RWA Protocol Ondo Finance Expands Access to USDY Yield Token to Arbitrum

RWA protocol Ondo Finance is expanding access to its USDY yield token to Arbitrum, an Ethereum layer-2 scaling network, according to an Aug.

Real-world asset (RWA) protocol Ondo Finance is expanding access to its Ondo US Dollar Yield Token (USDY) on Arbitrum, a layer-2 scaling network for Ethereum, the protocol announced in a blog post on Aug. 27.

Ondo’s USDY is a yield token that allows users to earn an annual percentage yield (APY) of up to 5.35% on stablecoins like USD Coin. Each USDY token is backed by bank deposits and short-term treasury bills, according to Ondo.

“This integration paves the way for some of the largest decentralized finance applications to leverage our tokenized US Treasuries,” Katie Wheeler, vice president of partnerships at Ondo, said in a statement.

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

Tokenized treasury products, which are designed to approximate the low-risk yield available in conventional money market funds or high-yield savings accounts, are rapidly proliferating on blockchain networks.

According to data from RWA.xyz and Cointelegraph Research, the total market capitalization for tokenized treasury products has increased by 150% year-to-date. The products are projected to reach $3 billion in total market capitalization by the end of 2024.

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, according to data from RWA.xyz.

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

Ondo is based in the United States, and USDY is offered under Regulation S. As such, USDY is not available to US investors and cannot be transferred for 40 days.

Collectively, tokenized RWAs present a $30-trillion market opportunity worldwide, as reported by Colin Butler, global head of institutional capital at Polygon, in an interview with Cointelegraph.