How Ondo Turned Tokenized Stocks into Productive Onchain Capital with Morpho

Ondo Finance has established itself as the pioneer of tokenized stocks and ETFs, bringing exposure to U.S. markets to users across the globe who were previously locked out.

However, simply holding tokenized stocks has its limitations. Investors increasingly expect the same kind of capital productivity from their securities positions that crypto-native assets already enjoy. Without the ability to deploy tokenized securities as collateral, borrow against them, or construct leveraged strategies, these assets remain underutilized — falling short of their full potential in the onchain economy.

The opportunity was clear: transform tokenized securities from static representations of TradFi exposure into active building blocks in onchain finance.

Morpho helps Ondo bring tokenized stocks into onchain lending markets.

Morpho’s permissionless and isolated market architecture made it the ideal infrastructure for introducing tokenized equities as a new collateral type. Each lending market on Morpho operates with precise risk isolation, meaning the introduction of SPYon and QQQon as collateral could proceed without exposing other lenders and borrowers to additional risks.

These markets were created by Gauntlet, who defines and monitors key parameters — collateral factors, borrow caps, and liquidation thresholds — ensuring that these securities-backed lending markets launched with conservative, data-driven risk controls from day one. USDC liquidity is supplied through Gauntlet’s RWA Vault, with Day-1 liquidity ready for borrowing.

The decision to launch with SPYon and QQQon was deliberate. As trackers of broad-market ETFs tracking the S&P 500 and Invesco QQQ respectively, they offer deep underlying liquidity and diversified exposure, making them well suited as the first tokenized securities to support lending use cases.

With SPYon and QQQon now live as collateral on Morpho, tokenized ETF holders can unlock new forms of capital productivity:

• USDC borrowing against securities positions: SPYon and QQQon holders can borrow USDC against their tokenized stock portfolios, accessing liquidity without selling their equity exposure.
• Carry trade strategies: Investors can pursue structured strategies that capture the spread between equity returns and stablecoin borrowing costs, similar to the looping strategies available for other RWA collateral types on Morpho.
• First-class collateral status: Tokenized stocks and ETFs are moving closer to functioning as collateral primitives onchain, capable of supporting borrowing, structured products, and more advanced DeFi strategies over time.

Disclaimer:

The tokenized assets referenced herein (including Ondo Global Markets tokenized stocks, tokenized ETFs, and tokenized ADRs, collectively, the “Ondo GM Tokens”) and USDY tokens (collectively, the “Tokens”) have not been registered under the US Securities Act of 1933, as amended (the “Act”), or the securities or financial instrument laws of any other jurisdiction. The Tokens may not be offered or sold in the United States or to US persons unless registered under the Act or an exemption from the registration requirements thereof is available. In certain jurisdictions, including the United Kingdom, Switzerland and (for certain Tokens) the European Economic Area (“EEA”), the Ondo GM Tokens and USDY tokens are offered and sold only to qualified investors or professional clients, as the case may be (or that jurisdiction’s analogue thereof). Other jurisdiction-based prohibitions and restrictions apply. The issuer of the Tokens is not registered as an investment company under the US Investment Company Act of 1940, as amended, or as an Alternative Investment Fund or Undertaking for Collective Investment in Transferable Securities in the EEA, or under the securities or financial instrument laws of any other jurisdiction.