Ondo’s USDY yield coin expands to Arbitrum

Tokenized treasury products are gaining widespread adoption on blockchain networks.

Ondo Finance, a real-world asset (RWA) protocol, is expanding access to Ondo US Dollar Yield Token (USDY) to Arbitrum, an Ethereum layer-2 scaling network, according to an Aug. 27 blog post.

Ondo’s USDY is a yield token designed to let users earn up to 5.35% annual percentage return on stablecoins such as USD Coin (USDC). Each USDY token is backed by bank deposits and short-term treasury bills, according to Ondo. 

The launch “pav[es] the way for some of the largest decentralized finance applications to leverage our tokenized US Treasuries,” Katie Wheeler, Ondo’s vice president of partnerships, said in a statement. 

USDY has a total value locked of $364 million and is also available on eight blockchain networks, including Ethereum and Solana. Ondo also offers another tokenized treasury product, Ondo Short-Term US Government Treasuries (OUSD). 

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Tokenized treasury products, intended to approximate the low-risk yield available in conventional money market funds or high-yield savings accounts, are 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. They are predicted to reach $3 billion in total market capitalization by the end of 2024. 

According to data from RWA.xyz, the largest players among tokenized money market products are the BlackRock USD Institutional Digital Liquidity Fund and Franklin OnChain US Government Money Fund (FOBXX), with $509 million and $428 million in market capitalization, respectively. 

Arbitrum has been gaining momentum in tokenized RWAs, including tokenized treasury yield products. On Aug. 8, asset manager Franklin Templeton announced it was expanding FOBXX to Arbitrum.

Ondo is operated out of the United States, and USDY is subject to Regulation S. As such, USDY is not available to US investors and cannot be transferred for 40 days. 

Collectively, tokenized RWAs represent a $30-trillion market opportunity globally, Colin Butler, Polygon’s global head of institutional capital, told Cointelegraph in an interview.

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