Blockchain recordkeeping for U.S. securities collateral tests SEC’s tolerance for hybrid finance

A public blockchain could soon play a role in tracking collateral for U.S. securities—without changing who legally holds them. Ondo Finance has asked the SEC not to take enforcement action over a pilot that would record ownership claims to more than 260 U.S. stocks and ETFs on the Ethereum Mainnet, using tokens to represent investor entitlements. The underlying assets would stay in the traditional system, held through the Depository Trust Company (DTC) by broker-dealer Alpaca Securities LLC. What changes is how collateral for Ondo’s offshore investment products is tracked. The tokens, minted by transfer agent Oasis Pro TA and held in BitGo custodial wallets, would mirror security entitlements—claims to assets in custody—not the securities themselves. Alpaca’s off-chain books would remain the official legal record. The blockchain layer would serve as a parallel system, enabling near real-time tracking, automated minting and burning of tokens with investor flows, and better reconciliation. These tokens wouldn’t trade openly. Instead, they’d operate within a controlled environment, with compliance built into the design: transfers screened against watchlists, and the ability to freeze, seize, burn, or reverse transactions. The core regulatory question is whether a broker-dealer can rely on public, permissionless infrastructure to support recordkeeping duties under the Securities Exchange Act and FINRA rules. Ondo argues it doesn’t need to, because the blockchain isn’t the legal record—just a tool. The SEC’s response will determine whether hybrid models that layer blockchain efficiency onto traditional custody can operate within existing law.