Ondo Finance, a security token start-up, is launching a stablecoin alternative that will pay its holders interest via a tokenized money market fund.

Ondo says its OMMF token will be pegged to US$1 and backed by money market funds that trade on traditional exchanges. Investors will be able to mint and redeem OMMF on business days and collect interest daily in the form of new OMMF tokens, according to the company’s blog post.

Leading stablecoins such as Tether’s USDT and Circle’s USDC currently do not pay out interest to holders, even amid a rising-rate environment, as doing so would strengthen the case that such stablecoins are unregistered securities. Ondo says that’s why they’re only targeting institutional investors designed as both accredited investors and qualified purchasers, a move that exempts Ondo from registering the product with the Securities and Exchange Commission (SEC).

(by Aoyon Ashraf)