Ondo Finance has introduced an institutional-grade solution designed to bridge the gap between conventional securities and their blockchain-based counterparts. In addition to cash, eligible organizations can now deliver the underlying shares themselves to obtain tokenized stocks and ETFs, removing the requirement to commit fresh capital for the minting process. Tokenized stocks and ETFs are blockchain representations of traditional securities that can be issued, held, and transferred on public networks. The new in-kind conversion route links Ondo Stocks with Alpaca's Instant Tokenization Network and is currently supported on Ethereum and BNB Chain.

Direct Conversion Between Shares and Tokens

The integration pairs Ondo Stocks with Alpaca's Instant Tokenization Network (ITN), which establishes a seamless link between traditional shares and their corresponding tokens. Alpaca, a brokerage infrastructure provider, hosts the accounts on both sides of the transfer, with the converting institution and Ondo each maintaining an Alpaca account for moving the underlying shares.

An approved institution proposes eligible share transactions from its Alpaca account to Ondo's Alpaca account through an internally approved book transfer. Ondo then creates the respective tokenized stocks or ETFs on a supported blockchain.

The process can also flow in reverse. An institution returns its Ondo Stocks tokens, and the corresponding shares are sent back to its Alpaca account. This creates a two-way conversion channel rather than a one-way issuance of tokens, allowing institutions to move between traditional and tokenized forms of the same security.

Access Remains Limited to Approved Institutions

The feature is not accessible to the public. Every institution is required to be approved by Alpaca and to complete the necessary onboarding procedures with both Alpaca and Ondo. Conversions are currently supported on Ethereum and BNB Chain, and use of the service is enabled only after activation is requested on the two platforms.

Existing Share Inventory Becomes Onchain Liquidity

Ondo already operates a cash-funded minting process for tokenized securities. In-kind delivery is a familiar mechanism in traditional ETF markets, where authorized participants have long been able to exchange baskets of underlying securities for newly created fund shares rather than paying cash. The new mechanism alters the capital requirements for institutions that already hold the underlying assets. Previously, an institution holding shares needed extra funds to establish the corresponding token position. Under the new route, tokens can be issued directly against in-kind converted shares.

Ondo believes that creating tokens from existing share inventory could facilitate deeper liquidity in the secondary market and limit funding friction. The change also reduces part of the time lag between traditional securities and their blockchain-based substitutes.

The shift carries particular importance for market makers and other institutional liquidity providers. For firms holding existing shares, it may be possible to convert shares into tokens more quickly in order to meet demand on secondary trading venues. The increased flexibility is expected to benefit Ondo by bringing more liquidity and depth to its tokenized assets.

Scale in the Tokenization Market

RWA.xyz data quoted in the coverage indicated that Ondo holds $3.63 billion in assets across 441 products on the platform, making it a significant player in the tokenization market.

The new conversion route provides institutions with an additional way to bring traditional asset value onto blockchain networks while retaining ownership of the underlying security. Further details are available in Ondo's official announcement.

This article was originally published by Crypto Ninjas: Ondo Unlocks $3.6B Tokenized Market With Direct Stock-to-Token Conversions.