Detailed explanation of Ondo Finance mechanism Comparative study with local Chinese projects Part 1

Ondo Finance uses U.S. Treasury bonds and money market funds, leveraging Reg D/Reg S compliance, to provide secure, low-risk, yield-bearing tokenized assets with global accessibility.

Its multi-phase strategy spans OUSG, USDY, OMMF launches to Ondo Chain, embedding KYC/AML and whitelist controls directly at the blockchain protocol layer for compliance scalability.

By deeply integrating with public chains and DeFi protocols, Ondo ensures tokenized assets are composable, liquid, and usable, bridging traditional finance and decentralized ecosystems worldwide.

Ondo Finance leads U.S. RWA tokenization with compliant U.S. Treasury-backed assets, deep DeFi integration, and Ondo Chain infrastructure—offering a model for global on-chain finance and China’s RWA evolution.

Introduction: Why study Ondo?

In 2025, while China’s domestic RWA narrative was still mired in the paradox of compliance constraints and non-standard assets, a project from across the ocean quickly gained consensus in the global capital market:

real asset tokenization platform with U.S. Treasury bonds as its underlying foundation, stable returns as its anchor, and on-chain circulation as its vision , is redefining the basic logic of “on-chain finance.”

Different from Malu Grape’s exploration of agricultural digitalization with NFT as its shell, and different from Langxin Technology’s cautious cross-border industrial paradigm under the “WFOE+SPV+ZKP Bridge” structure, Ondo represents a RWA path that is almost “institutional idealism”.

——It is based on the US compliance structure , bypassing the complex valuation and segmentation issues of non-standard assets, and directly moving the most standard, most financialized, and most globally recognized real assets (such as short-term government bonds and money funds) onto the chain .

Here, there are no policy compromises for “consumer NFTs” and no strong regulatory restrictions for “liquidity blockades”. There are only automatic dividends on earnings, free on-chain circulation of assets, and a complete financial compliance closed loop.

Because of this, studying Ondo is not about imitation, but about illuminating a future that we cannot reach.

This article will use Ondo Finance as a sample to analyze its underlying asset logic, technical mechanisms, liquidity design, and governance structure. It will also compare and analyze the practical paths of Malu Grape and Langxin Technology to answer the following key questions:

What does a typical American RWA architecture look like? Is the key to its success technology or system?

Can Ondo’s product structure be “localized”? Which modules can be absorbed locally?

If China wants to break through the domestic RWA dilemma in the future, does it have to break out of the existing compliance framework ?

Through this “reflection from the perspective of others”, we hope to provide a coordinate system for the next stage of development of China’s RWA that breaks away from the local narrative and identifies what are the real structural bottlenecks and what are the future possibilities that can be solved through institutional innovation.

Ondo is not an end point, but a “standardized questioning” of the status quo

1. Introduction to the fundamentals of leading companies in the US RWA track

Ondo Finance, founded in 2021 and headquartered in the United States, initially positioned itself as a bridge between decentralized finance (DeFi) and traditional finance ( TradFi ), focusing on the innovation and implementation of real-world asset tokenization (RWA). The project was founded by former Goldman Sachs investment banking team members with extensive backgrounds in both Wall Street and the crypto space.

Ondo’s core philosophy is to bring high-quality traditional financial assets (such as U.S. Treasury bonds and money market funds) onto the blockchain. Through a compliant architecture and smart contract technology, it enables institutional and individual investors to conveniently and securely allocate these assets globally. Its flagship products include:

USDY: A stablecoin-like token backed by short-term U.S. Treasuries and demand deposits, providing 24/7 on-chain returns ( approximately 4% annualized ) with the security of U.S. Treasuries.

OUSG: A tokenized wrapper around a short-term U.S. government bond ETF (e.g. BlackRock), tailored for accredited institutional investors.

OMMF: Tokenized money market fund, improving the selection of low-volatility income assets on the chain , is currently in the initial market stage, and the liquidity mechanism is still under construction

2 . Ondo Finance Product Development History: Analysis of the Strategic Layout from OUSG to Ondo Chain

Ondo Finance’s development trajectory clearly demonstrates the complete path of a compliant RWA project, evolving from a single product to a diversified product matrix, and finally to a self-built blockchain ecosystem. Its core strategy is to continuously expand on-chain liquidity and application scenarios while ensuring compliance and asset security .

2023 Q1 – OUSG launch

Ondo launched its first flagship product, OUSG, which tokenized a U.S. short-term Treasury bond ETF and issued it to accredited investors through Reg D. The goal of this phase was to verify the feasibility of bringing high-quality off-chain assets onto the blockchain while building trust among institutional clients.

2023 Q2 – USDY launch

As a stable dollar-denominated yield product for global users, USDY is issued through an Angola-registered special purpose vehicle (SPV) and is targeted at non-US investors. Its structure references Reg S principles but is not directly subject to SEC registration. Its underlying assets are short-term US Treasury bonds and repurchase agreements. USDY is focused on expanding its non-US investor base in emerging markets such as Asia and the Middle East.

2023 Q4 – OMMF launch

Ondo further launched OMMF (Ondo Money Market Fund Token) to achieve a more flexible liquidity and interest distribution mechanism, providing a stable income base for DeFi scenarios.

2024 Q2 – Multi- chain deployment and DeFi integration

with lending protocols such as Flux and Aave to introduce assets such as OUSG and USDY into mainstream DeFi pools, and deploy them to multiple public chains such as Ethereum and Solana to enhance liquidity.

2024 Q4 – Announcement of Ondo Chain plan

Building on its multi-chain operational experience, Ondo announced the construction of its own public blockchain , Ondo Chain, positioned as a native Layer 1 for RWAs. Its strategic goal is to unify functions such as clearing, compliance , revenue distribution, and governance within the on-chain infrastructure, reducing reliance on external public chains and cross-chain bridges .

2025 – Product matrix takes shape

The Ondo Chain mainnet is expected to be launched, and native RWA products based on the chain, customized income tools for institutions, and in-depth integration with stablecoins, lending, derivatives and other sectors will be launched to form a closed-loop ecosystem.

Within this logic, the emergence of Ondo Chain signifies a shift in the underlying foundation of the entire process from reliance on external public chains to native hosting on its own blockchain. This not only helps mitigate cross-chain risks but also enables chain-level functionality such as KYC compliance, automatic revenue distribution, and asset whitelist management, supporting Ondo in building a strategic product matrix covering diverse asset types and investor demographics .

3 . Ondo Finance’s asset on-chain mechanism: A detailed explanation of the technical path and compliance framework for US Treasury bond tokenization

Ondo Finance’s asset on-chain path reflects the full-process closed loop of a compliant RWA project. Its strategic core is to introduce highly stable, low-risk US dollar-denominated assets into the global crypto ecosystem through a compliant architecture and on-chain issuance mechanism.

3.1 Asset Selection

First, in terms of asset selection , Ondo uses U.S. Treasury bonds, short-term bonds and money market funds (MMFs) as its core asset pool.

This type of asset not only has extremely high security and extremely low default risk, but also provides predictable returns linked to U.S. Treasury yields, making it easier to match regulatory requirements.

By tokenizing such assets, Ondo can provide a low-risk and interest-bearing storage method for on-chain funds, expand the types of assets that DeFi can support, and allow international investors who cannot directly access the U.S. Treasury market to indirectly hold high-quality assets denominated in U.S. dollars.

3.2 On-chain Path

3.2.1 Off-chain asset acquisition

In the first step, Ondo will purchase U.S. Treasury bonds or target assets through U.S. registered investment advisors (RIAs) and licensed custodian banks, and these assets will be kept by regulated custodians (such as U.S. licensed trust companies) to ensure that off-chain assets are safe and traceable.

3.2.2 Legal structure establishment

In the second step, Ondo will first achieve the ownership and isolation of off-chain assets through a legal framework , whether it is US Treasury bonds, money market funds, or other regulated financial instruments that may be introduced in the future.

Typically, this step is accomplished by establishing an SPV (Special Purpose Vehicle) to ensure that the ownership, income rights, and operational risks of off-chain assets are separated from the Ondo entity and other assets.

This link provides investors with clear legal rights protection and lays a compliance foundation for subsequent on-chain mapping.

3.2.3 Issuing Coins on the Chain

Then it enters the on-chain mapping and tokenization stage.

Ondo maps the ownership rights of off-chain assets into on-chain tokens, using the ERC-20 standard to ensure their liquidity on Ethereum and compatible networks.

These tokens represent proportional shares of assets and can be transferred, staked, or used for other DeFi operations on the chain.

In this process, the design of smart contracts is crucial – it not only carries the logic of asset transfer and redemption, but also embeds permission control mechanisms related to compliance requirements .

3.2.4 Circulation Mechanism Design

The fourth step is liquidity and market access .

Ondo not only provides subscription and redemption services on its own platform, but also actively introduces tokenized assets into the external DeFi protocol ecosystem, such as the Flux lending platform, decentralized exchanges (DEX) and cross-chain bridging networks.

The goal of this strategy is to introduce low-risk assets that were originally confined to the off-chain into the high-liquidity environment on the chain, so that both institutional and individual investors can obtain profit opportunities within a compliant framework .

It is worth noting that Ondo plans to launch its own public chain in the future Ondo Chain forms a product strategy matrix by natively integrating cross-chain asset management and liquidity modules, reducing external docking costs.

〈Detailed explanation of Ondo Finance mechanism Comparative study with local Chinese projects Part 1〉這篇文章最早發佈於《CoinRank》。