Discussing the Regulatory and Development Prospects of RWA in Hong Kong

Three industry experts from well-known virtual asset institutions in Hong Kong recently conducted an in-depth discussion on the regulation and development prospects of physical asset tokenization ( RWA ).

Regulatory Principles of RWA

Experts believe that the Hong Kong regulatory authorities adhere to the "same principle, same practice" approach towards RWA. Specifically, the regulators tend to determine the regulatory methods based on the nature of the underlying assets of RWA, rather than treating all tokenized assets as virtual assets. For instance, if the underlying assets of RWA are stocks or bonds, they may be regulated in accordance with traditional financial assets.

This means that if a financial product can be made available to retail investors in traditional markets, then its tokenized version can theoretically also be sold to retail investors. Conversely, the same applies. However, experts warn that RWA tokenization may also need to comply with additional regulatory requirements related to virtual assets.

The Investment Appeal of RWA

For ordinary investors, investing in RWA seems to have certain thresholds and costs. So, what makes RWA attractive to investors?

Experts point out that one major advantage of RWA is its potential for "risk-free excess returns". Taking U.S. Treasury bonds as an example, some projects have tokenized them, allowing investors to not only earn returns from the bonds themselves but also gain additional returns through staking and mining. This compounding effect means that the yields of RWA may exceed those of traditional risk-free assets, and even surpass the risk-free returns in the virtual asset space.

In addition, RWA can also provide fragmented investment opportunities for some illiquid assets such as real estate (. However, the scale of such RWA projects is still limited at present.

Experts emphasize that investors conduct horizontal comparisons when selecting RWAs, tending to choose assets with the highest risk-free excess returns. This is precisely the key to attracting investors to RWAs.

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Development of RWA under Regulatory Compliance

Under the framework of regulatory compliance, how can we enter the RWA market? Experts believe that one possible entry point is to manage low-risk funds, such as government bonds or money market funds. However, this also faces the challenge of KYC), or Know Your Customer(. Currently, regulators still require traditional KYC processes, which may restrict some funds from entering the virtual currency market.

In the future, stablecoins in Hong Kong may become a bridge connecting traditional finance and the world of virtual assets. As this "bridge" continues to widen, the costs of cross-border investments are expected to decrease.

Opportunities and Challenges for Licensed Institutions

For licensed institutions, there are many opportunities in the RWA field:

1. Utilize regulatory dividends to develop innovative financial products.
2. As a bridge between traditional finance and Web3 projects, assist in handling business on the physical asset side.
3. Help cryptocurrency investors enter the traditional asset market, meeting their demand to invest in traditional assets without converting back to fiat currency.

However, these institutions also face challenges, such as the need to gain a deep understanding of the operational mechanisms in different fields, as well as how to meet the needs of investors while ensuring compliance.

Experts believe that in the future, more communication is needed with regulatory agencies to discuss how to provide channels for virtual currency holders who have completed the relevant procedures to invest in traditional assets, ensuring KYC/KYT compliance and thereby reducing the friction costs for investors.

In summary, as the regulatory environment continues to improve and the market gradually develops, the importance of RWA in the Hong Kong financial market is expected to further increase.

![Looking at RWA from a new perspective? Hear what the "regular troops" in Hong Kong have to say])https://img-cdn.gateio.im/webp-social/moments-8ecd624dc97006eadf86d8ed783eafd7.webp(