Ondo Finance urges more transparency before Nasdaq's tokenization proposal moves forward

Real-world asset startup Ondo Finance is pushing back against Nasdaq's proposal to support tokenized stocks and exchange-traded funds and says more information is needed on how settlement would work.

In a letter sent to the Securities and Exchange Commission this week, Ondo Finance says more information is needed in connection with Nasdaq's proposal to settle "securities in token form" using the Depository Trust Company [DTC] clearinghouse. DTC is a central securities depository that provides settlement services and safekeeping for securities transactions. 

"Tokenization is ushering in the next era of financial innovation and access, and should advance through open collaboration and transparent standards. In the meantime, we've asked the SEC to gather more information before making a final decision," the startup said. "With DTC's plans in the open, we look forward to working with Nasdaq and the entire tokenization industry to help usher in the next era of tokenized finance."

Nasdaq declined to comment. 

Ondo Finance manages tokenized versions of real-world assets and aims to make money market funds, U.S. government securities, and stocks available on blockchains. Ondo is linked to the Trump family-backed World Liberty Financial Project, which purchased ONDO tokens for its strategic token reserve. 

Tokenization has become a hot topic as firms look to bring stocks onchain. Last month, Nasdaq filed a rule change with the SEC for tokenized versions of stocks and, in that proposal, argued that markets can adopt tokenization without waiving core investor protections, pushing back on calls for broad exemptions from federal market-structure rules.

The SEC, too, is prioritizing tokenizing assets. SEC Commissioner Hester Peirce said tokenization is a "huge focus" for the agency. 

Meanwhile, Better Markets' Director of Securities Policy Benjamin Schiffrin warned that tokenization poses threats to investor protection. Better Markets is a nonprofit, nonpartisan organization that has been critical of crypto. Schiffrin noted that Peirce has said tokenized securities are securities, but that the agency's potential "innovation exemption" could change that. 

“It is not clear that investors want or need tokenized securities," Schiffrin said in a statement on Wednesday. "That is what should matter to the SEC. The SEC’s job is to protect investors, not do what the crypto industry wants.”

Updated at 6:05 p.m. UTC on Oct. 17 to include Nasdaq declined to comment