Cold Reflections Amidst the Current Market RWA Boom

Source: Seven bottles of Bots that don't get carried away

Reading guide:RWA's core business logic is asset tokenization,That is, on the basis of asset securitization, go one step further,Use the technical form of the token as a carrier to carry various rights and interests and risks of the connotation of the underlying asset,Its significance lies in giving full play to the technical advantages of the underlying architecture of the blockchain,It has inherent advantages in cost and efficiency in reducing the threshold for investor participation、Improve the turnover efficiency of financial products and improve the level of automated execution,But RWAThe requirements for the degree of data in business scenarios are relatively high,Application landing The constraint of "to go on the chain, go online first". What are the specific factors that can accelerate RWA from applause to applause? What are the specific paths that can guide the effective investment of market resources? In the current market, what factors can RWA rely on to gain its own living space? Here, based on the in-depth recognition of the development trend of RWA, we make some cold thinking about the RWA boom in the current market, in order to play the role of removing the false and retaining the true and eliminating interference, so that the industry can focus on finding the development path of RWA more efficiently.

Since the beginning of this year, RWA has continued to be a highly关注 topic globally. On one hand, the United States and the European Union have continuously introduced relevant policies to respond to and regulate the innovative business formats emerging in the fields of asset tokenization and stablecoins. For example, on April 3, the U.S. House Financial Services Committee voted to pass the "Stablecoin Transparency and Accountability Framework for a Better Ledger Economy" (referred to as the STABLE Act), which clarified the reserve and capital requirements and anti-money laundering standards for stablecoin issuance. On the other hand, numerous financial institutions and industry-leading companies have announced the launch of tokenization-related products, such as:

• Ondo Finance in the United States tokenizes short-term U.S. Treasury Bills (T-Bills), allowing investors to hold them and receive Treasury yields (annualized about 4-5%);
• Huaxia Fund ( Hong Kong ) launched the "Huaxia Hong Kong Dollar Digital Currency Fund", becoming the first tokenized fund for retail investors in the Asia-Pacific region;
• Standard Chartered Bank and the Hong Kong Monetary Authority (HKMA) utilize the blockchain platform eTrade Connect to tokenize trade documents such as letters of credit (LC) and bills of lading, enabling SMEs to quickly obtain financing;
• The Wiser Group has launched an Ethereum-based private equity fund token (VPF Token), with investment targets including Hong Kong tech startups and Southeast Asian infrastructure projects. Investors can redeem fund shares through the token or transfer them in the over-the-counter (OTC) market;
• BlackRock partners with Securitize to launch a blockchain-based real estate investment fund, allowing investors to hold stakes in commercial real estate (such as office buildings in New York and San Francisco) through tokens (like SEC-compliant Reg D securities);
• Australia Maple Finance tokenizes loans for small and medium-sized enterprises, allowing investors to earn fixed income (8-12% annualized) through MPL tokens;
• The Swiss Toucan Protocol tokenizes traditional carbon credits (such as Verra certified carbon offset projects);
• Shell Oil Company in the UK pilots blockchain to trade oil futures contracts;
• Sotheby's auction house tokenizes high-end artworks through NFT + RWA, allowing investors to purchase fractional ownership.

The above events not only support RWA becoming the focus of the industry but also attract numerous asset parties to turn their attention to RWA in hopes of obtaining financing through this innovative model, including a large number of small and medium-sized enterprises and individual entrepreneurs who wish to secure financing based on physical assets. The main difference between physical assets and financial assets is that holding the asset does not generate a certain cash flow. However, the market's response is very pragmatic; so far, the issuance of RWA globally has been based on relevant cases of financial assets (including categories with both financial and commodity attributes such as gold and crude oil), and there have been no successful instances of issuance based on physical assets. Even RWA projects based on financial assets are often led by top institutions in traditional finance or industry leaders. "When will the swallows fly into the homes of ordinary people?" remains unknown. RWA has the advantage of technology; how will it impact financial product innovation? What specific factors can accelerate or hinder the transition from popularity to actual usage? What specific pathways can guide the effective allocation of market resources and achieve a commercial closed loop? This article intends to conduct some calm reflections on the hot topic of RWA in order to provide support for the large-scale application and implementation of RWA.

1. Can everything be RWA?

RWA translates directly to Real World Assets, but its core business logic is asset tokenization, which means taking a step further on the basis of asset securitization, using the technical form of tokens as a medium to carry various rights and risks represented by the underlying assets. The Hong Kong Securities and Futures Commission defines tokenization as the process of recording asset rights, traditionally recorded in a ledger, on a programmable platform through the use of DLT.

The role and significance of asset tokenization lies in the fact that it can give full play to the technical advantages of the underlying architecture of the blockchain, and lower the threshold for investor participation (mainly reflected in the participation of global investors, self-service account opening and 7*24 all-weather trading convenience) compared with the existing financial infrastructure (financial electronic and Internet), Improving turnover efficiency (mainly reflected in the settlement without the participation of intermediaries) and improving the level of automated execution (reducing the participation of third-party institutions to reduce operational risks and operating costs) have inherent advantages from the perspective of cost and efficiency, but their disadvantages are also very obvious, mainly reflected in the fact that asset tokenization has relatively high requirements for the dataization of business scenarios, and is constrained by the constraints of "to be on the chain, go online first", for example, in the financial industry, all factors that can affect the risk and return of assets are required to be digitized. In addition, it can provide full-dimensional and real-time continuous data for the risk-return assessment of financial assets as support, so as to achieve complete asset tokenization.

This requirement is obviously too high, but it is determined by the technical characteristics of the blockchain, and it is also a reality that we must recognize. To put it in layman's terms, the blockchain is just a database with its own reconciliation mechanism, which is deaf and blind to the outside world, and can only receive external data input, but cannot actively obtain data. What if you want to take the initiative to get your data? Then IoT devices must be needed as a source of data collection. How to ensure that the data collected by IoT devices can be 100% authentic on the chain? One approach is technology, if the entire business process is fully automated and does not require human involvement, then the data is of course credible; Another way to do this is to endorse your credit through oversight by a trusted third party. The first method obviously depends on the intelligence of the business scenario, and at this stage, the second method, that is, first relying on a "mix and match" scheme to achieve data trustworthiness, and then establishing a business model such as RWA based on trusted data is an effective "expedient measure". Therefore, the margin of RWA business lies in the acquisition of trusted data, and in the current state, it is obvious that not everything can be RWA.

Further, since the essence of RWA is asset tokenization, its core logic is embodied in financial logic, and the basic principle of matching risk and return emphasized by financial business should play a fundamental role in the design of RWA products, and this principle is also the core criterion for selecting RWA priority landing scenarios in the current market. We know that the main risk-return characteristics of the underlying asset are a comprehensive reflection of the changes of various factors in the business scenario, and will not change in any way because of whether its carrier is a token or not. In industry practice, Ant Financial announced that it will give priority to the issuance of RWA in the new energy track, because the new energy industry chain, whether it is distributed generation or charging piles, but also includes wind power generation and energy storage, is generally based on intelligent systems to carry out operations, with the characteristics of synchronous cash flow and information flow, and the issuance of RWA based on new energy basic assets will greatly reduce the information asymmetry faced by investors, which in turn can provide investors with an investment opportunity with clear returns and transparent risks. If charging piles are also charged manually like traditional parking lots, then the RWA of such assets will be meaningless.

This model of risk control through real-time data clearly surpasses the scope covered by traditional financial institutions that excel at asset collateralization, so from the perspective of manageable risk, Ant Financial is willing to recommend assets of the "digital investment bank" type to its clients. Otherwise, what reason would Ant Financial have to recommend an asset that traditional financial institutions cannot manage with conventional risk control methods, but instead repackage it with a different token for its clients?

For the same reasons, the existing technological conditions cannot enable the on-chain transfer of the main data required for the valuation of physical assets, and cannot provide reliable data to support risk control. Overall, the RWA of physical assets cannot find an effective path.

Of course, according to the standard of "synchronizing data flow and cash flow," it is not only the new energy industry that can be prioritized as a scenario for RWA implementation. For example, cars equipped with autonomous driving capabilities, whether for financing leasing or shared mobility, can also serve as ideal underlying assets for RWA. As the digitalization level of various industries increases, issuing RWA based on these industry scenarios will give the market greater imaginative space.

2. Are all traditional financial products worth reconstructing with RWA?

The core logic based on RWA primarily reflects the premise of financial logic, especially after the financial industry has undergone electronic and internet transformation. Financial assets naturally exist in the form of data, and the degree of dataization in the financial industry chain has greatly increased. Compared to physical assets, financial assets are more easily tokenized to achieve the goals of lowering participation thresholds, improving turnover efficiency, and enhancing automation levels. So, do all financial products deserve to be reconstructed using RWA? Clearly not. According to the previous analysis, when it is not possible to significantly enhance the risk control capabilities of financial institutions by providing more credible data, "on-chain" is neither cost-effective nor meaningful. A more realistic path for the tokenization of financial assets is a "hybrid solution", which means first completing asset securitization based on the professional capabilities of financial institutions, and then anchoring the securitized assets with specific tokens, thus gaining the advantages of "on-chain" at the funding end of financial assets and part of the operational end. In the following sections, we will use the tokenization of REITs as an example to illustrate the basic characteristics of this model.

FTJLabs is the world's first RWA project REITs that connects traditional financial assets and on-chain liquidity based on a compliance structure, focusing on REITs assets listed on global exchanges, building a REITs portfolio through the issuance of funds, and issuing REITs tokens with fund shares as the underlying assets; Each REITs token corresponds to a share of a specific fund product; Investors can obtain REITs tokens through the corresponding REITs assets, fiat currencies or stablecoins in the portfolio, and can trade them anywhere and at any time around the world, and can also build portfolios with different income characteristics based on these token assets.

On-chain, the project develops the REITs Protocol, supporting the automatic execution of functions such as distribution, trading, and dividends of REITs Tokens, and provides data services for investors through the On-Chain Data Analysis module to extract data from publicly available blockchain information. Off-chain, the project selects licensed institutions to undertake the asset custody function for on-chain assets and issues real-time net asset value data to provide references for the secondary market trading of REITs Tokens, while also regularly issuing asset custody reports to ensure that on-chain assets and custodied assets are equivalent.

Based on the above functions, tokenization grants global liquidity to Reits assets, facilitating their value discovery, while also providing a unique investment target with distinctive risk-return characteristics for a broader range of investors. The investment portfolios that previously required cross-exchange operations can now be achieved with just one token.

In this product, two designs can better reflect the characteristics of the product design. First, the asset custody institution plays a fundamental supporting role in realizing the value of REITs Token. The asset custody institution discloses the net value of the custody assets through regular reports based on its own creditworthiness, ensuring that the value of REITs Token is equivalently anchored to the custody assets. Second, this project only uses exchange-listed Reits as the underlying assets. The asset custody institution can provide reference prices for REITs Token based on the price information provided by the exchange. If the underlying assets of this project also include private placement Reits products, the asset custody institution will be unable to provide reference quotes for REITs Token, thus failing to guarantee the asset transparency of REITs Token, which further affects its liquidity.

3. RWA, a wealth opportunity for the masses?

Under the current circumstances, the "Mainland assets + Hong Kong funds" model is relatively ideal for carrying out RWA business. However, the Hong Kong Securities and Futures Commission (SFC) adopts a cautious stance on asset tokenization, having established clear regulations regarding the identification of qualified investors and fundraising methods to avoid excessive risk exposure for investors.

In 2019, the Hong Kong Securities and Futures Commission (SFC) issued a statement on the issuance of security tokens, imposing restrictions on the distribution and promotion of security tokens to "only professional investors (individual financial assets ≥ HKD 8 million or licensed institutions)." In November 2023, the SFC published two circulars: "Circular on Intermediaries Engaging in Tokenized Securities Related Activities" and "Circular on Tokenized SFC Recognized Investment Products," which no longer regard tokenized securities as "complex products" and no longer limit their sale and marketing to professional investors; however, the SFC retained a provision from the "2019 Statement" that intermediaries intending to engage in tokenized securities-related activities should discuss their business plans with the SFC in advance. Tokenized securities cannot be publicly issued directly to all investors.

In December 2023, Harvest International partnered with Meta Lab HK to tokenise its fixed income fund products, but mainly for professional investors. On September 10, 2023, Tai Chi Capital launched Hong Kong's first real estate fund security token (PRINCE Token) for "professional investors", which is the first fund tokenized fundraising product approved by the Hong Kong Securities and Futures Commission, with a target fundraising scale of about 100 million yuan and a minimum investment standard of 1,000 Hong Kong dollars, which is much lower than the 1 million US dollars typically required to invest in private real estate funds. However, according to the relevant regulations of the Hong Kong Securities and Futures Commission, Hong Kong's licensed digital asset exchanges cannot accept the registration of mainland users, and the mainland of China also explicitly prohibits relevant institutions (for mainland residents) from providing virtual asset trading services.

In addition, the RWA products that have been successfully issued at this stage often have the attributes of fixed income or revenue-sharing rights, and the relatively fixed expected return rates are more suitable for large-scale institutions to allocate assets. Therefore, at this stage, there is still a significant gap between RWA and the wealth opportunities that general investors have in mind.

4. RWA, the ideal channel for SMEs to obtain financing?

If RWA cannot provide the imagined returns for retail investors on the funding side, can it provide an ideal channel for financing for a wide range of small and medium-sized enterprises on the asset side?

Everyone knows that financing costs are a core factor affecting the choice of financing channels for enterprises. According to market news, the issuance cost of RWA in Hong Kong generally includes two parts: issuance fees and capital costs. Among them, capital costs are mainly determined by the risk-return characteristics of the assets and the capital market environment at the time of issuance (currently, market forecasts are generally annualized at 6-10%); issuance fees include due diligence costs, product design and development costs, cross-border funding channels, and subsequent management costs, totaling approximately several million. The lower limit of the underlying assets for RWA can be inferred from the issuance costs; clearly, issuing RWA with an asset scale of less than 100 million is not economical. In addition to capital costs, there are also time costs. This article takes tokenized REITs issuance as an example to outline the asset selection criteria, main issuance processes, and time cycles, as shown in Table 1.

To sum up, in the current market environment, RWA issuance has a high threshold in terms of financing cost and financing time, and is not an ideal channel for most SMEs to obtain financing. For large enterprises whose financial indicators have reached or are close to being listed on the Hong Kong Stock Exchange, the three digital asset exchanges, which are currently the main channels for RWA issuance in the Hong Kong market (as of May 2025, a total of 10 institutions have been authorized by the Hong Kong Securities and Futures Commission to engage in digital asset trading-related business, but there are only 3 platforms that have been launched and can provide trading to the outside world). Enterprises with large capital needs prefer to give priority to listing and issuance on the Hong Kong Stock Exchange, and only enterprises whose financial indicators cannot meet the issuance standards of the Hong Kong Stock Exchange are more willing to spend higher costs to choose digital asset trading platforms for RWA issuance. This is also the main reason why it is difficult to implement RWA in the Hong Kong market.

5. Finance or Internet? The Survival Path of the Current RWA Market!

Judging from the definition of tokenized securities by the Hong Kong Securities and Futures Commission and the general consensus of the market, RWA based on financial assets does not change its financial attributes, but only materializes the original risk and return characteristics of the underlying assets with tokens as a new technical carrier. With tokens as a new carrier, financial products have unprecedented advantages in terms of transaction convenience, transaction efficiency and process transparency, if you go back hundreds of years, in 1397, the Florentine Medici family was the first in Europe to use bills of exchange to create cross-border exchange business; In 1602, when the Amsterdam Stock Exchange launched the world's first stock, the Dutch East India Company; Or, in 1844, when the Bank of England monopolized the power to issue notes in Britain and took its first steps towards global central banks, they should have chosen the distributed ledger as the underlying architecture for these groundbreaking financial instruments, given the obvious advantages of cost and efficiency.

But this is just a romantic assumption; time cannot flow backwards. After hundreds of years of accumulation, the financial industry has deeply bound itself to the global economic system in terms of product forms, service breadth, and depth. It is unlikely that RWA, which starts with the tokenization of securities, will completely reconstruct all traditional financial products; just as the internet permeated traditional society, RWA is more likely to find its own opportunities by starting from the areas with the best cost-effectiveness and those that can best reflect technological advantages.

While AI has already beaten humans in specialized areas such as chess and Go, it is unlikely to replace humans in providing personalized financial services to all investors. The advantages of the Internet are first reflected in the provision of services for large-scale long-tail users, therefore, when traditional financial institutions have occupied a major share of the market on the basis of their service experience with top customers, RWA, which takes financial attributes as its basic business logic, has to rely on the attributes of the Internet to find its own living space.

In the short term, RWA needs to meet the minimum requirements for traffic accumulation initiated by the market. Validating specific product forms in various scenarios is a beneficial attempt, especially selecting tracks with good participation from C-end users and in line with current industry development trends, such as opportunities in gaming and entertainment; In the medium to long term, when renewable energy sources like solar and wind power can seamlessly connect with traditional power grids through intelligent systems and automatically provide charging services; when taxis with autonomous driving capabilities have significantly lower overall usage costs than the cost of purchasing a family car; and when AI-supported agents can replace humans in executing more tasks, with computing power, models, and data becoming the main production factors, and humans no longer needing to participate directly in production, the role of RWA will be irreplaceable. As an innovative financial service model, RWA will inevitably grow into the mainstream form of financial services alongside the development of the intelligent economy, which shares the same genes and is closely integrated. An excellent example of this is how the dollar replaced the pound as the "global hard currency" after World War II, thanks to the rise of America's comprehensive national strength.

Writing at the End

The current RWA is still in the proof-of-concept phase, but we all agree that trends represent the future. We are here to do some cold thinking about the boom of RWA, not to deny RWA and its innovative exploration, on the contrary, it is based on the deep recognition of its development trend that we are willing to separate the false from the true, eliminate interference, and focus on finding a more efficient development path for it. As the old saying reflects in Geithner's new technology adoption curve, people tend to overestimate the short-term effects of a new technology and underestimate its long-term effects. According to the idea of verifying the product prototype, it may be more suitable to find a more suitable living space for RWA at the moment!