SEC ends Ondo probe with no action, clearing path for U.S. tokenization push

The U.S. Securities and Exchange Commission has concluded its two-year investigation of Ondo Finance without proposing enforcement action, paving the way for the tokenization company to overcome regulatory barriers as it expands its presence within the country. 

In October 2023, the company initiated a review to determine whether the tokenized U.S. Treasury products it offered complied with federal securities laws and whether the ONDO token fell within the securities classifications. 

SEC shift under Chair Paul Atkins

The Ondo review aligns with a longer-term shift in the SEC’s stance on digital assets under Chair Paul Atkins. The company says that since Atkins took office, the agency has shut down the majority of its crypto-related inquiries, including previously announced actions targeting Coinbase, Ripple, and Kraken.

The initial investigation aimed to determine whether the tokenization of U.S. Treasuries was consistent with existing securities laws and whether the framework used by the firm to issue ONDO tokens fell within the jurisdiction of these laws. According to sources close to the issue, the review took about two years before the SEC informed Ondo that it was over.

According to the company, the outcome eliminates regulatory ambiguity regarding continuing operations in the United States, especially following its registration as an investment advisor and the acquisition of Oasis Pro Markets, an SEC-registered broker-dealer, alternative trading system operator, and transfer agent.

Rising SEC focus on tokenization

The case is finally closed, with the SEC focusing more on the tokenization of traditional markets. The regulator held a panel at its Investor Advisory Committee meeting last week to discuss how distributed ledger systems could be deployed to issue, trade, and settle public equities. Conversations focused on the possibility of tokenized systems operating under current market regulations, while still protecting investors.

In opening statements, Chair Atkins remarked that distributed ledger technology and tokenization of financial instruments might affect the US capital markets structure. The focus of the agency has increasingly shifted to how tokenized assets are issued and how they can be regulated by entities and operated by regulated entities within existing frameworks.

Ondo claimed that the conclusion of the review provides a more precise regulatory environment, as it aims to develop U.S. initiatives. This acquisition of Oasis Pro Markets earlier this year has positioned the company to venture into regulated trading and settlement of tokenized products. 

ONDO market reaction and industry context

The ONDO token recorded an increase following the disclosure of the investigation. At the time of reporting, the asset was trading at $0.4861, representing an 8.12% increase over the past 24 hours.

It was also reported that major financial institutions, including Citi, JPMorgan, BlackRock, and Dinari, had tried exploring tokenization infrastructure on the Avalanche network.

Another instance of the SEC’s concluded investigations into digital assets is the Ondo review conducted during its current tenure. In the Ondo case, the decision terminates a compliance investigation proceeding that had been ongoing for over a year and prepares the company to continue its controlled operations in the tokenized financial product area.

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