Preface

Ondo Finance has released the first production implementation of the U.S. Securities and Exchange Commission's staff-described third-party custodial tokenization model. This initiative demonstrates how blockchain-based representations of conventional securities can operate within the existing U.S. regulatory framework rather than through offshore arrangements. By launching tokenized versions of BlackRock's iShares Core S&P 500 ETF (IVV) and shares of Micron Technology (MU), Ondo aims to show that tokenized securities can preserve traditional custody, shareholder rights and regulatory controls while leveraging Ethereum-based tokens for on-chain functionality. This article explains the structure, partners, regulatory context, and implications of Ondo's rollout.

Lazy bag

Ondo Finance has tokenized BlackRock's IVV ETF and Micron shares on Ethereum using an SEC-aligned third-party custodial model. Oasis Pro TA issues one-for-one token entitlements while regulated custodians hold the underlying securities; Broadridge provides proxy voting and shareholder communications so token holders receive comparable governance rights. The product is not yet available to U.S. retail investors.

Main Body

Ondo Finance announced the deployment of blockchain-based counterparts for two traditional U.S. securities — BlackRock's iShares Core S&P 500 ETF (IVV) and shares of Micron Technology (MU). The tokens are issued on the Ethereum network and structured to align with the U.S. securities framework described by SEC staff earlier in the year for third-party custodial tokenized securities. Rather than using an offshore structure or an issuer-sponsored tokenization, Ondo’s approach relies on a regulated intermediary to hold the underlying securities in traditional custody while minting corresponding digital entitlements on-chain.

Key infrastructure partners support this design. Oasis Pro TA, an SEC-registered transfer agent that Ondo acquired in the previous year, handles issuance of the tokenized entitlements. The underlying IVV and MU shares remain in regulated custody as part of the conventional U.S. custody chain. Oasis Pro mints one-for-one tokens on Ethereum that represent holders’ entitlements to those underlying securities. Custody, transfer restrictions, and broker-dealer or transfer-agent controls remain intact, preserving legal and operational protections associated with traditional securities ownership.

To bridge governance and investor communications between on-chain tokens and off-chain securities, Ondo integrated Broadridge’s investor services. Broadridge will manage proxy materials, shareholder communications and voting infrastructure, enabling token holders to receive the same voting rights and regulatory disclosures that investors holding the securities through standard brokerage accounts would obtain. This integration is intended to ensure parity in shareholder governance and information flow regardless of whether the holder’s entitlement is represented by a traditional account entry or a blockchain token.

Ondo positioned this rollout as the first production deployment of the SEC staff’s custodial tokenization model in the U.S. The SEC staff statement — issued in January — outlined how a third-party custodial model could be implemented consistent with securities law: a regulated intermediary keeps the actual shares in custody while issuing blockchain tokens that represent ownership entitlements. While staff statements do not carry the full force of formal commission rulemaking, they are influential signals about the agency’s thinking and acceptable compliance paths.

Tokenization has been gaining attention for promising operational benefits, including faster settlement, extended trading hours, and more fluid asset transfers across platforms. Proponents argue tokenized securities can modernize market plumbing and unlock liquidity by enabling atomic on-chain transfers and programmable asset functions. Industry research, including forecasts by major financial firms, has projected significant growth in tokenized securities over the coming decade, underscoring why market participants and infrastructure providers are exploring practical, compliant models.

The market debate centers on different tokenization models and the attendant legal and governance implications. The third-party custodial approach differs from issuer-sponsored tokenization, where the issuer of the underlying security is directly involved in the token issuance. Questions have arisen about whether tokens issued without the issuer’s direct involvement confer equivalent rights to traditional shares. High-profile disputes in the past have highlighted the risks of tokens claiming equity rights without issuer authorization. Ondo’s approach seeks to reduce those concerns by keeping the conventional custody chain and recognized intermediaries in place while issuing on-chain entitlements.

Ondo’s CEO, Ian De Bode, described the effort as building the necessary regulatory, product and service infrastructure to support tokenization models in the United States. The company used the two securities to demonstrate that digital entitlements can coexist with existing custody and regulatory processes for both U.S. and international investors. Ondo said the offering is not yet available to U.S. investors, indicating phased distribution or compliance gating as the platform scales and regulators, custodians and service providers finalize operational integrations.

The rollout also reflects a broader industry trend. Financial intermediaries, brokerages and central infrastructure providers have been experimenting with blockchain-based securities. Robinhood has announced tokenization initiatives and its own blockchain; the Depository Trust & Clearing Corporation (DTCC) has expanded blockchain-based infrastructure pilots; exchanges including Nasdaq and the New York Stock Exchange have publicized tokenization projects. These moves show both crypto-native firms and established market institutions pursuing pathways to integrate tokenized assets into regulated financial markets.

Ondo has been an active participant in tokenized securities markets outside the U.S., with substantial assets tokenized across many ETFs and stocks. By acquiring Oasis Pro TA and partnering with Broadridge, Ondo aims to align its on-chain products with U.S. regulatory expectations and investor protections. The company argues that this approach can broaden access to on-chain investments while preserving custody safeguards and governance parity.

In summary, Ondo’s launch demonstrates a practical application of the SEC staff’s custodial tokenization model by issuing one-for-one Ethereum tokens backed by traditionally held IVV and Micron shares, combining transfer-agent issuance, regulated custody, and established shareholder services. It represents a step toward operationalizing tokenized securities within the U.S. regulatory framework, though broader availability to U.S. investors and continued regulatory dialogue will shape next steps and adoption.

Key Insights Table