Ondo Finance introduced a method that enables eligible institutions to directly convert shares and exchange-traded funds into their tokenized equivalents or redeem tokens in exchange for the underlying shares.
Under the new system, approved institutions can transfer shares from their accounts at Alpaca to Ondo via an internal bookkeeping transfer, after which the corresponding Ondo Stocks tokens are issued on-chain. The process works in reverse as well: institutions can redeem tokens in exchange for the underlying shares.
The in-kind conversion option complements Ondo’s existing cash-funded model. Under this model, even an institution that already holds the underlying shares must still separately provide cash to issue the corresponding tokens.
A new mechanism allows institutions to use existing shares instead, potentially reducing the amount of additional capital required to create tokenized inventory. Ondo stated that this change may also lower financing costs and timing discrepancies between traditional shares and tokenized positions.
Currently, conversion is available on the Ethereum and BNB Chain networks. Access is limited to institutional clients approved by Alpaca; participants also need active accounts at Alpaca and Ondo.
Ondo tokenized asset metrics. Source: RWA.xyz
Ondo has become one of the largest tokenization platforms by asset value on-chain. According to RWA.xyz data, 441 products account for about $3.63 billion in distributed assets, placing the platform second after Securitize.