Ondo To Use Blockchains as Middleware to Trade Traditional Securities

The lines between crypto and traditional finance continue to get blurred.

Ondo Finance, a DeFi project offering some of the leading tokenized U.S. treasuries products, has introduced a new solution that taps into the liquidity of traditional financial markets.

Ondo Global Markets will issue tokens representing ownership of a security while the asset itself will be held in traditional custody services. While details of the implementation are not yet public, the tokens will trade on-chain, while instructions like transfers will then be transmitted back to broker-dealers and custodians to carry out off-chain.

Nathan Allman, founder and CEO of Ondo Finance, is excited to drive the experiment in tokenization. “We're very focused on sort of enabling these public securities to be used in on-chain financial systems,” he told The Defiant. Allman gave the example of collateralizing securities as a potential use case for this new tokenized form.

With Ondo Global Markets, settlement, the time period during which a trade is finalized, will still work the same as traditional securities, Allman said. “It’s just that there’s this 24/7 on-chain abstraction to it.” Current settlement for U.S. securities follows a “T+2” model, meaning that it takes two business days for a trade to be considered final.

Tokenized securities have long been a holy grail in the blockchain space. Entrepreneurs have experimented with different models over the years with varying degrees of success. Tokenized U.S. Treasuries have gained the most traction since 2022 due to interest rates rising to their highest levels in two decades.

With projects like Superstate, Mountain Protocol, and even investment giant Franklin Templeton operating in the Treasuries-adjacent space, more untapped markets may lie in accessing other securities.

Ondo launched its tokenized treasury products on Ethereum in January 2023. Since then, the project’s flagship product, OUSG, which invests in U.S. Treasuries through a BlackRock ETF, has reached a $120.6M market capitalization, according to rwa.xyz. Recently, Ondo expanded its offerings to other blockchains like Aptos and Sui. The project also released its ONDO token in January.

Allman declined to comment further on the potential infrastructure supporting what the project is calling the “directive tokenization model.” However, it’s worth noting that less than a month after Ondo launched its first products last year, the project launched Flux Finance, a lending platform for its new tokenized Treasuries.