Tokenized RWAs Surge Past $10 Billion, Ondo Finance Leads with $600 Million TVL

The tokenized Real-World Assets (RWA) market is booming, recently surpassing the impressive $10 billion mark. This growth is fueled by increased institutional interest, with giants like BlackRock, Franklin Templeton, and Grayscale recently entering the decentralized finance (DeFi) space.

At the forefront of this movement is Ondo Finance, a DeFi protocol specializing in tokenized U.S. Treasuries and other yield-generating products. Last week, Ondo Finance announced it had exceeded $600 million in Total Value Locked (TVL).

RWA Tokenization's Momentum Grows

The rapid expansion of the tokenized RWA market has captured the attention of both traditional finance (TradFi) institutions and DeFi protocols. Recent data from OurNetwork indicates that the total value of tokenized RWAs now stands at over $10.9 billion, an increase of more than $2 billion since the start of 2024. Tokenized private loans and U.S. Treasury debt have been the primary drivers of this growth.

As institutional involvement deepens, firms like BlackRock are making significant moves. BlackRock's BUIDL fund, launched in March 2024, has quickly gained prominence as a leading tokenized real-world asset, offering attractive dividend yields to institutional investors. Ondo Finance has capitalized on this trend, investing in products like BUIDL to broaden its range of tokenized derivatives.

According to DeFiLlama, the protocol just crossed the $600 million TVL threshold (currently around $614 million) across its yield-bearing products. This includes $384 million in USDY, its permissionless, yield-bearing stablecoin backed by U.S. Treasuries, and $221 million in OUSG, its U.S. Treasury-backed tokenized asset.

Launched in August 2023, USDY has quickly become the leading permissionless yieldcoin. Available on multiple blockchains, Ethereum, Solana, Aptos, Sui, Mantle, Mantra, and Cosmos via Noble, and recently Arbitrum, USDY's TVL has soared to over $380 million in just over a year. Ondo's strategic expansion of USDY's presence across DeFi ecosystems has proven successful, with the token now integrated into over 70 projects.

Bridging TradFi and DeFi: Prioritizing Investor Protection

Ondo's distinction lies in its commitment to providing institutional-grade investor protections while harnessing the composability of DeFi. Mark Janoff, Ondo's General Counsel, emphasized the importance of these protections, explaining that USDY's legal structure ensures bankruptcy remoteness. This means that in the event of bankruptcy for Ondo Finance or its affiliates, the assets backing USDY would be safeguarded from creditors.

Ondo has implemented additional safeguards, such as the use of collateral agents and security interests. The protocol has also introduced an equity buffer to over-collateralize USDY, adding an extra layer of protection during market fluctuations.

At the EpochSummit last Thursday, Rania Rahardja, Ondo's Director of APAC Sales, summarized the protocol's approach:

"Ondo Finance merges the best of both worlds by creating products with investor protections typically seen in TradFi, while leveraging the full range of benefits offered by the composable nature of DeFi."

Nathan Allman, Ondo's founder and CEO, spoke at the Blockchain Application Stanford Summit about the challenges of innovating within large financial institutions based on his experience at Goldman Sachs. He emphasized the excitement around traditional asset managers like BlackRock tokenizing assets on public blockchains. According to Allman, this tokenization brings meaningful utility as the tokens can be transferred and have a direct effect on ownership.

"They really see the value from us in helping with distribution," he said and noted that institutions are "limited in how they can tap into DeFi protocols and wallets and exchanges" on a large scale.