- Ondo wrote to SEC Chair Paul Atkins, recommending a more neutral and flexible approach to regulating digital assets.
- The company pushed equal support for permissioned, permissionless, and hybrid DLT systems.
Ondo Finance (ONDO) recently sent a letter to Paul Atkins, Chair of the US Securities and Exchange Commission (SEC), urging the regulator to revise its approach to tokenized securities. It also pushes for reforms supporting permissionless and hybrid Distributed Ledger Technology (DLT) systems.
Neutrality in Approach to Tokenization
Ondo’s letter titled “Roadmap for Tokenized Securities” questions the SEC’s current stance on tokenization. It particularly challenges the regulator’s limited incorporation models for securitized digital assets, which involve the following:
- Direct registration with issuers and/or transfer agents
- Tokenized beneficial ownership via intermediaries like the Depository Trust Company (DTC) and its members
- New digital native securities linked to securities entitlements through the DTC in a hybrid wrapper
The blockchain firm argued that selecting only a single model presents a “false choice.” Instead, the SEC must recognize all three models to give market participants the flexibility to determine the option best suited to their goals.
Additionally, Ondo urged the SEC to reach a consensus on reforms to allow innovation to thrive and ensure the USA’s leadership in digital asset markets.
Support for Permissionless Systems
Ondo proposed a neutral pathway to the regulation of tokenized securities. It said the SEC must be open to direct and intermediated ownerships. Moreover, it recommended targeted relief through transfer agents and broad regulatory relief to tokenization models linked to securities held in DTC.
However, the most significant policy push in the letter centers on integrating permissionless DLT systems into traditional finance (TradFi), alongside permissioned and hybrid chains.
For context, “permissionless” refers to an open, publicly accessible blockchain network. This inclusive and decentralized framework allows anyone to join, use, validate transactions, and build on an infrastructure without requiring approval from central authorities.
“The SEC should support the use of public, permissionless DLT systems being incorporated into financial markets as consistent with investors’ rights to own and control securities without undue restrictions,” said Ondo.
Such a distinction is vital as it harnesses the transparency, interoperability, and disintermediation that are often lacking in the siloed or “walled garden” systems of permissioned, private chains.
Ondo requested the SEC to take down the barriers set up by financial intermediaries, which mostly hinder wider investor participation.
“The belief that financial institutions are strictly necessary for security and privacy objectives to be achieved is outdated, and requiring permissioned blockchains to be used or limiting public, permissionless alternatives may worsen existing inequities,” Ondo added.
Ondo wrapped up its letter, expressing its eagerness to provide more details or assistance regarding the matter if needed. Attached to the communication was a roadmap that further detailed its recommendations.
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