Crypto Startup Ondo Launches Tokenized Money Market Fund On Public Blockchain – Ledger Insights
Today, crypto startup Ondo Finance says it is launching a tokenized money market fund with the OMMF token. The latest token is a follow-up to OUSG, Ondo’s tokenized exposure to US Treasuries, which it launched two months ago. Ondo describes itself as a decentralized investment bank.
OMMF offers two advantages, especially for crypto investors with large stable coin balances – a better return and 24/7 trading. When interest rates were low, DeFi lending protocols such as Aave and Compound offered attractive returns on stablecoin deposits. Currently this return is around 2.2% compared to 4.5% upwards on money market funds.
Ondo has yet to announce which money market fund will be tokenized. The Treasury tokens are backed by ETFs from Blackrock and PIMCO.
The OMMF token will be worth exactly $1 and will distribute interest to token holders daily as new tokens. We are a bit curious about the Ethereum gas costs involved in that.
“What stablecoins have done for cash, OMMF will do for money market funds, unlocking their potential to be used not only as a store of wealth – their primary current use – but also as a globally accessible security and settlement option,” said Nathan Allman, Founder and CEO of Ondo Finance.
Currently, the target market is wealthy crypto investors. Ondo’s funds are not SEC-licensed, as it states that it is only aimed at qualified buyers. That’s a higher threshold than typical accredited investors, requiring an individual to have more than $5 million in investments. The tokens can only be traded between white-listed holders who have been through familiarity with the customers’ (KYC) processes.
The OMMF tokens can be used for other DeFi activities such as trading, lending and settlement, but the relevant smart contracts must go through a compliance review to ensure they adhere to the whitelist. It just so happens that Ondo has its own DeFi lending protocol, FluxFinance, which supports permission and has a total value locked at $52.5 million, including $28.9 million of Treasury tokens OUSG.
Looking at the OUSG token, so far, they have a market cap of $68.5 million with 26 token holders. That’s quite a bit higher than Swiss competitor Backed Finance, which avoids dealing with US citizens. Its short-term US Treasury token BIB01 has a market capitalization of just $500,000.
A year ago, Ondo raised a $20 million funding round led by Peter Thiel’s Founders Fund and Pantera Capital, with other investors including Tiger Global and Coinbase Ventures. It has since turned around, but at that stage it was working with DAOs to raise liquidity and boasted Terra, Frax and Fei as partners. Terra started the crypto crash, Fei was hacked a couple of weeks before that event, and Frax is swinging from a partially algorithmic stablecoin to a fully supported one. Hopefully OUSG and OMMF will be safer bets.
