Analyzing Ondo Finance: How to handle RWA in the US?

Ondo has already brought assets such as U.S. Treasury bonds and money market funds onto the chain and integrated them into Decentralized Finance gameplay.

Written by: Mankiw

Right now, RWA is indeed trending.

From the Hong Kong Web3 Carnival in early April to the recent Web3 lawyer circle, everyone is talking about RWA. There is some reason for this, after all, RWA is a more reliable and safe way to "issue coins".

A few days ago, Lawyer Mankun discussed China's newly emerging RWA projects with everyone, such as "Mankun Research | Decoding the Characteristics of RWA in Mainland China: Practical Features, Risk Analysis, and Optimization Pathways," and also shared current RWA strategies, such as "Lawyer Mankun | The Fragmented Web3 World, at least three types of RWA."

However, when it comes to the precedents and leaders of RWA, we have to turn our attention to the United States. One of the more representative examples is probably Ondo. Especially in the past couple of days, the U.S. Securities and Exchange Commission (SEC) met with them to discuss a compliant issuance plan for tokenized securities, which truly adds a big S to Ondo's report card.

* Source of the image: SEC document screenshot

Therefore, in this article, Lawyer Mankun will chat with everyone about the gameplay of RWA in the United States based on Ondo's RWA model.

Ondo RWA Model Breakdown

The reason Ondo is referred to as the leader in RWA projects in the industry is that, according to lawyer Mankun, the most important point is that while most projects are still pondering "what real assets to launch for token financing," Ondo has already brought assets like U.S. Treasury bonds and money market funds onto the chain and integrated them with DeFi gameplay.

Take the token USDY (Ondo US Dollar Yield Token) issued by Ondo as an example. The real assets it is anchored to are short-term U.S. Treasury bonds and bank deposits, which means that:

First, this asset has solid yield support. USDY is essentially a yield-bearing stablecoin, allowing investors to enjoy the returns from US Treasury bonds or bank deposits on a daily basis;

Second, transparency and security are guaranteed. The underlying logic of the asset, such as custody, auditing, and profit distribution, still follows the compliance standards of traditional finance.

In addition, USDY adopts a bankruptcy isolation framework, completely separating reserve assets from the issuing entity. In the event of extreme circumstances, investors have priority claim rights over the reserve assets. Besides USDY, Ondo has also issued OUSG, which is pegged to a fund of short-term U.S. Treasury bonds, and its logic is similar to that of USDY.

Therefore, Lawyer Mankun believes that, to some extent, Ondo is more like moving traditional financial wealth management products and clearing mechanisms onto the chain, providing on-chain liquidity for assets while ensuring returns and controllable risks.

Speaking of asset liquidity, we should also mention another product from the Ondo team, Flux Finance.

If issuing coins is just the first step for RWA, then how to enable RWA tokens to flow on the chain is the key to value appreciation. Thus, Flux Finance was created - a lending protocol specifically for RWA.

The difference between Flux and common lending protocols (such as Compound and Aave) is that it allows users to use these tokenized national bonds (like OUSG) as collateral to borrow stablecoins like USDC.

So, the question arises: since government bonds have 100% security attributes, will putting them in DeFi touch upon US regulations?

The solution offered by Ondo is a licensing system: not everyone can use OUSG for borrowing; they must go through a compliance review to ensure they are qualified investors. In other words, through a centralized review system, it avoids the chaotic state of "any asset can be pledged" found in DeFi, ensuring that on-chain lending activities are conducted within a compliant framework.

This design is no different from establishing a template for the upcoming compliance of the overall on-chain RWA+Decentralized Finance.

In fact, at this point, the gameplay of RWA has already formed a closed loop. However, Ondo continues to expand its territory in the RWA field—since RWA is so popular and various projects want to engage in RWA, how do they issue it and where does it circulate? There must be some infrastructure in place.

Yes, Ondo has also been busy at the infrastructure level. It has built its own chain, Ondo Chain, specifically tailored for RWA, with the core gameplay being:

• Licensed validators, traditional financial institutions such as Franklin Templeton and WisdomTree serve as network nodes to ensure the security and compliance of the network;
• Open application layer, any developer can issue RWA tokens and create dApps on this chain;
• Built-in Oracles + Cross-Chain Bridges, asset prices and interest rates on the chain are directly fed by validating nodes.

This architecture not only meets the requirements of institutions for security and regulation but also guarantees the inherent openness of Web3.

Of course, with the infrastructure available for everyone to issue coins, the token standards also need to be arranged. Therefore, Ondo announced plans to create Ondo Global Markets (Ondo GM) in 2024.

Initially, the design of Ondo GM was relatively traditional, following the "brokerage order model," where the tokens represent investors' positions instructed through traditional brokerages, leaning towards a permissioned and closed system.

However, according to the Ondo blog post from February 2025, after in-depth discussions with developers, TradFi institutions, and regulatory officials, Ondo GM is redesigning the tokenization framework to shape RWA tokens similar to stablecoins, where the tokens themselves circulate freely, but the distribution layer embeds compliance licensing logic. As a result, any token issuer can issue compliant and flexible RWA tokens through Ondo GM.

In summary, while others are still researching how to issue RWA assets, Ondo has already developed a complete on-chain system for how RWA assets can be smoothly integrated from the traditional financial world to the blockchain.

Ondo for the US RWA

After discussing Ondo's RWA model, let's elevate the conversation and see what problems Ondo has solved and what advancements it has driven in the American RWA industry.

Lawyer Mankun believes that we can start from the following two aspects:

Market Level

In the current industry, many people talk about RWA, and most narratives stop at "helping traditional enterprises to issue coins for financing." However, lawyer Mankun believes that the true value of RWA has never been just issuing a coin. For quality assets, exploring RWA offers an opportunity for already valuable assets to gain higher liquidity and usage efficiency. The threshold is relatively lower compared to ABS, REITS, etc., and it can utilize the programmable nature of tokens to find more ways to activate assets in the future.

At this point, Ondo's design has set a standard for the industry.

Whether it is the two RWA coins that have already been issued or the Ondo GM that is currently being developed, they are building a new financial market that operates 24/7, allowing for anytime minting and redemption, breaking the traditional finance rules of "only open during business hours."

Of course, circulation is just the first step. Traditional financial products can also circulate, but their liquidity is often limited to specific times and platforms, and cross-market and cross-asset operations are essentially locked down. It's like when you buy a gold ETF or a bond fund; these assets may be "flowing" in your account, but what can you do with them? At most, you can wait for price fluctuations or buy and sell on another platform. If you want to participate in lending, returns, or derivatives, it's basically impossible.

The design of Ondo's RWA is to break down these "walls." Especially with DeFi mechanisms, it can bring these tokenized traditional financial assets into various on-chain application scenarios. In simple terms, it allows these assets, which previously could only "earn passive income," to be restructured and appreciated on-chain. This might be the true direction for uncovering the real value of RWA.

Compliance Perspective

The logic at the market level is actually easy to implement; as long as there is technology and funding, it can be done. However, in the U.S. market, the key hurdle to moving securities assets onto the blockchain is compliance, especially with the SEC tightening its grip in recent years.

So it can be said that Ondo can grow and strengthen in such a context, and there must be certain reasoning on the compliance level.

Firstly, Lawyer Mankun discovered during his visit to the Ondo platform that many products cannot be used under US IP, such as token types. This means that Ondo, in its product design, proactively restricts US users to avoid the high-pressure area of US regulation.

Of course, simply blocking US IPs is not enough. Because the anchored assets come from the US market, Ondo must strictly adhere to US compliance standards in processes directly related to funds, such as custody, auditing, and bankruptcy isolation, even when targeting users from overseas. Therefore, Ondo has implemented measures in these areas, such as: custodial assets in US-regulated trust institutions (like Ankura Trust), strict licensing and qualification reviews for lending activities, designing bankruptcy isolation mechanisms, and ensuring investors' priority claim rights.

But the question is, what should be done about the US market now that there is an overseas market?

In 2025, Ondo, in conjunction with Davis Polk law firm, engaged in discussions with the SEC regarding the compliance of tokenized securities. This led to the proposal mentioned by Lawyer Mankin about "wrapped security tokens," which explores paths such as registration exemptions and market structure exemptions through embedded permission controls in the distribution layer, attempting to find a legal landing space for tokenized securities in the U.S. market.

In other words, Ondo is steadily operating in non-US markets using existing compliance frameworks, while actively engaging in dialogue with US regulators, trying to explore the possibility of compliance for RWA assets in a high-pressure environment.

Mankun Lawyer Practical Advice

After discussing so much, let's return to the most critical question: how does the US RWA actually work?

Mankun lawyer's advice is: don't fantasize about getting it all done at once; avoiding + exploring, balancing + taking steps gradually is the most realistic approach.

First, the market is not lacking in products, but in "survival opportunities." The U.S. securities market has a large scale and high asset quality, making it indeed an ideal pool for RWA. However, the regulatory barriers are also high; from securities laws and market structures to brokers and anti-money laundering, every link is a "minefield." Although a crypto-friendly SEC chairman has taken office, no one knows where the regulatory direction will turn next. Therefore, it is still advisable for non-U.S. markets to take the lead, ensuring that the asset side complies with regulations.

Secondly, I want to learn to design more gameplay, but I also need to pay attention to the boundaries. Especially for DeFi gameplay, while it is very rich, the more flashy the gameplay in the U.S. market, the more sensitive the regulation becomes. Moreover, we shouldn't always think about the path of decentralization; facts have proven that wanting to be compliant still requires centralized participation, especially in high-risk scenarios like lending and derivatives, where centralized restrictions make the gameplay safer and more transparent.

Third, engage in dialogue with regulators and pave the way in advance. Don't think about circumventing it; you can't bypass it. The U.S. market regulation is strong, and if you want to grow, you must have your own compliance layout, including collaborating with law firms in advance or forming your own legal team, proactively engaging in dialogue with the U.S. SEC to explore compliance pathways.

In short, first dig deep into the two main moats of the market and compliance, then slowly find a way to break through; don't think about getting fat in one bite.