Ondo Finance Introduces Yield-Generating Stablecoin Alternative for Institutions – How Does it Work?
A new type of yield-generating stablecoin has been introduced by DeFi provider Ondo Finance, offering institutions a way to benefit from the return of US money market funds on-chain.
According to an update from Ondo Finance on Thursday, the new stablecoin, dubbed OMMF, will be a tokenized version of US government money market funds, tradeable 24/7 on the blockchain.
The DeFi-focused firm said that OMMF will accept both stablecoin and fiat subscriptions and redemptions, and that interest earned will be distributed to token holders on a daily basis in the form of new tokens.
In a tweet announcing the new launch, Ondo Finance promised that its new token will do for money market funds what stablecoins did for cash:
Explaining the firm’s motivation for creating the new yield-generating stablecoin, Ondo’s President and CEO Justin Schmidt told Bloomberg that the first generation of stablecoins “were created when interest rates were near zero, so designing them to be able to pass on yield was not a focus.”
He added:
“By tokenizing money-market funds we are able to deliver the price stability and on-chain utility of stablecoins while providing superior investor protections and passing on yield to holders.”
The launch of the new type of stablecoin comes after the same firm two months ago launched OUSG, a stablecoin tied to the so-called risk-free rate.
The coin, which is offered as a way for risk-averse stablecoin holders to tap into the return that can be earned from US Treasuries, has shown “strong early organic growth,” with more than $70 million in assets under management (AUM) and $27 million in OUSG collateral, Ondo said.
According to the firm, however, the price stability of the new OMMF stablecoin means that is can more easily be
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