We went electronic! Suddenly, trades that used to take days were done in minutes. The U.S. market switched to a T+2 system (two days to settle a trade, which has now transitioned to T+1), which was a huge leap forward.
Now: Blockchain can reduce settlement times from days to seconds—yes, seconds. Plus, no more market closures; trading is open 24/7. Forget waiting for the bell!

2. Lower Costs: More money for pizza (and stocks)

Before: Printing, handling, and mailing certificates wasn’t cheap. That all added up.
After: Digital records eliminated those costs. Not only did trading become cheaper, but more people could jump into the game.
Now: Blockchain’s decentralized magic could eliminate middlemen (goodbye, fees), and smart contracts can automate processes, reducing operational costs even more. Less overhead equals higher revenue. Developing and infusing smart contracts and blockchain with AI enables more perfect digitization solutions. Solutions that intelligently automate both deterministic (smart contracts and blockchain) and probabilistic (AI) business needs for much more activated, cost effective, and accessible industries.

3. Security & Transparency: Bye-bye fraud, hello clarity

Before: Physical certificates were prone to being lost, stolen, or (let’s be real) altered.
After: Electronic records helped reduce fraud and allowed better tracking through centralized systems such as the Depository Trust Company (DTC).
Now: Blockchain takes security to the next level with tamper-proof, immutable records. Plus, everything’s transparent and auditable in real-time, so no funny business can slip by unnoticed.

4. Increased Liquidity: More buying, less waiting

Before: Physically transferring securities was slow and awkward.
After: With electronic trading, stocks and bonds could move at lightning speed. More people could buy and sell without waiting on paperwork.
Now: Blockchain lets us tokenize assets, making it easier to trade even things such as real estate or art. Expanded ownership means more liquidity and new markets popping up everywhere … well everywhere they’re regulated and inter-operable.

5. Market Innovation: Bring on the shiny new financial products

Before: The paper-based system limited the pace of innovation for financial products.
After: Dematerialization allowed things such as ETFs and derivatives to flourish. New tech led to faster and more efficient trading platforms. Assets, though, remained static.
Now: Blockchain’s ability to automate processes means we can create new types of financial products—such as programmable securities that do everything from paying dividends to giving voting rights. The future’s looking creative and stateful.

Additionally firms can now leverage AI with on-chain processing to activate locked-in value of existing legacy systems and processes, as such this allows organizations to innovate without having to reinvent processes.

6. Globalization: The world . . . and beyond?

Before: Cross-border trading was a logistical nightmare with physical certificates involved.
After: Going digital made it easier for international investors to access U.S. markets. The world became a bit smaller, and the money flowed in.
Now: Blockchain’s borderless nature means international trades are smoother than ever. Whether you’re in the U.S. or on the moon (okay, maybe not the moon yet, but maybe the International Space Station soon), you can trade with ease.

7. Regulation: Playing by the new rules

Before: Dematerialization brought up all kinds of new regulatory headaches, from cybersecurity to defining ownership.
After: Regulators such as the SEC had to adjust to this new world of digital securities, making markets safer and more secure.
Now: Blockchain–with built-in compliance features and smart contracts that automate rules– is making it even easier for regulators. Less paperwork, more oversight, but with LOWER cost and risk.

Summary: The future is looking digital

Dematerialization changed everything in the 90s—efficiency soared, costs dropped, and markets became faster, safer, and more liquid. Now with the floodgates open, Blockchain will take that all to the next level, eliminating unnecessary costs and automating risky processes.  Firms need not just look to survive, but by embracing these changes and partnering with the right firms and technologies, could lead and thrive.

The future? It’s digital, and it’s brighter than ever.