DeFi entity Ondo Finance has unveiled a novel yield-generating stablecoin, paving the way for institutions to capitalize on the returns typically associated with US money market funds, but now available on-chain.
In Ondo Finance’s recent announcement on Thursday, they introduced the stablecoin named OMMF. This will act as a tokenized counterpart of US government money market funds, enabling trades around the clock on the blockchain.
Ondo further elaborated that OMMF will support both stablecoin and traditional fiat for subscriptions and redemptions. Moreover, the accrued interest will be routinely allocated to token owners daily, disbursed in the shape of additional tokens.
Elaborating on the rationale behind Ondo’s innovative yield-generating stablecoin, the company’s President and CEO, Justin Schmidt, shared with Bloomberg that the initial wave of stablecoins emerged during a period when interest rates hovered close to zero. As a result, these early stablecoins weren’t engineered with an emphasis on transmitting yield.
Schmidt further commented, “By converting money-market funds into tokens, we not only ensure the price stability and on-chain versatility of stablecoins but also bolster investor safeguards and offer enhanced yield to token owners.”
Follows US Tresury-tied stablecoin
Ondo Finance’s introduction of this innovative stablecoin follows their recent release, just two months prior, of OUSG—a stablecoin anchored to the so-called risk-free rate.
OUSG was designed as a vehicle for those stablecoin investors with a cautious approach, enabling them to harness returns achievable from US Treasuries. Ondo reported that OUSG has witnessed a “prominent initial organic growth.” The coin has accumulated more than $70 million in assets under management (AUM) and boasts $27 million in OUSG collateral.
However, Ondo asserts that the inherent price stability of their newly minted OMMF stablecoin makes it a more versatile tool. It can seamlessly replace fiat or other stablecoins in transaction settlements and serve as a reliable form of collateral, especially in over-the-counter (OTC) trading and lending arenas.
Ondo Finance further detailed in its announcement, “With its design centered on fostering these novel applications, and due to the consistent $1 price predictability, OMMF will maintain modest on-chain stablecoin reserves. This will facilitate uninterrupted 24/7 subscriptions and redemptions.”
However, due to regulatory considerations, the new stablecoin will be restricted to institutions and the so-called accredited investors. Yet, everyday cryptocurrency enthusiasts have the opportunity to indirectly reap its advantages by using it as collateral for lending on Ondo’s DeFi platform, Flux.
