Ondo Finance has introduced an in-kind conversion mechanism that allows approved institutions to mint tokenized stocks and ETFs using shares they already hold, eliminating the need to fund each conversion with separate cash.
The new functionality connects Ondo Finance’s Ondo Stocks platform with Alpaca’s Instant Tokenization Network (ITN).
According to Ondo, the new route is designed to make it easier for institutional participants and market makers to move existing traditional-market share inventory onto blockchain networks and back again.
The service went live on September 21, 2026, with conversions currently supported on Ethereum and BNB Chain. Access is restricted to institutions approved by Alpaca on a case-by-case basis.
Ondo Adds In-Kind Minting for Tokenized Stocks and ETFs
Previously, institutions using Ondo’s cash-funded minting model needed to provide cash to create the corresponding tokenized position, even if they already owned the underlying shares.
The new in-kind mechanism changes that process.
An eligible institution can transfer the underlying shares it already owns from its Alpaca account to Ondo’s Alpaca account through an internal book transfer. Ondo then issues the corresponding tokenized stocks or ETFs on a supported blockchain.
The process can also work in reverse. When an institution redeems its tokenized position, the corresponding underlying shares are transferred back to its Alpaca account.
Ondo said the integration automates the conversion process, eliminating the need for manual approval for every individual transaction.
How Ondo’s In-Kind Conversion Works
The process can be summarized in three steps:
- Institution holds shares: An approved institution already owns eligible stocks or ETFs in an Alpaca brokerage account.
- Shares are transferred: The institution transfers the underlying securities to Ondo’s Alpaca account through an internal book transfer.
- Tokens are issued: Ondo issues the corresponding tokenized position on a supported blockchain.
Redemption reverses the process. The institution returns the tokenized assets and receives the corresponding underlying shares back into its Alpaca account.
The mechanism therefore creates a direct connection between traditional brokerage-held securities and blockchain-based representations of those securities.
Why In-Kind Minting Matters for Institutional Liquidity
Ondo says the new system could make the creation of tokenized stock inventory more capital-efficient.
Under the previous cash-funded process, an institution that already held an underlying stock would still need additional cash to mint the corresponding tokenized asset. That could introduce financing costs and create a timing mismatch between traditional securities and their tokenized equivalents.
With in-kind conversion, existing share inventory can instead be used directly.
This may be particularly relevant for market makers and liquidity providers that need to maintain token inventories across multiple trading venues. Ondo said the new mechanism can make it easier for these participants to replenish tokenized inventory, manage exposure and respond to market demand.
Ondo expects the additional liquidity route to contribute to tighter spreads and greater depth across secondary markets connected to its tokenized stock ecosystem. Those are company-stated expected effects rather than guarantees of future market conditions.
Ondo Connects Traditional Shares With Onchain Markets
Ondo Stocks is designed to provide tokenized exposure to U.S. stocks and ETFs while maintaining backing through corresponding traditional securities.
Ondo’s current product information states that its tokenized stocks and ETFs are backed and collateralized by the corresponding stock or ETF, with underlying holdings maintained through U.S.-registered broker-dealers or U.S.-chartered national trust companies.
The company has also expanded its infrastructure around tokenized investment products.
In June 2026, Ondo announced 24/7 instant minting and redemption for a selection of tokenized U.S. stocks and ETFs across Ethereum, BNB Chain and Solana.
More recently, on September 16, 2026, Ondo’s subsidiary Oasis Pro Markets joined DTCC’s Fund/SERV platform. DTCC said Oasis Pro Markets became the first tokenization company to join the platform, which processes more than 85% of U.S. mutual fund transaction activity.
The developments indicate that Ondo is building connections between blockchain-based financial products and existing financial-market infrastructure.
In-Kind Conversion Is Currently Limited to Approved Institutions
The new conversion mechanism is not available to all Ondo Stocks users.
Ondo said access is limited to institutions approved by Alpaca on a case-by-case basis. Participating institutions must also maintain active accounts with both Ondo and Alpaca and complete the applicable onboarding and approval requirements.
Conversions are currently available on Ethereum and BNB Chain.
This should not be confused with the broader availability of Ondo Stocks itself. Ondo’s tokenized stock platform supports multiple blockchain networks, while the newly announced in-kind conversion route currently specifies Ethereum and BNB Chain.
What Changes for Tokenized Stock Markets?
The significance of the update is primarily at the institutional infrastructure level.
Tokenized securities require mechanisms that connect blockchain-based assets with the traditional securities they represent. By allowing eligible institutions to contribute existing shares rather than separately sourcing cash, Ondo’s new model provides another route for creating tokenized inventory.
For market makers, this could reduce the need to maintain separate pools of cash and traditional shares for different parts of the market.
It may also allow institutions to move more efficiently between traditional securities held through brokerage infrastructure and their tokenized counterparts.
Ondo said the resulting increase in available institutional inventory could support liquidity across exchanges, wallets and decentralized finance applications connected to Ondo Stocks.
Ondo’s Broader Push Into Tokenized Financial Assets
The latest announcement comes as Ondo continues expanding its tokenization infrastructure.
In July 2026, Ondo announced that its SEC-registered broker-dealer subsidiary, Oasis Pro Markets, had received FINRA authorizations relating to tokenized corporate equities and funds for U.S. investors under the applicable regulatory framework. The company said the authorization covers areas including equities, ETFs, mutual funds and index funds, subject to applicable requirements.
The September 2026 DTCC Fund/SERV integration represents another connection with established financial-market infrastructure.
Together with the new in-kind conversion system, these developments show Ondo pursuing multiple infrastructure routes for connecting tokenized securities with traditional financial markets.
What the Ondo Update Means
Ondo’s new in-kind conversion system does not replace its existing cash-funded minting process. Instead, it adds another primary-market route.
The key difference is that eligible institutions can now use existing underlying shares to create corresponding tokenized positions rather than providing separate cash for the mint.
For institutional participants, the structure could reduce an additional funding requirement and make inventory management more flexible. For the broader tokenization market, it provides another example of traditional securities being connected directly to blockchain-based settlement and trading infrastructure.
The service is currently restricted to approved institutions and is live on Ethereum and BNB Chain.
As tokenized stocks and ETFs continue to develop, the ability to move between traditional securities and onchain representations without an additional cash leg could become an important part of institutional liquidity infrastructure.
Key Takeaways
- Ondo Finance launched an in-kind conversion mechanism for tokenized stocks and ETFs.
- Approved institutions can use existing underlying shares to mint corresponding Ondo Stocks tokens.
- The process is powered by Alpaca’s Instant Tokenization Network.
- Shares move between institutional Alpaca accounts through an internal book transfer.
- Tokenized positions can also be redeemed back into the underlying shares.
- The new conversion route is currently live on Ethereum and BNB Chain.
- Access is restricted to institutions approved by Alpaca on a case-by-case basis.
- Ondo says the system could reduce financing requirements and improve institutional liquidity provision.
- The feature adds to Ondo’s existing cash-funded minting model rather than replacing it.
Source: Ondo Finance official announcement; supporting reports from PR Newswire and other financial publications.
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