USDY on Sei: A Guide to Tokenized Treasury Yield
Ondo's USDY brings tokenized U.S. Treasuries to Sei—combining institutional-grade yield with full DeFi composability.
What is USDY?
USDY is a tokenized note backed by short-term U.S. Treasuries and bank deposits, created by Ondo Finance. USDY accrues yield while relying on the dollar for price stability.
Key characteristics:
- Yield-bearing: USDY appreciates as Treasury yield accrues to the token price
- Non-rebasing: Token balances remain constant; the price per token increases
- Institutional-grade: Backed by U.S. Treasuries with bankruptcy-remote structuring
- Composable: Full ERC-20 compatibility across Sei's DeFi ecosystem
How yield accrual works:
Traditional stablecoins like USDC and USDT serve essential functions in DeFi, but they do not generate yield in their token form. The issuer earns yield on the reserves backing those tokens—not the user.
USDY operates differently: yield from the underlying Treasury assets accrues to the token price, meaning holders capture the return rather than solely the issuer.
Who Can Use USDY?
USDY is available to non-U.S. individuals and institutions. U.S. persons are restricted from holding USDY.
Users need to complete Ondo's onboarding process to be added to the transfer allowlist. This is a one-time step that enables a wallet to send and receive USDY.
Checking eligibility:
- Visit ondo.finance
- Connect wallet
- Complete the onboarding flow if prompted
If a USDY transaction fails on Sei, insufficient allowlist status is the most common cause.
Use Cases for USDY on Sei
USDY's composability across Sei's DeFi ecosystem enables a range of potential applications. Below are use cases users and protocols may utilize USDY based on its design characteristics. These use cases reflect established patterns for USDY across major ecosystems — now available on Sei through day-one integrations
Passive Yield Accumulation
Users seeking dollar-denominated exposure with yield may hold USDY as an alternative to traditional stablecoins. Because USDY accrues Treasury-backed yield daily, balances appreciate over time without requiring active management, staking, or locking.
USDY can be acquired by swapping stablecoins on Saphyre or by bridging existing USDY from another supported chain.
Illustrative example: A user holding 5,000 USDC swaps for approximately 4,750 USDY (at $1.05/USDY). Over 12 months at 4.5% APY, the USDY position would appreciate to approximately $5,225 in value—without additional action required.
Yield-Bearing Collateral
Lending protocols like Takara Lend and Yei Finance support USDY as collateral. This structure allows users to borrow against their position while the underlying collateral continues accruing yield—potentially offsetting a portion of borrowing costs.
With traditional stablecoin collateral, a borrower pays interest on an idle asset. With USDY, the collateral generates yield while locked, which may reduce the user's effective borrowing cost relative to non-yield-bearing alternatives.
Illustrative example: A user deposits $10,000 in USDY as collateral and borrows $5,000 USDC at 8% APR. The USDY position earns approximately 4.5% APY while locked. The yield generated by the collateral partially offsets the borrowing cost, resulting in a lower effective rate.
Liquidity Provision
USDY can be paired with other assets in liquidity pools on Saphyre. Unlike traditional stablecoin LP positions where the base asset sits idle, USDY's yield accrual may enhance overall returns for liquidity providers.
Considerations for liquidity providers:
- Standard AMM risks apply, including impermanent loss and smart contract risk
- USDY's price appreciation (rather than 1:1 peg) may affect impermanent loss calculations differently than pegged stablecoins
- Users should review pool mechanics and assess risk tolerance before providing liquidity
Protocol Treasury Management
USDY's liquidity and composability may make it suitable for protocol treasury applications. Organizations evaluating yield-bearing alternatives to traditional stablecoins could assess whether USDY fits their specific requirements.
Potential considerations for treasuries:
- Passive yield: Reserves appreciate without requiring active management or recurring governance votes
- Liquidity: USDY maintains full liquidity, allowing capital deployment when opportunities arise
- Composability: Treasury USDY can be utilized as collateral, in LP positions, or as protocol reserves
- Institutional backing: Treasury-grade assets with bankruptcy-remote structuring
Cross-Chain Yield Consolidation
Users holding USDY on other supported chains (Ethereum, Arbitrum, Mantle, Sui, Aptos, etc.) can bridge to Sei via LayerZero. This enables access to Sei-native DeFi opportunities while consolidating yield-bearing positions onto a single execution layer.
Potential reasons users bridge to Sei:
- Faster transaction finality
- Lower fees for frequent transactions
- Access to Sei-native lending markets and liquidity pools
- Consolidation of yield-bearing positions across ecosystems
Dollar-Denominated Savings
For non-U.S. users, USDY provides a mechanism to hold dollar-denominated value that accrues yield—accessible without traditional banking infrastructure or intermediaries.
Accessing U.S. Treasury yields traditionally requires a brokerage account, banking relationships, and often significant minimums. USDY removes many of these barriers, enabling anyone with a wallet to access institutional-grade yield on dollar-denominated holdings.
Ecosystem Integrations
USDY is integrated across Sei's DeFi ecosystem:
Understanding USDY Pricing
Important: USDY ≠ $1.00
Unlike USDC or USDT, USDY does not maintain a 1:1 peg to the dollar. The price increases over time as yield accrues.
How this works in practice:
- When USDY launched, it was priced at $1.00
- As yield accrues, the price rises (e.g., $1.05, $1.08, $1.12)
- Token balances remain constant—the value per token increases
Illustrative example: A user purchases 1,000 USDY at $1.05 each, representing $1,050 total value. After 12 months at 4.5% APY, the USDY price rises to approximately $1.097. The user still holds 1,000 USDY, but the position is now worth approximately $1,097.
When checking a wallet or DEX interface, the current USDY market price will be displayed. This is expected behavior—USDY is not designed to trade at $1.00.
While USDY is designed to appreciate over time as Treasury yield accrues to the token price, the market price on secondary markets (such as DEXs) may fluctuate based on liquidity conditions, market dynamics, or broader market dislocations. The price displayed on a DEX reflects current market conditions and may differ from USDY's underlying net asset value (NAV). Users should be aware that short-term price fluctuations are possible.
Why Use USDY on Sei?
Sei's high-performance execution layer provides infrastructure well-suited for yield-bearing assets like USDY:
- Speed: Near-instant finality enables swaps, deposits, and withdrawals to settle in seconds
- Low fees: Reduced transaction costs make smaller positions more economically viable
- Composability: Full EVM compatibility allows USDY to integrate across Sei's DeFi ecosystem
- Capital efficiency: Parallelized execution supports complex strategies without network congestion
Getting Started
Step 1: Verify Eligibility
- Confirm non-U.S. person status
- Visit ondo.finance and complete onboarding if required
Step 2: Acquire USDY
- Option A: Swap stablecoins for USDY on Saphyre
- Option B: Bridge existing USDY from another chain via LayerZero
Step 3: Explore Use Cases
- Hold: Balances accrue yield passively
- Collateralize: Lending protocols support USDY as collateral
- Provide Liquidity: USDY pairs are available on Saphyre
Frequently Asked Questions
How often does yield accrue?
Yield accrues daily to the USDY token price. No claiming or staking is required.
Is there a minimum amount to hold?
There is no minimum for holding or using USDY on Sei. However, very small positions may not be economical after accounting for transaction fees.
How is USDY converted back to stablecoins?
On Sei, USDY can be swapped for stablecoins (USDC, USDT) via Saphyre. Direct USD redemption is handled through Ondo Finance for larger amounts.
What happens if a user is not on the allowlist?
Transactions will fail. Ondo's onboarding process at ondo.finance enables wallet authorization.
What are the risks of holding USDY?
USDY is backed by short-term U.S. Treasuries and bank deposits with bankruptcy-remote structuring. However, all digital assets carry risk—including smart contract risk, regulatory risk, and market risk. Users should conduct their own research and assess their individual risk tolerance.
What's the difference between USDY and OUSG?
OUSG is Ondo's product designed for U.S. accredited investors with higher minimums. USDY is designed for global (non-U.S.) users with no minimum and full DeFi composability.
Can USDY be used for payments?
Yes—USDY is a standard ERC-20 token and can be sent to any allowlisted address. Recipients accrue yield while holding it.
Additional Resources
- Ondo Finance — USDY issuer and documentation
- USDY Documentation — Technical details and FAQs
- Sei Documentation — Network guides and developer resources
- Saphyre — Sei-native DEX for swaps and liquidity
- Takara Lend — Lending and borrowing on Sei
- Yei Finance — Lending and borrowing on Sei
Disclaimer: This is the last tweet in this thread. This content is provided for informational and educational purposes only and does not constitute financial, investment, legal, tax, or any other form of professional advice. Sei Labs, the Sei Development Foundation, and affiliated contributors do not offer or purport to offer investment advice, nor are they registered financial advisors, broker-dealers, or financial institutions. Any references to tokens, protocols, or blockchain technologies, including the phrase "Markets Move Faster on Sei," are purely illustrative and should not be interpreted as a solicitation, offer, or recommendation to buy, sell, or hold any asset or to engage in any investment strategy. Investing in digital assets and blockchain-based technologies involves substantial risk, including the potential loss of capital, market volatility, and regulatory uncertainty. Past performance is not indicative of future results. The Sei protocol and associated technologies are experimental, and any participation in the ecosystem should be approached with caution. All users and readers are strongly encouraged to conduct their own independent due diligence, seek advice from qualified financial and legal professionals, and fully understand the risks involved before making any decisions. No warranties or representations are made as to the accuracy, completeness, or reliability of any content presented. Use of or reliance on any information made available through this content is strictly at your own risk. This product is not available to U.S. persons.
