What is the difference between Ondo Finance's USDY and stablecoin?

USDY is not a stablecoin

USDY is a tokenized note backed by short-term U.S. Treasury bonds and bank deposits. Unlike stablecoins, their prices are designed to rise over time because they accumulate benefits. As of the end of August 2026, according to Ondo's own transparency dashboard, USDY's outstanding tokens were approximately US$2.14 billion, backed by approximately US$2.19 billion in underlying assets, with a mortgage ratio of 105.79%. This rising redemption value, rather than the fixed $1.00 peg, distinguishes USDY from Tether's USDT, Circle's USDC, and all other dollar-pegged stablecoins on the market.

The actual operating mechanism of USDY

USDY is issued by Ondo USDY LLC and is an unsecured senior note. Holding the token means holding a claim on a portfolio of assets, rather than directly holding a share of treasury bills, nor is it a simple replacement for the dollar. According to Ondo's latest public disclosure, the asset portfolio is placed in segregated custody accounts, mainly located at JP Morgan Stanley, and holds bank demand deposits in insured U.S. institutions to meet redemption needs that day. Independent auditors conduct monthly reviews of positions.

According to Ondo's latest classification recently released (April 2026), the structure of the portfolio is as follows:

• Approximately 92% are short-term U.S. Treasury securities, most of which have maturities within six months;
• Approximately 8% are bank demand deposits, which are used to fund redemption needs without early sales of treasury bonds.

USDY was launched on Ethereum in August 2023 and has since expanded to Solana, Mantle, Sui, Aptos and multiple other networks. As of August 2026, it is operating on about a dozen blockchain networks, up from eight at the beginning of the year, and Solana is reported to carry a significant proportion of the circulating supply.

Why doesn't USDY remain at $1.00?

The design goal of stablecoins is to be as close to US$1.00 as possible. USDY deliberately did the opposite. It was issued at $1.00, and its redemption value climbed as underlying treasury bonds and deposits generated interest. As of the end of August 2026, USDY's trading price was much higher than its issue price, reflecting accumulated gains over more than two years.

Ondo also offers a reinstatement version called rUSDY, which pays interest in the form of growing token balances rather than rising token prices. Both versions track the same underlying portfolio; they just express returns in different ways, which affects how tokens behave in smart contracts and accounting systems.

Rate of return that fluctuates with the market

USDY's yields are not fixed. It reflects the weighted average return on a portfolio of treasury bonds and deposits after deducting expenses. Ondo's stated management fee is 0.15% per year, and the company has waived the fee until January 1, 2027, which means that holders are currently receiving the total return on the investment portfolio rather than the interest rate after deducting fees. According to data disclosed by Ondo and third-party trackers, as of August 2026, the annualized yield on the seventh day was close to 3.49%, lower than the level above 4.5% at the beginning of the year, as short-term government bond yields fell back. In contrast, traditional stablecoins pay zero return to holders; any interest earned on their reserves goes to the issuer.

Who can actually buy USDY?

In terms of access restrictions, the difference between USDY and stablecoins has further widened. The USDT and USDC are open to almost anyone with a crypto wallet. USDY is not. It is limited to eligible non-U.S. persons, and Ondo Global Markets expressly prohibits U.S. persons or anyone present in the United States from subscribing, redeeming or obtaining the token. The casting process also requires "Know Your Customer"(KYC) verification.

Ondo's SEC-registered broker-dealer subsidiary, Oasis Pro Markets, received FINRA authorization in July 2026, one of the steps towards final opening it up to U.S. retail users. However, as of early September 2026, USDY is still not available to Americans. Almost all of its growth comes from markets outside the United States.

How big is USDY's growth?

USDY has become the largest single product in the Ondo product line with obvious advantages. Company and third-party data show that as of mid-2026:

• As of the end of August 2026, USDY's circulation is approximately US$2.14 billion to US$2.20 billion;
• In the first half of 2026 alone, the net inflow is approximately US$1.4 billion;
• is distributed on about a dozen blockchain networks;
• Statistics as of August 2026, there are more than 15,000 addresses directly holding USDY;
• Another statistics as of July 2026, the total number of holders of all interest-bearing products under Ondo exceeds 173,000.

This size allows USDY to surpass Ondo's other treasury bond products, OUSG. OUSG holds hundreds of millions of dollars in assets, but is limited to qualified investors who meet the investment threshold of more than one million dollars. USDY exists specifically to serve individual non-U.S. buyers who cannot meet this threshold.

Core differences between USDY and traditional stablecoins

Price mechanism: USDY's redemption value increases with cumulative gains; stablecoins are designed to remain fixed at $1.00.

Returns: USDY passes on the return of the portfolio to the holder (after deducting fees); most stablecoins do not pay any fees to the holder.

Legal structure: USDY is a secured note claim on a portfolio of assets;USDT and USDC are often described as reserve-backed tokens.

Access restrictions: USDY excludes Americans and requires KYC verification to mints; mainstream stablecoins are much more accessible.

Composition of collateral: USDY holds treasury bonds and bank deposits and is reviewed monthly; reserve disclosures of stablecoins vary depending on the issuer.

Conclusion

USDY is constructed as an interest-bearing note backed by treasury bonds and bank deposits, rather than as a dollar-linked payment token. Its rising redemption value, a portfolio-related yield of nearly 3.49% in August 2026, a circulating supply of approximately US$2.14 billion, and restrictions on non-U.S. buyers together make it structurally different from USDT, USDC and other traditional stablecoins.

References

Eco Report: Ondo USDY: Analysis of Tokenized Treasury Bonds
Allium Report: Ondo Finance (ONDO) Valuation Report
Ondo Finance: USDY Portfolio Transparency Dashboard
CoinPaprika Report: Ondo Finance (ONDO): Leader in Tokenized Treasury Bonds, Comprehensive Review
Tokenized Living Report: Ondo Finance 2026 Review: Tokenized Treasuries, Equities and Risk
Eco Report: OUSG In-depth Analysis 2026: Ondo's Short-Term Treasurys Fund