What exactly are we talking about when we discuss RWA assets being on-chain?

Question

Written by: Shao Jiadian, Liu Honglin; Mankiw

In the Web3 circle in 2025, the most important thing is the "outlet". Following DeFi, NFT, Metaverse, and meme, RWA has suddenly become the top stream - the screen is full of slogans of "assets on the chain to reconstruct the financial system" and "new blue ocean of trillions of markets", and various RWA industry associations, summits, alliances, and forums have fissioned like cancer cells, dozens of times more than the RWA projects that have really landed. Even the uncle who sells pancakes at the entrance of the village has heard that "putting the house on the chain can be sold globally", but I'm sorry, I have to pour cold water today: when you shout "RWA assets on the chain", you may not even understand what you are talking about.

First, let's break the first myth: RWA is not a "new species", it's just "old money with a new ledger".

Don't be fooled by the "Web3 innovation" package. The funds you buy with Alipay, the A-shares in the stock software, and the bonds in the bank app are essentially "real asset tokenization" - stocks are digital certificates of equity, funds are share certificates of asset portfolios, and bonds are electronic records of creditor's rights. The only difference is that the tokens of traditional finance are stored in the centralized databases of banks and brokerages, while the tokens of RWA are stored on the decentralized ledger of the blockchain. It's like changing the ledger from Excel to Google Docs, the core is still bookkeeping, but the bookkeeping method has changed.

But now many people talk about this as if it were "the first time humanity discovered fire": "Wow! Blockchain has put assets on-chain!" Come on, stocks have already achieved "asset tokenization" back in the 17th century, only it was done with paper certificates at that time, which later became electronic data. RWA is essentially "Tokenization 2.0", moving the certificates from centralized databases to the chain, adding the characteristics of immutability and decentralized verification, but the underlying logic is still "using digital certificates to represent rights and interests".

To give a straightforward example: you buy Tencent shares, and the brokerage APP shows that you hold 100 shares, and these 100 shares are the tokens of Tencent equity, which are stored in the brokerage's database; If Tencent issues RWA equity, you receive 100 Tokens on the blockchain, which essentially represents the 100 shares, the difference is that this Token can be circulated on the chain, while traditional shares can only be transferred on the exchange. So don't mythologize RWA, it's not about "creating new assets", it's about "changing old assets for a cooler ledger".

90% of people get the main point wrong: the essence of RWA is not "data on chain", nor is it "assets on chain", but rather "rights certificates on chain".

Now the streets are full of nonsense about "data on the chain = assets on the chain". Someone said: "I scan the real estate deed into a PDF and put it on the chain, and this house will become RWA!" "Wake up, you take 100 photos of the real estate certificate and send it to the blockchain, and the house is still registered in the housing authority system, which has nothing to do with the data on the chain. Data is just information, and the core of the asset is the "right" – you own the house, not because you have a photo of the title deed, but because your name is written on the register of the housing authority, which is a right granted by law.

There are also people who blow: "Our Token is a 1:1 mapping of real assets, and holding Token is equivalent to owning assets!" "What's the difference between this and a child's house? If you draw a "million tokens" and say that it represents the convenience store downstairs, does the convenience store belong to you? "Mapping" without legal backing is a castle in the air. The core of RWA is not to move the assets themselves to the chain (the house can't be moved, the equity can't be moved), but to tokenize the "equity certificates that prove that you own the assets" - for example, the legally recognized equity certificates such as stocks, bonds, and property rights certificates are converted into tokens on the chain.

Key points: The essence of assets is "rights", and the carrier of rights is "legally recognized certificates". Movable property depends on contracts and invoices, immovable property depends on property rights certificates, equity depends on shareholder registers, and claims rely on debt contracts. What RWA needs to do is to repackage these "legally protected certificates" with blockchain technology to make the circulation of certificates more efficient and transparent, but the premise is: there are rights under the legal framework first, and then there are tokens on the chain. If you skip the law and talk directly about "assets on the chain", it is pure hooliganism.

Don't treat "going on-chain" as a holy grail: without legal backing, RWA is just the "emperor's new clothes."

The blockchain community likes to say that "code is law", but in the field of RWA, law is the father of code. If you own the Bitcoin private key, you own 100% of the Bitcoin, because the "rights" of the Bitcoin are completely defined by the blockchain code; However, RWA's Token represents real assets, and the ownership of real assets is determined by the laws of various countries. For example, if you buy an RWA Token representing a U.S. property, but the developer runs away, you can't take the private key to a U.S. court to sue - the U.S. court first has to look: Is the token recognized as a legitimate certificate of interest under the local legal framework? Do you qualify as an "Accredited Investor" under the U.S. rules? Is your purchase process compliant with U.S. securities regulations?

A more heart-wrenching example: someone in China put a house in Beijing "on the chain," issuing 1,000 tokens, each representing 0.1% of the property rights.

However, according to Chinese law, the change of property rights must be registered at the real estate registration center, and the circulation of Tokens on the blockchain does not count at all. If one day the homeowner sells the house, and the Token holder goes to court to protect their rights, the court will only look at the property certificate and will not consider the records on the blockchain—because the law does not recognize the legality of this "on-chain rights certificate."

Therefore, the core of RWA is not a technological issue, but a legal construction issue: how to make the on-chain tokens recognized as rights certificates within the real legal system? This requires addressing three key issues:

Rights Anchoring: Tokens must correspond to rights protected by law in the real world (such as equity, debt, property rights), rather than being mere abstractions.
Compliance Framework: The issuance process must comply with the regulatory requirements of the target market (such as the SEC regulations in the United States and financial regulations in Hong Kong, China); otherwise, it is considered an illegal issuance of securities.
Dispute Resolution: When there is a dispute regarding the rights represented by the Token, can the legal system recognize on-chain records as evidence, and can it protect the rights of the holders.

Those who talk about RWA without understanding the law are either ignorant leeks or deceptive fraudsters pretending to be confused—after all, the slogan of "decentralization and global circulation" sounds much better than "first, deal with the regulations of various countries."

RWA is essentially a financial product; don’t be blinded by the term "decentralization."

Many people hype RWA as a "disruptive financial tool," claiming it allows ordinary people to invest in overseas real estate, top private equity, and artworks. But the truth is: RWA is just the tokenization of financial instruments, and finance inherently comes with regional characteristics and regulatory constraints.

First of all, all RWAs are "financial products". Whether it is real estate mortgage bonds, corporate accounts receivable, or fund shares, they are essentially tools for "making money with money", and must conform to the core logic of financial supervision: protecting investors, preventing risks, and maintaining market stability. For example, in the United States, investors who purchase RWA-type securities must be "accredited investors", while in China, financial products must be approved and must not illegally raise funds from the public. Projects that claim that "anyone can buy RWA" are either engaging in illegal fundraising or playing the dangerous game of "regulatory arbitrage".

Second, the territoriality of finance determines that it is difficult for RWA to "circulate globally". Your real estate RWA Token issued in the U.S. may be considered "foreign securities" in China and may not be sold to Chinese investors without approval; Similarly, U.S. investors may not be able to purchase RWA's corporate debt in China due to regulatory restrictions. Even if the technology is global, legal recognition is still a huge obstacle – can you imagine a Chinese investor taking an on-chain token and going to a U.S. court to sue a U.S. company for default? Not to mention the cost of cross-border litigation, the question of whether U.S. courts recognize the legitimacy of your token holdings is a big question.

More realistically, financial risks will not disappear simply because they are "on-chain." Credit risk, market risk, and liquidity risk in traditional finance still exist in RWA, and may even become more concealed due to "decentralization." For example, if an RWA project issues tokens backed by fraudulent assets, the immutability of the blockchain may actually make the scam harder to expose—after all, the data is real, but the assets are fake.

Beware of the "RWA Bubble": 99% of the discussions are just hype, and the challenge lies in the "last mile".

The current RWA circle resembles the ICO frenzy of 2017: various white papers are everywhere, the number of intermediaries surpasses the number of practical cases, and industry associations outnumber project parties. However, there are very few that can present compliant and operable RWA cases. Why? Because the implementation of RWA needs to overcome three "ghost gates":

Level One: Legal Compliance Level

This is the hardest part. In the United States, for example, the SEC treats most RWAs as "securities" that must comply with the Securities Act, be registered or be exempted, or be illegal. This meant hiring a team of top lawyers, spending millions of dollars on legal documents, and passing regulatory scrutiny. In China, it is stricter, and any behavior involving "asset securitization" and "financial product issuance" must be approved by the financial regulatory authorities, and unauthorized issuance may be suspected of illegally absorbing public deposits.

Level Two: Asset Penetration Level

To gain the trust of investors, RWA must address the issue of "asset authenticity." For example, in the case of a real estate RWA, does the token on the chain truly correspond to a physical property? Is the ownership clear? Is there any mortgage? This requires professional asset assessment, due diligence, and legal confirmation, rather than relying on the "smart contract automatically executing" in the white paper. Many projects claim that "going on-chain means confirmation of rights," but in reality, property rights confirmation requires significant effort, and blockchain only records the result; it cannot replace offline legal processes.

Level 3: Investor Protection

Traditional finance has a mature investor protection mechanism, such as regulation by the Securities Regulatory Commission, bank custody, risk warnings, etc. But what about RWA? In a decentralized architecture, who regulates the project parties? Who guarantees the investors' right to know and their right to redeem? If the Token price plummets, can investors redeem like they do with mutual funds? If there is fraud at the asset level, do investors have channels to protect their rights? Until these issues are resolved, RWA will always be just a "castle in the air."

Ironically, many RWA projects are now playing tricks to evade regulation: for example, placing the issuing entity in the Cayman Islands and using the name "Decentralized Autonomous Organization (DAO)" to evade legal responsibilities, claiming to be "not subject to the regulation of any country." But the reality is that as long as you are targeting investors from specific countries, you must comply with local laws—DAOs are not lawless territories, and Tokens are not "get out of jail free cards."

The Future of RWA: Tear Off the "Myth" Label and Return to the "Tool" Essence

Having said so much "pouring cold water", it is not a denial of the value of RWA. On the contrary, RWA does have great potential: it can improve the efficiency of asset circulation, reduce financing costs, and provide liquidity for niche assets such as art shares, real estate investment trusts (REITs), corporate receivables, etc. But the premise is: remove the filter of "blockchain omnipotence" and honestly solve the core issues of law, regulation, and compliance.

The future RWA should be like this:

Compliance first: Issue under a specific legal framework, such as the Reg D private placement exemption in the United States and the asset securitization pilot in China, first become a "legal financial instrument," and then discuss "on-chain innovation."

Technical assistance: Blockchain is used to improve the efficiency of certificate circulation and enhance transparency, rather than to subvert the legal system. For example, using smart contracts to automatically execute dividends and using on-chain data for real-time regulatory compliance review.

Focus on vertical scenarios: start with standardized assets, such as funds, bonds, commercial papers, and REITs. These assets have clear legal relationships and mature regulatory frameworks, making them easier to implement. Instead of jumping straight into high-complexity, high-regulatory-risk areas like "real estate fragmentation" or "artwork splitting."

Most importantly, investors need to be clear-headed: RWA is not a "get-rich-quick" magic tool, but a more efficient financial instrument that also requires risk assessment, legal review, and compliant investment. Projects wrapped in "asset on-chain, global circulation" are either being run by inexperienced retail investors or are scams trying to exploit retail investors—real RWA players are quietly working with regulatory agencies in various countries, not shouting slogans on social media.

Conclusion: Don't be deceived by "on-chain"; see through the essence of RWA.

Returning to the original question: what exactly are we talking about when we discuss the on-chain of RWA assets? It is not a technical gimmick of data on-chain, nor a utopia of global asset circulation, but a compliance revolution of "restructuring the rights certificate system with blockchain technology." The core of this revolution is not technology, but law; it is not decentralization, but regulatory compatibility; it is not about creating new assets, but about facilitating the more efficient circulation of old assets.

Those who talk about RWA without legal grounding are like building skyscrapers on the beach; those who ignore regulation while discussing global circulation are like carrying a torch through a powder keg. The true value of RWA is hidden in the compliance documents of each jurisdiction, in the mapping of rights between assets and tokens, and in the specific terms of investor protection—rather than in the beautiful phrases like "disruption," "reconstruction," and "trillion-dollar market" found in white papers.

Next time someone tells you "RWA assets on the blockchain will change the world," you might as well ask him three questions:

In which country's legal system is your Token recognized as a legitimate certificate of rights?
How do you prove that the on-chain tokens actually correspond to real-world assets, rather than being just vapor?
If the asset defaults, what legal channels can you use to protect your rights as an investor?

The answer lies within these three questions. The story of RWA has only just begun, but only by tearing off the packaging of the "myth" can we see the true value - or the bubble.