SEC-Style In-Kind Mechanism Powers Alpaca's 24/7 Tokenized Equity Bridge

AlpacaDB Inc. has launched its Instant Tokenization Network (ITN), a blockchain infrastructure layer designed to enable institutions to mint and redeem tokenized U.S. equities 24/7, a development that could enhance liquidity in the tokenized asset market. The ITN allows for in-kind creation and redemption of tokenized stocks, mirroring the structure recently adopted by the U.S. Securities and Exchange Commission (SEC) for Bitcoin and Ethereum exchange-traded products (ETPs) Alpaca launches Instant Tokenization Network for US stocks^[3]. This mechanism eliminates settlement delays and enables seamless transfers between traditional brokerage-held assets and their tokenized counterparts, reducing friction in cross-chain liquidity SEC Gives Green Light to In-Kind Transactions for Crypto ETPs^[5]. By allowing institutions to redeem tokens directly for underlying securities, Alpaca's network aims to create a more cohesive market for tokenized stocks, which could otherwise suffer from fragmentation and price deviations similar to exchange-traded products Alpaca launches Instant Tokenization Network for US stocks^[3].

The SEC's approval of in-kind creation and redemption for crypto ETPs in July 2025 marked a pivotal shift in regulatory policy. Chairman Paul Atkins highlighted that the move would "make these products less costly and more efficient," aligning crypto ETPs with traditional commodity and equity ETPs SEC Approves In-Kind Creation & Redemption for Crypto ETPs^[6]. This framework reduces operational costs for market makers and enhances market integrity by enabling direct asset swaps rather than cash transactions. Alpaca's ITN adopts a similar approach, positioning tokenized stocks to benefit from the same efficiencies. For instance, derivatives desks could hedge positions using on-chain liquidity, while DeFi loan protocols could manage collateral more effectively during volatility Alpaca launches Instant Tokenization Network for US stocks^[3]. The SEC's actions and Alpaca's infrastructure both address structural inefficiencies that have historically limited the scalability of tokenized assets.

Alpaca's ITN has garnered support from major financial institutions and fintech firms, including Backed (xStocks), Ondo Finance, and DRW. These partners are leveraging the network to facilitate tokenized equity transactions, with Solana currently serving as the exclusive settlement chain. Alpaca's head of crypto, Arush Sehgal, emphasized that the ITN represents "a whole new infrastructure stack" for tokenized assets, bridging traditional finance and decentralized systems Alpaca launches Instant Tokenization Network for US stocks^[3]. The network's potential scale is underscored by Galaxy Research's projection that tokenized stocks could reach a $10 trillion market cap by 2030 Alpaca launches Instant Tokenization Network for US stocks^[3]. Early adopters, such as Ondo Finance, have highlighted the ability to bring U.S. stocks and ETFs on-chain, extending the model pioneered by stablecoins to traditional equities Alpaca launches Instant Tokenization Network for US stocks^[3].

The integration of in-kind mechanisms into tokenized stocks mirrors the SEC's regulatory evolution. Prior to July 2025, crypto ETPs operated under cash-only creation and redemption rules, which limited institutional participation and increased transaction costs. The shift to in-kind processes has been facilitated by revised SEC guidance for broker-dealers and the Federal Reserve's withdrawal of restrictive supervisory policies on crypto activities . These changes have enabled APs (authorized participants) to handle tokenized assets more flexibly, a dynamic Alpaca's ITN replicates for equities. The result is a system where liquidity providers can arbitrage price discrepancies across venues, and issuers benefit from a unified order book SEC Gives Green Light to In-Kind Transactions for Crypto ETPs^[5].

Analysts suggest that Alpaca's ITN could accelerate the adoption of tokenized assets by addressing liquidity challenges. Tokenized stocks currently face structural barriers, such as limited on-chain trading hours and fragmented market access. By enabling 24/7 in-kind conversions, Alpaca's network aligns tokenized equities with the operational standards of traditional markets, potentially attracting institutional investors. Roberto Klein of Backed (xStocks) noted that the ecosystem requires infrastructure that combines "on-chain inclusivity with investor protections" to achieve mass adoption Alpaca launches Instant Tokenization Network for US stocks^[3]. The ITN's focus on compliance and market integrity aligns with these goals, though risks such as custody complexity and regulatory uncertainty remain SEC Gives Green Light to In-Kind Transactions for Crypto ETPs^[5].