Ondo Finance Expands USDY Yield Token to Arbitrum
Ondo Finance, a real-world asset (RWA) protocol, has announced the expansion of its Ondo US Dollar Yield Token (USDY) to Arbitrum, an Ethereum layer-2 scaling network. This expansion was detailed in an Aug. 27 blog post by the company.
What is USDY?
USDY is a yield token designed to help users earn up to 5.35% annual percentage return (APR) on stablecoins such as USD Coin (USDC). Each USDY token is backed by bank deposits and short-term treasury bills, ensuring stability and reliability.
Significance of the Arbitrum Expansion
The launch on Arbitrum “pav[es] the way for some of the largest decentralized finance applications to leverage our tokenized US Treasuries,” according to Katie Wheeler, Ondo’s vice president of partnerships. This move is a strategic step for Ondo, as it continues to expand its footprint in the decentralized finance (DeFi) space.
Key Statistics
- Total Value Locked (TVL): USDY currently has a total value locked of $364 million.
- Blockchain Availability: USDY is available on eight blockchain networks, including Ethereum and Solana.
In addition to USDY, Ondo also offers another tokenized treasury product known as Ondo Short-Term US Government Treasuries (OUSD).
Growth of Tokenized Treasury Products
Tokenized treasury products, which aim to approximate the low-risk yield available in conventional money market funds or high-yield savings accounts, are rapidly proliferating on blockchain networks.
The total market capitalization for tokenized treasury products has increased by 150% year to date, according to data from RWA.xyz and Cointelegraph Research. These products are predicted to reach a market capitalization of $3 billion by the end of 2024.
- BlackRock USD Institutional Digital Liquidity Fund: $509 million market capitalization.
- Franklin OnChain US Government Money Fund (FOBXX): $428 million market capitalization.
Arbitrum’s Growing Influence in Tokenized RWAs
Arbitrum has been gaining momentum in the tokenized RWA sector, including tokenized treasury yield products. On Aug. 8, asset manager Franklin Templeton announced the expansion of its FOBXX product to Arbitrum, highlighting the growing influence of this layer-2 network.
Regulatory Considerations
Ondo operates out of the United States, and USDY is subject to Regulation S. As a result, USDY is not available to US investors and cannot be transferred for 40 days after issuance.
The Global Opportunity in Tokenized RWAs
Tokenized RWAs represent a $30-trillion market opportunity globally, according to Colin Butler, Polygon’s global head of institutional capital. This market is expected to continue its rapid growth as more institutional players enter the space.
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