Institutional Push for Tokenized Treasuries Clashes with ECB's Risk Warnings

Ondo Finance has announced a $25 million strategic investment in Figure Technology Solutions' $YLDS stablecoin to bolster its Short-Term US Treasuries Fund (OUSG), a flagship tokenized fund. The move aims to diversify and strengthen the yield sources backing OUSG, which currently invests in assets from various managers. The $YLDS stablecoin, issued by Figure Certificate Company, is a registered security backed by the same assets as GENIUS Act-compliant stablecoins and pays interest to holders.

The investment follows Figure's recent initial public offering and aligns with its reported $19 billion in blockchain-based lending of real-world assets on the Provenance Blockchain. Michael Tannenbaum, CEO of Figure Technology Solutions, emphasized that the partnership "bolsters the dominance of the $YLDS stablecoin in tokenized real-world assets," while Ian De Bode, President of Ondo Finance, highlighted the move as a step to "strengthen OUSG's position as the leading on-chain vehicle for institutional clients".

Contextually, the stablecoin market has grown to a $280 billion valuation, representing 8% of the total cryptocurrency market. However, the European Central Bank (ECB) has raised concerns about systemic risks, warning that stablecoins could destabilize financial systems by drawing retail deposits away from traditional banks. A "run" on stablecoins, the ECB noted, could trigger fire sales of reserve assets, potentially disrupting U.S. Treasury markets and sparking a broader financial crisis.

Figure's recent financial performance supports its credibility in the sector. The company reported third-quarter 2025 earnings exceeding analyst expectations, with revenue of $156.37 million and an adjusted earnings per share of $0.34. Mizuho analysts raised their price target for Figure to $56 from $47, citing strong growth in its consumer loan marketplace.

The collaboration between Ondo and Figure underscores the growing institutional interest in tokenized finance. Both companies aim to accelerate the adoption of blockchain-based financial products, particularly in the real-world asset (RWA) space. As regulatory scrutiny remains a key challenge, with central banks and policymakers balancing innovation with systemic risk mitigation.