Ondo Finance Seeks SEC Clearance for Tokenised Securities
Ondo Finance has approached the US Securities and Exchange Commission (SEC) with a no-action letter request dated April 13. The firm aims to obtain permission to record specific securities entitlements in a tokenised format on the Ethereum Mainnet for its Ondo Global Markets initiative.
Key Aspects of the Proposal
The proposal specifically seeks to allow BitGo, a well-known custodian, to manage tokenised versions of US-listed stocks and exchange-traded funds (ETFs). Ondo has outlined the intent behind this request as a narrow innovation in recordkeeping rather than a complete overhaul of existing securities laws.
The primary focus of Ondo Global Markets is to provide non-US investors access to US-listed stocks and ETFs through tokenised notes. The proposal ensures that the underlying securities will remain within current legal frameworks, utilising structures like Article 8 and the Depository Trust Company (DTC). Meanwhile, the operational tasks would be facilitated through a parallel token layer on Ethereum.
BitGo would be responsible for the custody of these tokenised assets, and Alpaca, a broker-dealer and transfer agent, would ensure adherence to essential regulatory standards, including Exchange Act Rules 17a-3, 17a-4, and 15c3-3. This structured arrangement aims to maintain the current regulatory landscape while leveraging blockchain technology for enhanced operational efficiency.
Ondo’s Justification for the Approach
Ondo positions this strategy as a targeted operational upgrade. The planned tokenised layer is designed to facilitate better collateral management, streamline the creation and redemption processes, and ease reconciliation tasks across its full range of products. By opting for Ethereum, Ondo taps into a platform that already integrates well with its operational framework.
It’s noteworthy that the request specifically seeks assurance that this unique model would not incite enforcement actions from the SEC, rather than aiming for a blanket endorsement for all tokenised securities.
Current Market Position
As of now, Ondo Finance holds approximately US$3.55 billion (AU$5.15 billion) in total value locked, with its ONDO token trading around US$0.25 (AU$0.36). This positions Ondo strategically as part of the push to transition regulated financial assets to public blockchain platforms.
In summary, Ondo Finance’s proposal to the SEC reflects an effort to innovate within the confines of existing securities regulations while embracing the efficiencies that blockchain technology can afford. The firm is keen on ensuring that their approach remains compliant with regulatory standards while offering new avenues for access to US financial markets for global investors.
