Ondo Finance announced the launch of a tokenized fund allowing stablecoin holders globally to invest in bonds and US Treasuries. The fund seeks to close the widening gap between on-chain and off-chain yields, a potentially attractive opportunity for investors holding more than $100 billion in stablecoins, which they currently receive no yield on.
Today, crypto investors have a relatively unattractive set of yield opportunities available to them. The most proven protocols like Compound and Aave yield about 1-2% per year. While newer uncollateralized lending protocols offer yields in the 7-10% APR range, these loans have been experiencing higher-than-expected default rates and are proving to be less transparent and more risky than many traditional bonds with comparable yields. Meanwhile, an inverted yield curve and the potential for the federal funds rate to exceed 5% make short-term Treasuries a particularly compelling asset.
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“The crypto market is in desperate need of low-friction access to traditional capital markets. Large stablecoin holders, including start-ups and DAOs, are faced with a choice between having their purchasing power eroded away by inflation or taking too much risk with the current set of on-chain yield offerings,” says Nathan Allman, founder and CEO of Ondo Finance. “We’re delighted to bring to market high-quality, institutional-grade offerings like our tokenized US Treasuries.”
The fund will process daily subscriptions and redemptions in stablecoins as well as traditional fiat, and investors will receive tokens on the Ethereum blockchain representing their ownership. These tokens will be transferable between whitelisted investor addresses, as well as any smart contract that passes a compliance review. Ondo envisions investors using smart contracts to engage in on-chain trading and lending with the fund tokens alongside traditional cryptoassets.
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The fund will have three tokenized classes, each investing in a single ETF from either Blackrock or PIMCO. Ondo will manage the fund, with Clear Street serving as the prime broker and qualified custodian of the securities, Coinbase as the qualified custodian of the stablecoins, NAV Consulting as the fund admin, and Richey May as the fund auditor.
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