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Ex Goldman Associates-Led Firm Launches T-Bills Backed Stablecoin
OndoFinance introduced the first-ever tokenized note backed by T-Bills and bank deposits, with a starting annual percentage yield of 5%.
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Ondo Finance, an on-chain finance firm started by former Goldman Sachs associates, rolled out the USD Yield (USDY) today, the first-ever tokenized note backed by US Treasuries and bank deposits. The product will be available to non-US retail and institutional investors.
USDY Annual Percentage Yield Starts at 5%
Blockchain firm Ondo Finance announced the launch of USD Yield on Friday – the first tokenized bond backed by US Treasury bills and bank deposits. According to the announcement, USDY cannot be offered, sold, or made available in the US or to US residents. In addition, the asset is not registered under the US Securities Act of 1933.
Ondo refers to USDY as a bearer instrument, which provides a similar degree of accessibility as digital stablecoins. Meanwhile, USDY rewards its holders with a variable yield, starting at an annual percentage yield (APY) rate of 5%.
Issued by a specialty purpose vehicle called Ondo USDY LLC, the USD Yield is over-collateralized by around 3% first loss equity position that absorbs short-term volatility in US Treasury prices.
“USDY will expand the universe of investors seeking to save and spend in a more global and digitally-native manner by sharing the yield and providing improved transparency and security over conventional stablecoins.”
– Nathan Allman, CEO of Ondo Finance.
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Ondo Finance Joins the Asset Tokenization Boom
The launch of USDY comes after Ondo Finance’s foray into the tokenization space earlier this year with the rollout of the Ondo Short-Term US Government Bond Fund (OUSG), the first on-chain US Treasuries product. Even though it is available only to institutional investors, OUSG attracted significant attention and currently manages more than $160 million in assets.
From a broader perspective, the launch of USDY underscores the growing popularity of blockchain-powered asset tokenization. This is due to the ability of tokenized assets to represent real-world assets, such as real estate, stocks, or commodities, while also bringing a string of advantages thanks to the decentralized ledger technology (DLT).
The DLT allows fractional ownership, increased liquidity, and accessibility to a broader range of investors. Additionally, it offers enhanced transparency, security, and efficiency in asset management.
Last month, the SWIFT banking network plans to cooperate with central banks and financial institutions to test how its extensive infrastructure transfers tokenized assets between private and public blockchains. The blockchain oracle, Chainlink, will enable the interconnectivity between different blockchains.
Do you think the tokenization of assets such as T-bonds and commodities will gain mainstream acceptance shortly? Let us know in the comments below.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
