Ondo Finance has introduced a new primary-market process that allows approved institutions to mint and redeem Ondo Stocks by transferring the underlying shares or ETFs directly through Alpaca’s Instant Tokenization Network. The route is live on Ethereum and BNB Chain and sits alongside Ondo’s existing cash-funded minting model.

Under the new setup, eligible firms can use securities they already hold instead of supplying separate cash for each token creation. Ondo said access is granted case by case, and institutions must have active accounts with both Ondo and Alpaca before the feature is enabled.

How the conversion process works

For token minting, an approved institution moves the underlying stock or ETF from its Alpaca account to Ondo’s Alpaca account through an internal book transfer. Ondo then issues the matching tokenized position on a supported blockchain. Redemptions work in reverse, with the token redeemed first and the corresponding shares returned to the institution’s Alpaca account.

Ondo said the integration removes the need for manual approval on each individual conversion. The company presented the feature as a way for market makers and other institutions to shift inventory between traditional brokerage accounts and onchain markets more efficiently.

What changes and what does not

The new arrangement creates a specific exception for institutions admitted to the conversion program, because approved firms can redeem Ondo Stocks through the ITN process and receive the underlying shares back into their Alpaca accounts. That access depends on institutional approval and the required account setup, not simply on holding the tokens.

For ordinary Ondo Stocks holders, the general product terms remain unchanged. Ondo’s documentation says the tokens are offered only to eligible non-U.S. persons through its platform and are not available there to U.S.-based clients. The company also states that the tokens provide economic exposure to referenced securities but are not themselves stocks, ETFs or ADRs, and do not automatically entitle holders to receive the underlying securities.

Alpaca makes a similar distinction in its own disclosures, saying tokenized assets created through its network generally provide economic exposure to equities rather than direct ownership of the underlying company unless a specific structure provides otherwise.

Why Ondo says in-kind conversion matters

Before this launch, an institution using Ondo’s cash-funded route could already own the underlying securities but still need additional cash to mint corresponding Ondo Stocks. The in-kind route lets an approved participant contribute existing shares instead, eliminating that separate funding step.

Ondo said this could reduce financing needs and timing mismatches when institutions need to create more tokenized inventory. The company linked that operational change to the prospect of tighter spreads and deeper liquidity in secondary trading.

According to RWA.xyz, Ondo had $3.63 billion in distributed assets across 441 products as of Sept. 22. Ondo Stocks have a broader network presence than the new conversion feature itself, with the tokens available across Ethereum, BNB Chain and Solana, while in-kind conversions currently cover only Ethereum and BNB Chain.

Regulatory backdrop and next steps

The launch comes days after a Sept. 17 SEC order that created temporary, conditional exemptions for certain Tokenized Securities Venues, allowing qualifying platforms to facilitate trading in tokenized NMS stocks through permissioned automated market maker pools under specified conditions. Ondo did not say the new Alpaca service operates under that Innovation Exemption.

Ondo has separately pursued U.S. regulatory engagement. In April, it submitted a no-action request to the SEC seeking assurance on a model in which Ethereum would record tokenized security entitlements while Alpaca’s offchain books remained the official ledger. Ondo said in that proposal that the underlying securities would stay within the existing brokerage and DTC custody framework.

Another recent infrastructure milestone came on Sept. 16, when DTCC said Ondo subsidiary Oasis Pro Markets had joined Fund/SERV as the platform’s first tokenization-platform member. For the new Alpaca conversion route, Ondo has not announced a separate fee schedule, minimum conversion size, a Solana launch date or any broader timetable for opening access. Institutions that want to use the service must complete onboarding with both companies and request activation.

Source: crypto.news