Ondo Finance has introduced a new system that allows eligible institutions to convert stocks and exchange-traded funds directly into tokenized shares, and redeem those tokens for the underlying securities. Under the new model, approved institutions can transfer shares held in their Alpaca accounts to Ondo through an internal book transfer.
Ondo then issues corresponding tokenized shares onchain. The process also works in reverse, allowing institutions to redeem the tokens for the underlying stocks. The new in-kind route is available on Ethereum and BNB Chain, although access is currently limited to approved institutional clients.
Introducing a new way to bring shares onchain.
Starting today, approved institutions can use shares they already hold to mint Ondo Stocks through Alpaca’s Instant Tokenization Network.
This gives institutions a direct path from existing share inventory to onchain markets,… pic.twitter.com/70VKVGaKnb
— Ondo Finance (@Ondo) September 21, 2026
The new system expands Ondo’s existing model for creating tokenized stocks. Previously, institutions using the platform’s cash-funded model had to provide separate cash to mint the corresponding tokens, even if they already owned the underlying shares.
The in-kind system changes that process. Instead of supplying additional cash, an institution can use shares it already owns as the underlying asset for creating tokenized positions. Ondo said this could reduce the amount of additional capital required to create tokenized inventory.
The company also expects the model to address some of the timing differences that can arise between traditional securities and their blockchain-based versions. By moving existing shares directly into the tokenization process, institutions may be able to reduce financing costs and simplify the creation of onchain positions.
The system currently supports conversions on Ethereum and BNB Chain. However, it is not an open service for individual investors. Institutions must be approved by Alpaca, maintain an active Alpaca account and also have an active account with Ondo.
The process works in both directions. Shares can be transferred to Ondo and represented by tokenized versions onchain, while the tokens can later be redeemed for the underlying securities.
The development comes as tokenization platforms continue to expand the range of traditional financial assets that can be represented on blockchains. Stocks and ETFs are among the assets attracting attention because blockchain-based versions can potentially be transferred and integrated with other digital financial applications.
Ondo has become one of the larger players in this market. According to RWA.xyz data cited in the source material, the platform had approximately $3.63 billion in distributed assets across 441 products, placing it second behind Securitize at the time of the report.
For institutions, the latest change is mainly about making the link between traditional securities and tokenized assets more direct. Instead of first converting securities into cash and then using that cash to create tokenized inventory, eligible users can now use the securities themselves.
The development also highlights an important feature of institutional tokenization: the blockchain representation remains connected to an underlying traditional asset. In Ondo’s system, the process is designed to work in both directions, allowing tokenized positions to be converted back into the underlying shares.
As tokenized securities become more integrated with blockchain-based financial markets, such mechanisms could become an important part of the infrastructure connecting traditional brokerage accounts with onchain markets.
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