Ondo Finance has launched a mechanism enabling eligible institutions to convert stocks and exchange-traded funds directly into their tokenized equivalents or redeem tokens for underlying shares. Under this new system, approved institutions can transfer shares from their Alpaca accounts to Ondo through an internal book transfer, resulting in the issuance of corresponding Ondo Stocks tokens onchain. The process operates bidirectionally, allowing institutions to redeem these tokens for the original shares.
This in-kind option supplements Ondo’s existing cash-funded model, which previously required institutions holding underlying shares to provide separate cash to mint corresponding tokens. By allowing the use of shares instead, the new route potentially reduces the additional capital needed to create tokenized inventory. Ondo stated that the change could also lower financing costs and mitigate timing mismatches between traditional share holdings and tokenized positions. Currently, these conversions are available on Ethereum and BNB Chain, with access restricted to institutional clients approved by Alpaca who maintain active accounts with both platforms. According to RWA.xyz data, Ondo ranks as the second-largest tokenization platform by onchain value, managing approximately $3.63 billion in distributed assets across 441 products.
The introduction of in-kind conversion capabilities addresses a critical friction point in the adoption of real-world asset (RWA) tokenization: capital efficiency. Previously, the requirement to deploy fresh cash to mint tokens against already-held equities created unnecessary liquidity drag and operational complexity for institutional investors. By integrating directly with Alpaca’s infrastructure for book transfers, Ondo streamlines the bridge between traditional brokerage accounts and onchain settlement, effectively lowering the barrier to entry for institutions seeking to tokenize existing portfolios without liquidating positions or securing additional funding lines.
From a market structure perspective, this development highlights the growing importance of custody and compliance integration in the RWA sector. Restricting access to approved institutional clients with dual-account requirements ensures regulatory adherence while leveraging established broker-dealer relationships. As Ondo competes with Securitize for dominance in the multi-billion dollar tokenization space, features that reduce financing costs and timing mismatches may become standard expectations for institutional-grade platforms. This move signals a maturation of the sector, shifting focus from mere asset listing to optimizing the operational workflows that underpin large-scale institutional participation.
