The boundary of decentralized finance (DeFi) is expanding beyond native crypto assets, and a major shift is underway. Ondo Finance has introduced tokenized funds that allow stablecoin holders to gain exposure to U.S. Treasuries and corporate bonds—ushering in a new era where real-world assets (RWAs) are seamlessly integrated into DeFi. This innovation arrives at a pivotal time when traditional DeFi yields have plummeted, making high-quality, income-generating off-chain assets more appealing than ever.
With lending platforms like Compound and Aave offering less than 1% APY on USDC deposits, investors are seeking better alternatives. Meanwhile, U.S. Treasury rates remain significantly higher, with some short-term instruments yielding over 4%. Ondo Finance bridges this gap by bringing regulated, yield-bearing financial products on-chain—offering crypto users access to institutional-grade fixed income with DeFi’s convenience.
Three Tokenized Bond Funds Backed by Institutional Giants
Ondo Finance has launched three distinct tokenized funds, each representing ownership in exchange-traded funds (ETFs) managed by top-tier asset managers such as BlackRock and PIMCO. These products combine the reliability of traditional finance with the accessibility and transparency of blockchain technology.
1. OUSG – U.S. Government Bond Fund
OUSG is pegged to BlackRock’s iShares Short Treasury Bond ETF (SHV), focusing exclusively on short-term U.S. Treasury securities. With an estimated yield of 4.62%, it offers low volatility and high liquidity—ideal for risk-averse investors seeking stable returns.
2. OSTB – Short-Term Investment Grade Bond Fund
Backed by PIMCO Enhanced Short Maturity Active ETF (MINT), OSTB targets investment-grade corporate debt with short durations. It currently delivers a yield of 5.45%, balancing credit quality with competitive returns.
3. OHYG – High-Yield Corporate Bond Fund
OHYG tracks the iShares iBoxx $ High Yield Corporate Bond ETF (HYG), providing exposure to higher-risk, higher-reward corporate bonds. With a projected yield of 8.02%, it appeals to investors willing to accept moderate credit risk for enhanced income.
All three funds issue ERC-20 tokens representing pro-rata ownership in the underlying ETFs. Investors can transfer these tokens peer-to-peer via smart contracts, enabling seamless secondary market trading while maintaining compliance through controlled issuance.
Security, Compliance, and Institutional Partnerships
Learning from past collapses in the crypto space—such as the UST depeg and unregulated lending failures—Ondo Finance prioritizes regulatory compliance and asset protection.
The platform partners with trusted institutions:
- Clear Street serves as the prime broker and holds securities in a DTC-eligible account, ensuring segregation and legal clarity.
- Coinbase Custody secures all stablecoin holdings, while Coinbase Prime handles fiat-stablecoin conversions.
- Richey May, a certified public accounting firm, acts as tax advisor and auditor, reinforcing financial transparency.
Additionally, Ondo enforces a whitelist system requiring all participants to undergo KYC (Know Your Customer) and AML (Anti-Money Laundering) checks before investing. Only accredited or qualified purchasers—defined by the SEC as individuals or entities with at least $5 million in investments—are eligible to participate.
Management fees are kept minimal at 0.15% annually, making these funds cost-competitive compared to traditional mutual funds or ETFs.
From DeFi Lending to Real-World Asset Tokenization
Founded by former Goldman Sachs executives Nathan Allman and Pinku Surana, Ondo Finance initially operated as a collateralized lending protocol on Ethereum. Users deposited crypto into "Ondo Vaults" to earn interest from borrower repayments.
However, after raising $30 million in funding—including investments from Founders Fund and Pantera Capital—the team pivoted toward real-world asset integration. Their earlier collaboration with Fei Protocol on liquidity-as-a-service (LaaS), though now defunct, laid groundwork for sustainable DeFi liquidity models.
As CEO Nathan Allman stated:
“We aim to close the gap between low-yield, secure assets and high-risk, high-reward opportunities in DeFi. Our goal is to offer safer, liquid, and higher-yielding alternatives that let investors move easily between stablecoins and traditional assets.”
Today, Ondo Finance has fully transitioned away from its original lending model, focusing exclusively on tokenizing high-quality off-chain assets.
Why Real-World Assets Are the Future of DeFi
Despite early growth, DeFi faces structural limitations. According to DeFi Llama, total value locked (TVL) dropped from over $180 billion to around $39 billion in one year—a decline of more than 78%. Much of this stems from reliance on volatile native tokens and unsustainable yield farming practices.
In contrast, global bond markets exceed $130 trillion, dwarfing the entire crypto ecosystem. Integrating even a fraction of these assets into DeFi could unlock unprecedented scalability.
Several pioneers are already advancing this vision:
- JPMorgan’s Onyx Digital Assets completed cross-border government bond trades using Aave on Polygon, demonstrating how tokenized sovereign debt can be used in regulated environments.
- MakerDAO issued the first DeFi-backed loan using real-world assets via Centrifuge’s Tinlake platform and launched a $220 million fund dedicated to RWA financing.
- Aave launched its own RWA Market in partnership with Centrifuge, allowing businesses to tokenize invoices, royalties, and other income streams for on-chain financing.
These developments signal a broader trend: DeFi’s next growth phase depends on real-world asset adoption.
👉 See how blockchain is transforming traditional finance—unlock new yield opportunities today.
Frequently Asked Questions (FAQ)
Q: Can I invest in Ondo’s funds using only stablecoins?
A: Yes, investors can use either stablecoins or USD. However, participation requires passing KYC/AML verification and meeting qualified purchaser criteria.
Q: Are these funds available globally?
A: Currently, access is restricted due to regulatory requirements. Only whitelisted investors from compliant jurisdictions may participate.
Q: How are yields generated and distributed?
A: Yields come from dividends paid by the underlying ETFs (SHV, MINT, HYG). These are collected periodically and reflected in the fund’s net asset value (NAV), which accrues to token holders.
Q: Is my investment protected if something goes wrong?
A: While no investment is risk-free, assets are held in segregated accounts with regulated custodians (Clear Street and Coinbase Custody), reducing counterparty risk significantly.
Q: What happens if the underlying ETF changes its composition?
A: The fund mirrors the ETF’s performance exactly. Any changes in the ETF’s holdings are automatically reflected in the tokenized fund without requiring governance votes or manual adjustments.
Q: Can I trade these tokens on decentralized exchanges?
A: Secondary trading is possible peer-to-peer via smart contracts, but listings on major DEXs depend on compliance frameworks and are not yet widely available.
The Road Ahead: Bridging TradFi and DeFi
Ondo Finance represents a critical step toward merging traditional finance with decentralized infrastructure. By tokenizing U.S. Treasuries and corporate bonds, it offers crypto-native users a reliable path to diversified, regulated income—without sacrificing control or transparency.
As more institutions explore asset tokenization, we’re likely to see increased liquidity, lower entry barriers, and innovative financial products built atop these foundations. For DeFi to achieve mass adoption, integrating real-world value isn’t just beneficial—it’s essential.
Core Keywords: stablecoin investing, tokenized bonds, U.S. Treasuries DeFi, real-world assets (RWA), Ondo Finance, fixed income crypto, blockchain asset management, decentralized finance yield