Ondo Finance, a decentralised exchange that offers tokenized securities, has launched crypto tokens backed by U.S treasuries and bonds. The fund will allow investors to deposit stablecoins and USD into three ETFs managed by BlackRock and PIMCO that are approved by smart contracts and can be transferred on-chain.
Ondo Finance, a decentralised finance (DeFi) protocol that offers institutional-grade investment products and services, has announced the launch of a tokenized fund that will allow stablecoin holders to invest in U.S Treasuries and bonds.
According to an announcement made by Nathan Allman, co-founder and CEO of Ondo, the company will start off with short-term US treasuries and bonds through “large and highly liquid” exchange-traded funds (ETFs) managed by investment giants BlackRock and PIMCO. At launch, there will be three separate share classes that will be made available to investors: U.S Government Bond Fund (OUSG), Short-Term Investment Grade Bond Fund (OSTB), and High Yield Corporate Bond Fund (OHYG).
OUSG ($SHV), will allow clients to invest in short-term U.S treasuries through the BlackRock US Treasuries ETF. OSTB ($MINT) will stake in short-term investment grade corporate bonds via PIMCO’s Enhanced Short Maturity Active ETF, and OHYG ($HYG) will invest in high yield-earning corporate bonds under the BlackRock iBoxx $ High Yield Corporate Bonds ETF.
While Ondo Capital Management – the company’s asset management arm, will act as the investment adviser facilitating purchase and sale of the ETFs, Ondo Finance’s decentralised exchange (DEX) will handle the tokenization process and also charge a 0.15% per annum management fee for the assets. Investors in the Ondo 1 LP (liquidity pool) can use stablecoin and US dollars to purchase the tokens that represent their ownership in the funds.
Token holders can create a smart contract to lend or trade the assets with each other. However, the ETFs will have certain restrictions as they cannot be sent to individuals that are not qualified as investors in the fund. Smart contracts that investors wish to use for these transactions must first be approved by fund managers through a thorough compliance review to ensure their legality.
To subscribe to the fund, investors will be required to pass know-your-customer (KYC) and anti-money laundering (AML) screening, sign documents, and then transfer payments for their investments in dollar-pegged stablecoins or USD. Deposit and withdrawal services for the ETFs will be offered by Ondo every business day and will be executed by fund managers after calculating the share class’s daily net asset value (NAV).
To ensure security and legality of the products, Ondo has partnered with highly-regulated third-party service providers and will hold the assets with custodians that are bankruptcy-remote qualified. Brokerage firm Clear Street will custody the ETF securities in its account at the Depository Trust Company (DTC) – the world’s largest securities depository. All stablecoin investments will be held by Coinbase Custody, and the U.S-based crypto firm’s institutional brokerage, Coinbase Prime, will handle conversions between fiat and stablecoins. NAV Consulting will serve as the fund administrator and maintain capital accounts for investors, and Richey May will be the tax advisor and auditor for the Ondo ETFs.
Ondo Finance, which was founded by Allman and Pinku Sharma – two former employees of banking giant Goldman Sachs – in 2021, raised $20 million in a Series A funding round participated in by venture capitalists Founders Fund, Pantera Capital, Coinbase Ventures and Wintermute. The decentralised exchange that offers structured investment products also raised $10 million from a public sale of its native token ONDO on the CoinList crypto exchange.
Those who are interested in subscribing to Ondo’s latest offerings can do so by visiting ondo.finance or contact the team via email at email@example.com for more information.
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