What is this about?

The discussion revolves around a grant application submitted by Ondo Finance to the Arbitrum community. The grant, amounting to 1,500,000 ARB, is intended to incentivize DEX LPs containing USDY, a tokenized note secured by US Treasuries and bank deposits¹. The proposal, put forth by Nathan.allman, aims to attract new users and capital to Arbitrum and prevent outflows by providing a yield-bearing substitute to conventional stablecoins¹. The grant will also enable users on Arbitrum to buy and sell USDY with minimal price impact¹.

How is the community reacting?

The community's reaction to the proposal is not explicitly mentioned in the summaries. However, the proposal includes a plan to deploy USDY natively on Arbitrum, integrating it into their native asset bridge powered by Axelar¹. This suggests that the community may be supportive of the initiative. However, Joli has raised concerns about the legal risks associated with Arbitrum issuing a grant to Ondo, due to potential violations of SEC regulations⁴. They have requested a detailed legal and risk analysis from Ondo, specifically asking how the team expects new USDY liquidity to be introduced to Arbitrum⁴.

Why this is positive?

The grant proposal is positive as it aims to attract new users and capital to Arbitrum, which could lead to increased liquidity and stability for the platform¹. The proposal also includes a plan to deploy USDY natively on Arbitrum, which could further enhance the platform's functionality and appeal to users¹. Furthermore, Ondo Finance has a strong performance record and is well-positioned to capture a significant portion of the estimated $16 trillion in tokenized assets by 2030¹.

Why this is negative?

The potential negatives are not explicitly mentioned in the summaries. However, it's worth noting that the grant request is for a substantial amount of 1,500,000 ARB, and the funding and contract addresses are yet to be determined¹. This could potentially lead to uncertainties and risks associated with the grant proposal. Additionally, Nathan.allman confirmed that the team is aware that non-compliance with certain requests can lead to the cessation of the program's funding¹, indicating potential risks if the team fails to meet certain requirements.

Joli raised concerns about the legal risks associated with Arbitrum issuing a grant to Ondo, due to potential violations of SEC regulations⁴. Ondo's USDY is issued under Reg S, which requires a 40-day holding period for assets, a restriction that poses challenges for immediate token transfers and market making⁴. They concluded that without engaging in potentially problematic behaviors, market making of USDY would not be feasible due to the 40-day purchase period and redemption costs⁴. They called for further legal clarification from Ondo⁴.