Ondo Finance has rolled out a new in-kind conversion system that lets approved institutions transform traditional stocks and exchange-traded funds directly into tokenized versions, using the underlying securities themselves rather than cash.
How the System Works
The mechanism allows qualified institutions to mint and redeem tokenized equities by depositing or withdrawing the actual shares that back them. Instead of selling stocks for cash and then using that cash to acquire tokenized versions, institutions can now move directly between the two forms, streamlining what has traditionally been a multi-step process.
This in-kind approach mirrors how ETF creation and redemption already function in traditional finance, where authorized participants exchange baskets of securities for fund shares. By applying the same model to tokenized assets, Ondo aims to reduce friction and make the bridge between conventional markets and blockchain-based finance more efficient.
Tokenized stocks are only as useful as the ease with which real securities can flow in and out of them.
Why It Matters for Institutions
For institutional players, the ability to convert holdings without liquidating into cash can offer meaningful advantages in cost, speed, and tax efficiency. Cash-based conversions often introduce trading costs and potential taxable events, while direct swaps of the underlying assets can sidestep some of those hurdles.
The move reflects a broader push across the industry to bring real-world assets on-chain in ways that appeal to regulated financial firms. Tokenized equities and funds have emerged as one of the most closely watched segments of the real-world asset trend, promising round-the-clock trading and programmable settlement.
Key features of the offering include:
- Direct minting and redemption using underlying securities
- Access limited to approved institutional participants
- Coverage of both tokenized stocks and ETFs
As tokenization gains traction among established financial institutions, systems that closely replicate familiar market infrastructure could prove central to wider adoption. Ondo's latest offering positions the firm to capitalize on growing interest in blending traditional securities with blockchain rails.