Table of Contents
Key Takeaways:
- ONDO ETF: Pioneering ETF structure, 21Shares’ filing marks the first attempt to create a spot ETF for a DeFi-native RWA token
- Institutional bridge: Ondo Finance’s recent acquisition of SEC-registered Oasis Pro strengthens compliance case
- Political intrigue: Trump-linked World Liberty Financial holds $383K in ONDO amid growing RWA momentum
- Market impact: Tokenized assets surge 58% YTD to $25B, with U.S. Treasuries leading adoption
The ETF Frontier Expands to Tokenized Finance
Wall Street’s partnership with crypto reaches a landmark milestone as 21Shares has filed for potentially the first decentralized finance (DeFi) protocol token-based spot exchange-traded fund (ETF). 21Shares’ proposed 21Shares Ondo Trust, summarized in a July Securities and Exchange Commission (SEC) submission, seeks to track ONDO, which is the governance token for Ondo Finance’s rapidly expanding real-world asset (RWA) ecosystem.
This product would not be a Bitcoin ETF that physically holds Bitcoin, but it would provide exposure to underlying economic activity involved with tokenized U.S. Treasuries, private credit, and traditional assets moving on-chain. Coinbase will serve as custodian, and the CME’s Ondo-Dollar Reference Rate will provide pricing, and it would look very similar to the structures approved for spot Bitcoin products earlier this year.
Why Ondo? The RWA Gold Rush Explained
21Shares has identified three strategic advantages that have positioned Ondo Finance as a crucial link between decentralized finance (DeFi) and traditional finance (TradFi):
- Regulatory groundwork: February’s acquisition of Oasis Pro, an SEC-registered broker-dealer, gives Ondo unique capacity to issue compliant tokenized securities
- Institutional adoption: Partner Pantera Capital seeded Ondo’s treasury tokenization initiative with $250M
- Political connections: Trump-affiliated World Liberty Financial holds ONDO in its $208M crypto portfolio
Nowadays, Ondo seems to be the key to a $25B tokenized asset market that’s growing faster than NFTs did in 2021, and not just another governance token.
The Mechanics: How the ONDO ETF Would Work
The ONDO ETF filing reveals an elegantly simple structure:
- Cold storage custody: Coinbase will hold actual ONDO tokens offline
- Passive tracking: No active management, just mirroring the CME’s benchmark rate
- Dual creation model: Institutions can swap cash or ONDO tokens for ETF shares
In stark contrast to Ondo’s native blockchain products, such as OUSG (tokenized Treasuries), the ETF offers exposure through conventional market infrastructure. This approach can be seen as a Trojan horse, introducing Real World Assets (RWAs) into retirement accounts.
The ONDO ETF and the Challenges Ahead
Not all analysts seem to be convinced. Some are concerned about:
- Regulatory uncertainty: SEC Chair Paul Atkins has called most tokens unregistered securities before
- Concentration risk: Ondo’s $3.2B market cap, at the time of writing, pales next to Bitcoin’s $1T+ liquidity
- Political optics: Trump ties could draw inspections in an election year
So far, this ONDO ETF timing aligns with broader macro trends, as traditional finance becomes increasingly comfortable with blockchain-based asset ownership. BlackRock’s tokenized fund BUIDL, for example, has surpassed $500M in assets, and Ethereum is a dominant force in Real World Asset (RWA) issuance.
The Tokenization Tipping Point
21Shares’ initiative indicates a shift in the status of Real World Assets (RWAs) from a niche crypto interest to a significant institutional investment concept. If approved, this could pave the way for an influx of similar financial products, potentially including those centered around MakerDAO’s DAI or even tokenized real estate.
The ramifications for individual investors are substantial: Ondo ETF would allow for 401(k) investments in yield-generating blockchain assets, bypassing the need for platforms like MetaMask. This could effectively broaden access to returns typically found in private markets.
Final Thought: The true disruptor emerges when your brokerage app offers tokenized T-bills before your traditional bank. ONDO ETF first!
For more ETF-related stories, read: SEC Approves Grayscale’s Multi-Crypto ETF: Bitcoin, ETH, SOL, XRP, ADA in One Basket
