Ondo Finance Enables Institutions to Directly Convert Stocks into Tokenized Shares
Ondo Finance has introduced a new solution allowing approved institutional investors to directly convert stocks and exchange-traded funds (ETFs) into tokenized equivalents, as well as redeem tokens to reclaim the underlying shares. This system facilitates internal transfer of securities and reduces the need for extra capital when minting tokenized assets.
Conversion Process Between Stocks and Tokens on Ondo Finance
Approved institutional clients can transfer shares from their Alpaca accounts to Ondo through an internal book transfer mechanism. Corresponding Ondo Stocks tokens are then minted on the blockchain.
The process also works in reverse, allowing institutions to redeem tokens for the underlying shares, simplifying transfer and enhancing flexibility in handling tokenized assets.
Benefits and Current Status of Ondo Platform
Previously, institutions needed to provide separate cash to mint tokens even if they already held the underlying shares. The new in-kind method allows the use of existing shares, reducing the need for additional capital.
Currently available on Ethereum and BNB Chain, access is restricted to Alpaca-approved institutional clients with active accounts on both platforms. According to RWA.xyz, Ondo ranks among the largest tokenization platforms by onchain value with $3.63 billion spread across 441 products, second only to Securitize.
Why it matters
Ondo Finance's innovation is significant for institutional investors because it simplifies the creation and circulation of tokenized shares. The ability to use existing shares instead of bringing in cash reduces capital expenditures and addresses timing mismatches between traditional and tokenized assets. This promotes wider adoption of tokenization in traditional financial markets, enhancing liquidity and transparency.
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