Ondo Finance Launches SEC-Compliant Tokenized Stock Model

Ondo Finance has launched its initial application of the Securities and Exchange Commission's (SEC) third-party custodial tokenization model, specifically using BlackRock's iShares Core S&P 500 ETF (IVV) and Micron Technology shares. This setup utilizes a structure that complies with existing U.S. securities regulations and is based on the SEC's guidance released earlier in the year.

The model, which issues tokenized securities on the Ethereum blockchain, is managed by Oasis Pro, an SEC-registered transfer agent that Ondo acquired in the previous year. Broadridge, a financial services company, will manage proxy voting, regulatory disclosures, and shareholder communications for token holders, who will have the same rights as those holding traditional brokerage accounts. However, currently, these tokenized securities are not available to U.S. investors.

Ondo Finance's CEO Ian de Bode commented, "Ondo has built the regulatory, product, and service infrastructure to support all major models within the United States. Today’s milestone shows we can tokenize securities in ways that meet both market and regulatory requirements, for U.S. and global investors and provides a strong foundation for our expanding access to onchain investments for more U.S. investors." The tokenization of assets, which refers to converting traditional assets into blockchain-based tokens, is gaining traction as a means to enhance capital markets through benefits like quicker settlement and continuous trading.

This initiative follows the SEC's January statement regarding tokenized securities. Although SEC staff statements do not carry the full authority of formal agency guidance, they reflect the agency's stance on issues related to tokenization. In this model, a regulated intermediary maintains custody of conventional shares while issuing blockchain-based tokens representing ownership rights. This differs from issuer-sponsored tokenization where the security issuer is involved directly in the process. Debates continue regarding the legal rights of token holders compared to traditional shareholders, especially highlighted by past disputes like that with OpenAI over unauthorized token offerings.

The underlying IVV and Micron shares remain secured within traditional custodial systems while Oasis Pro mints one-for-one tokenized representations on Ethereum. Broadridge's involvement ensures that token holders receive relevant communications and voting rights in line with traditional ownership practices. This development aligns with a broader trend where tokenized equities are becoming more prominent in both crypto and traditional financial landscapes. Other companies like Robinhood are also launching their own tokenized stocks, reflecting an expanding acceptance of blockchain technology within regulated markets.