Ondo Finance Calls for Regulatory Clarity on Tokenized Securities to Boost US Market Competitiveness
SEC Urged to Provide Clear Framework as Global Markets Advance Faster in Digital Asset Integration
In a comprehensive submission to the U.S. Securities and Exchange Commission (SEC) Crypto Task Force, Ondo Finance Inc. has outlined a strategic roadmap aimed at accelerating the adoption of tokenized securities in the United States. The December 4th proposal highlights how unresolved regulatory questions have significantly hampered domestic progress, causing the U.S. to fall behind other global financial markets that have embraced clearer frameworks for digital assets. This intervention comes at a critical juncture as traditional finance increasingly intersects with blockchain technology, creating both opportunities and regulatory challenges that demand thoughtful consideration from policymakers.
“The purpose of this submission to the Commission is to describe what we believe are the root causes limiting tokenization adoption, to describe practical steps the Commission and its staff may take to develop greater consensus on appropriate actions to take, and to offer our expertise as support for those actions,” Ondo Finance explained in its detailed proposal. The company’s intervention represents a significant effort to bridge the gap between innovative financial technology and the regulatory frameworks that govern securities markets. By addressing these issues directly with the SEC, Ondo aims to create a more conducive environment for the evolution of financial markets that can leverage blockchain technology while maintaining necessary investor protections.
Three-Pronged Approach Recommended to Advance Tokenization Efforts
The comprehensive blueprint submitted by Ondo Finance advocates for the SEC to simultaneously support all three emerging tokenization models that are currently developing in the market. These include direct registration systems utilizing blockchain technology, tokenized beneficial ownership structures connected to securities held within the Depository Trust Company (DTC), and newly created digital securities backed by traditional assets maintained within the DTC infrastructure. This multi-faceted approach acknowledges the complexity of the existing financial ecosystem while providing multiple pathways for innovation and integration. According to financial technology experts, such flexibility is essential for allowing market participants to explore different models based on their specific needs and use cases without regulatory impediments stifling potential breakthroughs.
In particular, Ondo urged the SEC to prioritize the tokenization of securities entitlements currently held within the DTC, as this approach could provide a bridge between traditional financial infrastructure and emerging blockchain technology. The company further recommended that regulators pursue targeted no-action letters and exemptive relief to enable compliant products to launch without unnecessary delays, fostering innovation while maintaining appropriate oversight. Perhaps most significantly, Ondo called on the SEC to recognize permissionless blockchains as appropriate settlement layers for certain securities transactions—a position that represents a significant evolution in thinking about market infrastructure and settlement mechanisms. These recommendations reflect a nuanced understanding of both the technological possibilities and the regulatory considerations that must be balanced in this rapidly evolving landscape.
Market-Led Innovation and Structural Reforms Central to Proposal
A key element of Ondo’s submission emphasizes the importance of allowing market-led product development rather than imposing prescriptive regulatory solutions that might inadvertently stifle innovation. This approach recognizes the dynamic nature of financial technology and the need for flexibility as new use cases and applications emerge. Simultaneously, the firm advocated for a long-term review of the DTC’s structural role in U.S. markets, suggesting that the current centralized system may need to evolve alongside technological advancements. Blockchain technology, with its inherent transparency and immutability, presents an opportunity to reimagine certain aspects of market infrastructure that were designed in a pre-digital era.
“Tokenization efforts now underway are better for investors in numerous respects with fairly modest reforms, so, when paired with the SEC’s traditional focus on investor protection, the topic should be a natural candidate for SEC leadership,” the submission states, highlighting the alignment between investor benefits and technological innovation. Beyond immediate regulatory clarifications, Ondo recommended broader reforms designed to strengthen investor control over their assets—a core principle that resonates with both traditional securities regulation and the ethos of decentralized finance. This balanced approach seeks to preserve essential investor protections while embracing the potential benefits of blockchain technology, including enhanced transparency, improved settlement efficiency, and greater investor autonomy in managing their financial assets.
Global Competition Intensifies as US Regulatory Uncertainty Continues
Ondo Finance’s roadmap comes against a backdrop of accelerating global competition in the tokenized securities space, with numerous jurisdictions including Singapore, Switzerland, and the European Union establishing clearer regulatory frameworks that have attracted substantial investment and innovation. The submission pointedly notes that these regulatory uncertainties have placed the United States at a competitive disadvantage, potentially jeopardizing its traditional leadership position in financial markets and innovation. Financial technology experts have increasingly warned that continued regulatory ambiguity in the U.S. could lead to a significant “brain drain” as entrepreneurs and established financial institutions alike seek more predictable regulatory environments overseas.
Market analysts tracking the development of tokenized securities markets estimate that the global market could reach several trillion dollars within the next decade, representing a transformative shift in how financial assets are issued, traded, and settled. While some traditional financial stakeholders have expressed caution about tokenization potentially complicating existing systems or introducing new operational challenges, proponents of blockchain integration counter that properly implemented on-chain structures can dramatically enhance transparency, reduce settlement times from days to minutes, and significantly expand investor autonomy. These improvements address longstanding inefficiencies in traditional financial markets while potentially reducing systemic risks through near real-time settlement and enhanced visibility into market movements and counterparty exposures.
Future of Finance May Hinge on Regulatory Approach to Blockchain Integration
The implications of how U.S. regulators respond to proposals like Ondo’s extend far beyond immediate market considerations, potentially shaping the fundamental architecture of financial markets for decades to come. Supporters of permissionless blockchain architectures argue that these systems could ultimately increase capital efficiency across markets while giving participants more direct ownership rights and reducing dependencies on centralized intermediaries. This vision represents a significant evolution from the current market structure, which relies heavily on layers of intermediaries and central clearing facilities that were designed primarily in the paper-based era of securities trading.
As the SEC considers Ondo’s recommendations and similar input from market participants, the decisions made in the coming months could significantly influence whether the United States maintains its position as a global financial leader or cedes ground to more nimble regulatory jurisdictions. Industry observers note that finding the right balance between innovation and investor protection remains the central challenge for regulators, with potentially trillions of dollars in economic activity hanging in the balance. The tokenization of traditional financial assets represents one of the most significant opportunities for blockchain technology to deliver tangible benefits to mainstream financial markets, potentially bringing greater efficiency, transparency, and accessibility to a financial system that has remained structurally unchanged for decades despite significant technological advancements in other sectors of the economy.
