Ondo Adds In-Kind Route for Tokenized Stock Conversions

Ondo Finance has launched a system letting eligible institutions convert stocks and exchange-traded funds directly into tokenized equivalents, or redeem those tokens back for the underlying shares, without needing separate cash to fund the mint.

The feature adds an in-kind route to Ondo’s existing model and is live now on Ethereum and BNB Chain, though access remains restricted to institutional clients cleared by Alpaca.

Ondo’s In-Kind Conversion System for Tokenized Stocks

Under the new mechanism, approved institutions transfer shares from their Alpaca accounts to Ondo through an internal book transfer. Ondo then issues corresponding Ondo Stocks tokens onchain, matching the transferred position one for one.

The process also runs in reverse. Institutions holding Ondo Stocks tokens can redeem them for the underlying shares, which flow back through the same book-transfer mechanism rather than an open-market sale.

This differs meaningfully from Ondo’s prior setup. In the cash-funded model, an institution that already owned the underlying shares still had to supply separate cash to mint the matching tokens. Rather than using the shares already held to create the tokenized position, the institution had to fund the mint separately with cash. The in-kind route allows those existing shares to be used for the conversion instead. The feature is available through Ondo Stocks and Alpaca’s Instant Tokenization Network, using the internal transfer process between the relevant Alpaca accounts.

The in-kind option removes the separate-cash step in the prior funding process, potentially cutting the amount of additional capital needed to build tokenized inventory. Ondo said the change could reduce financing costs and narrow the timing gap that opens up between a traditional share position and its tokenized counterpart. Ondo also said the integration automates the conversion process, so institutions do not need manual approval for every individual transaction. The company said the more capital-efficient process can help market makers replenish token inventories, manage exposure and respond to demand across trading venues. It expects the process to support tighter spreads and greater market depth across secondary markets connected to the Ondo Stocks ecosystem. That mirrors a broader trend already visible in how existing publicly traded shares get tokenized while retaining traditional-market access, where the friction point has typically been reconciling onchain and offchain settlement timing rather than the tokenization itself.

Tokenization Platform Context

Ondo’s push into more capital-efficient minting comes as the firm positions itself among the largest players in the tokenization space by onchain value. According to data from RWA.xyz cited alongside the announcement, Ondo has roughly $3.63 billion in distributed assets spread across 441 products, placing it second in the sector behind Securitize.

That scale is the backdrop against which the in-kind conversion matters most. A platform managing hundreds of distinct tokenized products has a direct incentive to strip out unnecessary capital requirements from its minting pipeline, since every dollar of cash previously needed to match an existing share position was capital sitting idle rather than available for other use.

Ondo’s announcement focuses on the mechanics of creating and redeeming tokenized positions: underlying shares move through internal book transfers, corresponding tokens are issued onchain, and redeemed tokens are exchanged for the underlying shares.

Regulatory and Access Constraints

The feature is not open to retail users or unaffiliated institutions. Access requires approval from Alpaca specifically, and participants need active accounts with both Alpaca and Ondo before any conversion can take place.

That gatekeeping structure matters for anyone assessing how quickly this could scale. Alpaca approval is handled on a case-by-case basis, and institutions must complete the required onboarding and approval process before using the in-kind route. Active accounts with both Alpaca and Ondo are also required. Once those conditions are met, an institution can transfer underlying shares from its Alpaca account to Ondo’s Alpaca account through an internal book transfer and receive the corresponding Ondo Stocks tokens on a supported blockchain. On redemption, the underlying shares are returned to the institution’s Alpaca account. The stated conditions therefore limit use of the conversion route to institutions that satisfy the approval, onboarding and account requirements.

Nothing in Ondo’s announcement describes a change in securities regulation, a new exemptive framework, or a shift in how tokenized stocks are treated by regulators. The mechanism is purely operational – an internal book-transfer process between Alpaca and Ondo accounts – and readers should treat any claims about broader regulatory shifts tied to this specific launch as separate from what Ondo actually announced.

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