The mechanism for onboarding 3rd party offchain assets is similar, but with some differences.
A 3rd party asset is first tokenized as an NFT, which includes details of the asset, any valuation reports, title details, agreements, custodians etc.
Being an NFT addresses most of the securities regulations as it is unfractionalized and is deemed as property.
Separately, the asset is never sold directly and is used only as collateral to be borrowed against. The money market itself, via which USDO is borrowed, operates in a fully permissionless and decentralized manner; this further negates any securities related issues.
We are able to allow NFTs as collateral by passing the NFT via an ERC721 to ERC20 adapter which is plugged on top of the money market, thus making borrowing against NFTS possible.
When dealing with offchain assets, you will typically not have onchain liquidity, which makes establishing a price feed and collateral factor difficult.
The answer to this problem is we let the borrower decide what the price is as well as the collateral factor. Users will then be able to decide for themselves whether or not the risk vs reward makes sense, and they can do this by checking the details of the offchain assets linked in the NFT.
This will effectively mean borrowing offers from quality issuers will attract more lending and hence lower interest rates and vice versa.
The borrowings will typically be done by an intermediary such as an offchain lender who will take on the responsibility of enforcement in the event of a default.