Ondo

There is a particular kind of confidence that comes from having worked inside the machine one now proposes to disrupt. Nathan Allman spent his early career at Goldman Sachs, structuring the sort of fixed-income products that most people never see, let alone understand. When he left to found Ondo Finance, the pitch was not the usual crypto fare of reinventing money from first principles. It was narrower and, in its way, more modest: take an asset the world already trusts implicitly — short-dated United States government debt — and give it a passport into the world of blockchains. Whether that modesty is genuine or merely good marketing is a question worth sitting with.

The appeal is not difficult to grasp. Treasuries are the bedrock of global finance, dull by design and prized precisely for that dullness. Crypto markets, by contrast, have spent a decade lurching between euphoria and collapse, propped up in their calmer moments by stablecoins whose reserves were not always what they claimed to be. Ondo’s proposition was to bridge those two worlds: bring the yield and credibility of government paper on-chain, and let it settle, trade and compose with the rest of decentralised finance the way a stablecoin does, only with an actual coupon attached.

It is an idea that sounds almost too sensible for an industry that made its name on speculation, which is either its greatest strength or the reason to be wary of how neatly it has been packaged.

The story so far

Ondo Finance was established in 2021, during the tail end of a bull market when almost any protocol promising yield could raise capital without much scrutiny. Allman’s team took a different route, courting institutional partners and regulatory advisers rather than chasing retail hype, and building products — OUSG among the first — that wrapped exposure to short-term Treasury funds in a tokenised form accessible to on-chain investors. The timing proved fortuitous: as the 2022 collapse of Terra and then FTX tore through crypto’s credibility, an asset class built on the full faith and credit of the US government suddenly looked rather appealing by comparison.

The following two years saw Ondo expand its ambitions considerably, launching USDY, a yield-bearing dollar instrument backed by Treasuries and bank deposits, aimed particularly at investors outside the United States who wanted dollar exposure with a return attached. The project attracted backing from established names in venture capital, including Founders Fund and Pantera, lending it a degree of institutional legitimacy that many rivals in the real-world-asset space could only envy.

The turning point, in narrative terms, arrived when BlackRock entered the tokenisation conversation with its own on-chain fund, BUIDL. Rather than treating this as competition, Ondo positioned itself as complementary infrastructure, integrating with such funds and reinforcing the idea that the world’s largest asset managers and a crypto-native protocol could occupy the same emerging market rather than opposing camps. The ONDO governance token itself arrived in January 2024, distributed to a community that had been cultivated for years beforehand, a sequencing that stood in contrast to the token-first, product-later approach common elsewhere in the industry.

Since then, the protocol has continued to broaden its offerings, adding tokenised exposure to a wider range of fixed-income instruments and courting institutional partners for custody and compliance, the unglamorous plumbing that determines whether tokenised finance is taken seriously or dismissed as a novelty.

The case for Ondo

Believers in Ondo point first to the scale of the opportunity it addresses. Tokenising government debt and money-market instruments is, in theory, a way of dragging trillions of dollars of traditional finance onto rails that are faster, more transparent and open around the clock, rather than confined to the working hours of a handful of financial centres. If even a modest fraction of global fixed income migrates on-chain over the coming decade, infrastructure providers positioned early and credibly stand to benefit disproportionately.

There is also the matter of pedigree. Ondo’s willingness to engage with regulators, its partnerships with established custodians and asset managers, and its founder’s background in traditional finance all lend the project a seriousness that distinguishes it from the more freewheeling corners of the RWA narrative. For those who believe tokenisation’s future belongs to institutions rather than anonymous protocols, Ondo reads as one of the more plausible vehicles for that transition.

The case against Ondo

Sceptics are quick to note that a token representing governance rights over a protocol whose underlying business is, essentially, wrapping Treasury bills is an unusual thing to value speculatively at all. The yield accrues to the underlying fund; the token’s worth rests instead on assumptions about future fee capture, adoption and a governance structure that remains, like most in crypto, only partially decentralised in practice. There is also the uncomfortable reality that as BlackRock and other giants build their own tokenisation infrastructure, the moat protecting smaller entrants like Ondo may prove thinner than early enthusiasm suggested.

Regulatory risk looms as well. Tokenised securities sit at the intersection of securities law and blockchain technology, a junction where rules remain unsettled across most jurisdictions, and a shift in enforcement posture could reshape the economics of the entire sector with little warning. Finally, there is the broader question of whether real-world-asset tokenisation, for all its institutional sheen, actually needs a public blockchain token to succeed, or whether the same efficiencies could be delivered through permissioned systems that dispense with a tradable governance asset altogether.

The bottom line

Ondo occupies an interesting middle ground between crypto’s speculative instincts and traditional finance’s caution, and its fortunes will likely track how convincingly that synthesis holds up as bigger institutions enter the same territory. Whether it emerges as essential infrastructure or as an early mover eclipsed by larger players is not a question this essay can settle. This is journalism, not financial advice.