Ondo Finance’s SEC Approval Initiative
Ondo Finance is seeking approval from the U.S. Securities and Exchange Commission (SEC) to implement a system where securities entitlements at American broker-dealers are represented as tokens on the Ethereum blockchain. This initiative is part of the firm’s Ondo Global Markets (OGM) project and aims to gain assurance from the SEC that no enforcement action will be taken regarding their proposed recording of securities interests as blockchain-backed tokens.
Enhancements to Existing Operations
In a detailed blog entry regarding its no-action request, Ondo emphasizes that this is more of an enhancement to existing operations rather than the introduction of a new class of assets. The firm already provides tokenized notes and directly backed securities that correspond 1:1 with U.S. stocks, ETFs, and Treasuries maintained at licensed broker-dealers. The OGM platform has broadened its reach to Ethereum, Solana, and BNB Chain, boasting over 200 tokenized U.S. stocks and ETFs on Solana along with a total value across its tokenized offerings exceeding $500 million and nearly $9 billion in trading volume as reported in a February update.
Proposed Model and Compliance
Under Ondo’s suggested model, investors would retain their entitlements through regulated intermediaries, while tokens would be utilized for functions such as collateral monitoring and redemption processing, transforming Ethereum into a dual-function recordkeeping and settlement system in tandem with the existing Depository Trust Company and broker-dealer framework. Ondo argues that,
“Tokenisation does not itself create novel compliance obligations,”
stressing that compliance with pre-established regulations concerning registration, custody, transfer agency, and disclosures remains paramount, regardless of the blockchain technology employed.
Regulatory Changes and Future Implications
This no-action request reflects a notable change in Ondo’s regulatory stance. Just last December, the SEC wrapped up a confidential inquiry regarding Ondo’s tokenized U.S. Treasuries and its ONDO token without imposing any charges, an event described by Yahoo Finance as pivotal for compliance concerning tokenized securities, and recognized by Ondo as a significant affirmation of its interpretation of U.S. securities legislation.
In addition, Ondo previously submitted a proposal advocating for the SEC to officially acknowledge and allow the use of public, permissionless blockchains within tokenized securities markets, aiming for regulatory relief for models where tokens signify claims on securities held by traditional custodians. The current no-action request serves as a litmus test for that advocacy; an affirmative response from SEC staff would indicate a willingness from U.S. regulators to endorse permissionless-chain settlements for tokenized real-world assets, provided the integrity of traditional securities entitlements is maintained.
Global Context and Future Prospects
Such acceptance could bridge the U.S. closer to ongoing developments in Europe and Asia, where bank-affiliated stablecoins and tokenized money market funds are increasingly employed as settlement mechanisms for tokenized treasuries and equities, as discussed in a recent article on the surge of real-world asset tokenization. For Ondo, which claims the title of “the world’s largest tokenized stock and ETF platform by total value locked (TVL),” a positive outcome could pave the way for fully registered distribution of on-chain securities in the U.S. via public networks like Ethereum, rather than confining the process to private, permissioned platforms.
