The rise of Real-World Assets (RWA) in blockchain has become one of the most compelling narratives in Web3 today. From discussions at Hong Kong’s Web3 Festival to legal circles, RWA is no longer just a buzzword — it's a bridge between traditional finance and decentralized innovation. Among the pioneers shaping this space, Ondo Finance stands out as a leading force, particularly within the U.S. regulatory landscape.
Unlike many projects still exploring which real-world assets to tokenize, Ondo has already brought high-quality, income-generating instruments like U.S. Treasury bills and money market funds on-chain — and done so with a clear eye toward compliance, transparency, and scalability.
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Breaking Down Ondo’s RWA Model
Ondo Finance has earned its reputation as an RWA leader by combining DeFi efficiency with TradFi-grade security. At the core of its ecosystem are two key yield-bearing tokens: USDY and OUSG.
USDY: A Yield-Generating Stablecoin
USDY (Ondo US Dollar Yield Token) is pegged to short-term U.S. Treasuries and bank deposits. But unlike traditional stablecoins backed 1:1 by cash or equivalents, USDY generates yield from its underlying assets — making it a true yield-bearing stablecoin.
Key advantages:
- Real yield: Holders earn daily returns from U.S. government securities.
- Transparency: Regular audits and reporting ensure trust.
- Bankruptcy remote structure: Assets are held in a trust separate from Ondo’s corporate entity, giving investors priority claim in adverse scenarios.
This design ensures that even in volatile markets, investor capital remains protected while still participating in the broader DeFi economy.
OUSG: Tokenized Exposure to U.S. Treasuries
OUSG represents shares in a fund holding short-duration U.S. Treasury bonds. Like USDY, it offers daily liquidity and yield accrual — but with slightly higher risk and return potential due to longer maturities.
Both USDY and OUSG exemplify how Ondo is digitizing traditional financial products, bringing them onto public blockchains where they can be used programmatically.
Enabling RWA Liquidity: Flux Finance
Issuing tokenized assets is only step one. The real value emerges when these assets can move — be traded, lent, or used as collateral.
Enter Flux Finance, Ondo’s permissioned lending protocol designed specifically for RWA tokens.
Unlike open DeFi protocols such as Aave or Compound, Flux requires users to undergo KYC/AML verification before borrowing against assets like OUSG. This means only accredited or qualified investors can participate — a deliberate choice to stay within regulatory boundaries.
Why does this matter?
Because U.S. Treasuries are legally classified as securities. Placing them into an unregulated DeFi environment could trigger serious legal consequences. By implementing a permissioned access layer, Ondo creates a compliant pathway for these assets to generate utility without violating securities laws.
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This hybrid model — decentralized infrastructure with centralized compliance checks — may become the blueprint for future RWA integration into DeFi.
Building the Infrastructure: Ondo Chain
To scale RWA adoption, Ondo didn’t stop at applications. It built an entire blockchain: Ondo Chain, purpose-built for regulated asset tokenization.
Key features include:
- Permissioned validators: Traditional financial institutions like Franklin Templeton and WisdomTree serve as node operators, ensuring governance aligns with regulatory expectations.
- Open application layer: Developers can freely build dApps and issue new RWA tokens on the chain.
- On-chain oracles and bridges: Price feeds and interest rates are provided directly by trusted validator nodes, reducing reliance on third-party data providers.
This architecture balances institutional needs for control and compliance with Web3’s ethos of openness and interoperability.
The Future of RWA Issuance: Ondo Global Markets (Ondo GM)
Recognizing that many institutions want to tokenize assets but lack the technical or legal infrastructure, Ondo launched Ondo Global Markets (Ondo GM) — a platform enabling compliant RWA issuance.
Originally conceived as a closed, broker-mediated system, Ondo GM has evolved following consultations with regulators, developers, and traditional finance players.
As revealed in early 2025, the new framework reimagines RWA tokens as freely transferable digital assets, with compliance enforced not at the token level, but at the distribution layer — similar to how stablecoins operate globally while adhering to local regulations through on-ramps.
This shift allows any issuer — from asset managers to private credit firms — to launch compliant, liquid tokenized securities without reinventing the wheel.
What Problem Does Ondo Solve?
Beyond product innovation, Ondo addresses two critical challenges in the U.S. RWA landscape: liquidity fragmentation and regulatory uncertainty.
Market-Level Impact: Unlocking Asset Utility
Traditionally, assets like Treasury bonds or money market funds are static — held in brokerage accounts, traded during market hours, and rarely used outside their original context.
Ondo changes that by:
- Enabling 24/7 trading and redemption
- Allowing use in DeFi protocols (e.g., lending, staking)
- Supporting composability with other on-chain financial tools
Imagine using your Treasury-backed token as collateral to borrow USDC, then deploying that capital into yield strategies — all without leaving the blockchain. This level of flexibility was previously impossible in traditional finance.
Compliance Innovation: Navigating U.S. Regulation
The U.S. regulatory environment is notoriously strict — especially under the SEC’s watchful eye. Yet Ondo manages to operate effectively by adopting a dual-track strategy:
- Non-U.S. Market Focus: Many Ondo products are restricted for U.S.-based users, minimizing direct regulatory exposure.
Robust Compliance Frameworks: Even for international users, Ondo maintains high standards:
- Assets are custodied with regulated trusts like Ankura Trust
- Regular third-party audits verify reserves
- Legal structures enforce investor protection
Crucially, Ondo doesn’t avoid regulation — it engages with it. In 2025, the team partnered with top-tier law firm Davis Polk to hold formal discussions with the SEC about "wrappable security tokens" — a novel concept where tokens remain freely tradable, but access is permissioned at entry points.
This proactive dialogue positions Ondo not just as a product builder, but as a policy shaper in the emerging world of tokenized securities.
Key Takeaways for Practitioners
For teams exploring RWA in regulated environments, Ondo offers several strategic lessons:
- Start Outside Strict Jurisdictions: Launch first in more flexible markets to prove product-market fit before tackling complex regulatory regimes.
- Embrace Hybrid Models: Full decentralization isn’t always necessary — or advisable — for compliance-heavy use cases. Permissioned layers can enhance safety and legitimacy.
- Engage Regulators Early: Waiting until after launch can lead to shutdowns. Proactive communication builds trust and opens doors for innovation.
Frequently Asked Questions (FAQ)
Q: Is Ondo Finance available to U.S. investors?
A: Most of Ondo’s tokenized products are currently restricted for U.S.-based users due to securities regulations. However, the company is actively working with regulators to explore compliant pathways for domestic access.
Q: Are USDY and OUSG considered securities?
A: While backed by securities like Treasuries, USDY and OUSG are structured to minimize their own classification as securities through bankruptcy-remote trusts and passive exposure models. However, regulatory interpretations may vary by jurisdiction.
Q: How does Ondo ensure asset backing is transparent?
A: Ondo conducts regular third-party audits and publishes reserve reports. Custody is handled by regulated entities like Ankura Trust, providing institutional-grade assurance.
Q: Can I use OUSG as collateral on any DeFi platform?
A: Not universally. Platforms like Flux Finance support OUSG borrowing, but only for verified users who pass KYC checks — ensuring regulatory compliance.
Q: What makes Ondo Chain different from other blockchains?
A: It’s designed specifically for regulated assets, combining permissioned validation (for compliance) with open development (for innovation), creating a balanced environment for institutional-grade RWA deployment.
Q: How does Ondo GM plan to scale RWA issuance?
A: By offering a standardized, compliant issuance framework where tokens flow freely but distribution is controlled — enabling global reach without sacrificing legal adherence.
By building a full-stack solution — from asset tokenization and yield generation to lending infrastructure and issuance platforms — Ondo Finance is not just participating in the RWA revolution; it's defining its future trajectory in the United States and beyond.
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