Ondo Finance Unveils In-Kind Conversion for Tokenized Securities and ETFs
Approved institutional clients can now swap traditional stocks directly for on-chain tokenized equivalents through Ondo's new system.
Expanding its footprint in institutional decentralized finance, Ondo tokenized stocks can now be minted and redeemed through direct in-kind exchanges of underlying equities and exchange-traded funds. The mechanism enables pre-approved institutions to deposit traditional securities rather than cash to receive corresponding tokenized assets on-chain, streamlining the gateway between conventional equity brokerages and decentralized ecosystems.
Under the newly launched operational workflow, qualified institutional participants avoid the friction and potential tax liabilities associated with selling off shares for cash before acquiring tokenized equivalents, according to Cointelegraph. The system works inversely as well, allowing token holders to redeem their digital shares directly back into traditional custody accounts as physical equities, creating an arbitrage loop that supports asset price parity.
Real-world asset protocols have rapidly expanded beyond US Treasury yields into equity markets, private credit, and commodities. While cash-to-token on-ramps are standard, institutional funds often maintain large, static equity portfolios that are costly to liquidate. By supporting direct in-kind processing, the platform is mirroring classic exchange-traded fund primary market creation and redemption dynamics.
Market participants have welcomed the feature as a structural leap that could boost secondary market liquidity across on-chain securities. However, legal and compliance experts note that navigating securities regulations across different jurisdictions remains complex, particularly around investor accreditation, custody ownership validation, and transfer restrictions.
Looking forward, industry observers will watch the adoption rate among traditional broker-dealers and family offices seeking on-chain collateral. If successful, in-kind creation and redemption could become the gold standard for institutional real-world asset protocols bridging traditional stock markets with web3 rails.
Key takeaways
- Ondo now permits approved institutions to mint tokenized assets directly using underlying shares.
- In-kind creation and redemption eliminates the friction and tax drag of liquidating equities to cash.
- The structure mirrors traditional ETF operations to improve on-chain liquidity and arbitrage efficiency.