This year, there has been a growing interest in tokenized real-world assets (RWA), especially from institutional investors. Well-known financial institutions such as Citigroup, Boston Consulting Group and Standard Chartered Bank have all released predictions that the tokenized RWA market could reach trillions of dollars in the near future. BlackRock has launched a tokenized treasury fund in partnership with Securitize. PayPal successfully introduced the stablecoin issued in cooperation with Paxos to the Solana network at the end of May. Recently, Stripe acquired the stablecoin infrastructure company Bridge for $1.1 billion.
Tokenized risk assets are not a new concept in the blockchain industry. Risk assets cover a wide range of tangible assets (real estate, etc.) and financial assets (stocks and bonds). Tokenization brings many benefits, such as improved capital efficiency and accessibility, agile infrastructure, automation through smart contracts, and enhanced regulatory compliance and transparency.
The most successful tokenized RWA so far is the stablecoin, USDC or USDT, which is backed by the US dollar. These stablecoins are designed to maintain a stable value and provide ample liquidity, making them the most widely used asset type for trading in various crypto assets.
Despite their advantages and growth potential, most current fiat-backed stablecoin offerings lack adequate investor protection mechanisms. For stablecoins to be widely used by retail and institutional entities, it is critical to ensure a regulatory framework that adequately protects against various crises, including bankruptcy.
The billions of dollars in reserves held by these entities are typically invested in low-risk liquid assets such as cash or government securities to generate interest income. In the case of Tether, the reserves are not separated from the issuer’s operating assets, and the lack of regular audits or third-party oversight means there is no structure in place to mitigate the risk of insolvency.
The total supply of stablecoins has increased significantly from $27 billion in 2021 to about $160 billion today. Stablecoins are a fundamental means of transaction and value storage in the thriving DeFi ecosystem, so the surge in volume can be seen as a natural result of the growing global interest in cryptocurrencies.
Despite the huge potential of tokenized RWAs, their widespread adoption has historically been limited. This is mainly due to the need to overcome regulatory and technical barriers. In addition, people need to see that these assets can indeed provide better use cases by being on-chain.
In other words, developing the tokenized RWA market requires comprehensive cooperation involving regulatory compliance legal institutions, custodians, valuation services, securities firms, technology partners supporting advanced infrastructure, and participants in the blockchain ecosystem.
In this challenging environment, Ondo Finance brought together various stakeholders with the vision of increasing access to diverse financial assets. Ultimately, it successfully broke new ground in the market by pioneering the tokenization of US Treasury assets and introducing the concept of “yield coins”.
The new asset class defined by Ondo Finance is called “ Yieldcoins ” and is designed from the outset with the structural stability issues of existing stablecoins in mind. The core concepts of this asset class include legal separation of reserve funds from operational assets, regular and transparent reporting and auditing, and strict compliance with regulatory requirements to ensure adequate investor protection, including guaranteed redemption rights.
Ondo Finance has successfully demonstrated through its initial products OUSG and USDY that tokenized treasury assets can provide investors with the same protection as traditional finance and provide utility beyond stablecoins. These successes have helped the tokenized treasury market gain momentum, encouraging stakeholders to identify with Ondo Finance's vision and actively pay attention to this market.
Currently, Ondo Finance offers USDY and Ondo Short-Term US Government Bonds (OUSG). Let’s start with USDY, which offers high yields. Ondo Finance distributes most of the interest generated by the underlying assets to token holders, leaving only a minimal spread.
They offer two ways of distributing returns: repricing and accumulating returns. The repricing mechanism means that the interest earned from holding the token will be distributed in the form of additional tokens. In other words, in the former case, the interest is automatically reinvested, increasing the value of the token itself. In the latter case, the value of the token remains stable at $1, but the interest will be paid in the form of additional tokens, resulting in an increase in quantity rather than value.
OUSG is a licensed fund asset that allows institutional investors to invest in short-term U.S. Treasury products. A large portion of the OUSG portfolio is currently backed by BlackRock's BUIDL, and the rest is backed by BlackRock's federal funds, bank deposits, and USDC. Although OUSG is a fund asset, it offers features such as instant issuance and redemption around the clock, lower minimum order amounts and fees compared to other institutional investor assets, and multi-chain support.
Ondo Finance has divided its development roadmap into three phases. Each phase is based on its mission of "providing institutional-grade financial products and services to everyone" and adheres to four core principles: security and transparency; legal and regulatory compliance; efficiency and investor protection; and providing an excellent product experience.
Ondo Finance is expanding the distribution channels of its products and enhancing the utility of its products through more than 70 DeFi-related protocols on eight blockchain networks in its ecosystem. For example, USDY can not only be used to provide liquidity on DEXs such as Jup, Ray, Orca and Camelot, but can also be used as a collateral asset on Perps exchanges, providing investors with the opportunity to obtain more returns.
Ondo Finance has a deep understanding of both traditional financial markets and Web3 technologies. By leveraging the power of blockchain, the network effects of its ecosystem and expertise in on-chain distribution, Ondo Finance is uniquely positioned to bring structural efficiency improvements and additional revenue sources to the current financial system.
Ondo Finance’s success to date, as it demonstrates its leadership in the tokenized U.S. Treasury market, speaks volumes about its differentiated approach and effective execution. Unlike other projects, Ondo Finance sees a future where public securities are traded through a financial infrastructure that seamlessly connects liquidity (regardless of where it resides) with trade orders from a global audience and allows for unlimited customization of risk and structure.
For Ondo Finance, tokenization is not just about putting physical assets on a blockchain network, but about expanding the availability of these assets, transforming them into more valuable assets. With a consistent vision and proven execution capabilities, Ondo will continue to work with financial institutions and develop strategic blockchain infrastructure. It is not only expected to achieve its vision of becoming a trading platform for all types of public securities, but also to set a positive precedent for tokenized RWAs for the broader global financial market.
ONDO Finance has received tens of millions of USDC transferred from BlackRock BUIDL in recent months. It is self-evident how deep the cooperation relationship is. Ondo's stable currency USDY has also become the fourth largest value storage method in the Solana ecosystem. Recently, the copycat bull has come. $ONDO was born in DeFi+RWA and is expected to have a good trend.