Ondo opens new path for institutions to bring shares onchain

Ondo Finance has introduced a new way for approved institutions to turn shares they already hold, into tokenized stocks. This creates another route for bringing traditional assets onto blockchain networks.

The new in-kind conversion feature is available through Ondo Stocks and Alpaca’s Instant Tokenization Network (ITN). It allows eligible institutions to use existing share inventory to mint corresponding Ondo Stocks tokens rather than funding the transaction with cash.

The feature is live on Ethereum and BNB Chain.

Related: Ondo token jumps as SEC opens door to onchain stock trading

How the share conversion works

Under the new system, an approved institution transfers its underlying shares from its Alpaca account to Ondo’s Alpaca account through an internal book transfer. The corresponding Ondo Stocks tokens are then issued on the supported blockchain.

Institutions can also reverse the process. When they redeem their Ondo Stocks tokens, the underlying shares are returned to their Alpaca account.

Ondo said the integration automates the conversion process, meaning institutions do not need to obtain manual approval for every individual transaction.

Access is limited to institutions approved by Alpaca on a case-by-case basis. Institutions also need active accounts with both Ondo and Alpaca and must complete the required onboarding and approval process.

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Ondo targets deeper secondary-market liquidity

The new system builds on Ondo Stocks’ existing just-in-time minting and redemption model, which connects tokenized stocks and ETFs with liquidity from traditional markets including Nasdaq and the NYSE.

Previously, an institution holding the underlying shares would need to source separate cash to mint tokenized stocks. Ondo said this could create additional financing costs and a timing gap between traditional share holdings and tokenized positions.

Using existing shares removes that step. Ondo said the change can make it easier for market makers to replenish token inventories, manage their exposure and respond to demand across trading venues.

The company expects the more capital-efficient process to support tighter spreads. It also expects greater market depth across secondary markets, including exchanges, wallets and DeFi applications connected to the Ondo Stocks ecosystem.

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