Alpaca has launched its Instant Tokenization Network (ITN), a new infrastructure that enables institutions to directly mint and redeem tokenized U.S. stocks. This move aims to improve on-chain liquidity within the tokenization market, which has been constrained by structural barriers.
The ITN allows institutions to tokenize portfolios through a single API call and redeem tokens for the underlying shares without settlement delays. The service operates 24/7, extending access beyond traditional market hours. By enabling in-kind redemptions, where tokens are directly exchanged for their underlying assets, the network seeks to make tokenized stocks more liquid and efficient.
Alpaca's Head of Crypto, Arush Sehgal, explained that the ITN functions as a single API that enables two primary functions: journaling securities to and from brokerage accounts for U.S.-regulated financial institutions, and delivering tokens by the issuer to their Authorized Participant, typically a non-U.S. entity affiliated with the U.S. institution.
The launch of the ITN builds upon the U.S. Securities and Exchange Commission's (SEC) recent efforts to address similar inefficiencies in the crypto exchange-traded product (ETP) market. The SEC recently approved in-kind creation and redemption for spot Bitcoin and Ether ETFs. Alpaca aims to bring the same benefits to tokenized stocks through its ITN.
Several global partners have already adopted Alpaca's Instant Tokenization Network, including Backed (xStocks), Dinari, DRW, Ondo Finance, Keyrock and Virtu Financial. These partnerships aim to facilitate the movement of liquidity from traditional finance to tokenized stock markets.
Ondo Finance, a platform for tokenizing stocks and ETFs, has collaborated with Alpaca to tokenize U.S. stocks and ETFs. The collaboration seeks to remove barriers faced by global investors in accessing the U.S. securities markets, such as high fees, limited access, transfer frictions, platform fragmentation, and geographic exclusions. Through Alpaca's Broker API, Ondo Global Markets offers over 100 tokenized U.S. stocks and ETFs, with plans to scale to over 1,000 assets by the end of the year. These tokenized assets are transferable 24/7, provide deep liquidity, and can be used in DeFi.
Tokenized assets do not represent direct equity ownership in any underlying company or issuer. Instead, they generally provide economic exposure to the equity securities of an underlying issuer. Holders of tokenized assets typically do not have voting rights, dividend entitlements, or legal claims to the underlying company shares. Tokenized assets are considered highly speculative and may not be suitable for all investors.
Alpaca Securities LLC, a U.S. Securities and Exchange Commission (SEC) registered broker-dealer and member of FINRA/SIPC, holds the securities underlying any tokenized asset. Tokenization is performed by a third party. Alpaca Crypto LLC provides digital asset services, including on- or off-ramp transactions involving stablecoins.
Alpaca's Instant Tokenization Network is available to U.S.-regulated financial institutions. Tokenization services are not available to U.S. persons or residents, and additional geographic restrictions may apply based on local regulatory requirements.
The tokenized stock market is currently valued at over $700 million. According to Galaxy Research, the tokenized stock markets could potentially reach a $10 trillion market cap by 2030.
