Ondo Finance has introduced a new mechanism allowing eligible institutions to convert stocks and exchange-traded funds directly into tokenized equivalents, as well as redeem the tokens back into the underlying shares.
Under this system, approved institutions can transfer shares from their Alpaca accounts to Ondo via an internal book transfer. Following the transfer, corresponding Ondo Stocks tokens are issued onchain. The process operates in reverse as well, enabling institutions to redeem the digital tokens for the traditional underlying shares.
This new in-kind option complements Ondo’s existing cash-funded model. Previously, an institution holding underlying shares was required to provide separate cash to mint the corresponding tokens.
According to Ondo, the updated route enables institutions to utilize their existing shares, which could lower the additional capital required to generate tokenized inventory. The company noted that the change may also help decrease financing costs and mitigate timing mismatches between traditional shares and tokenized positions.
Currently, these conversions are supported on Ethereum and BNB Chain. Participation is limited to institutional clients approved by Alpaca who maintain active accounts with both Alpaca and Ondo.
Data from RWA.xyz indicates that Ondo operates as one of the largest tokenization platforms by onchain value, holding approximately $3.63 billion in distributed assets across 441 products and ranking second behind Securitize.
