A Stopped Currency War: The US-China Pricing Power Struggle Behind RWA

Summary

This paper systematically analyzes the financial structural constraints behind China’s phased tightening of RWA regulation at this critical turning point, and further reveals the deep mechanism by which RWA has evolved from a technological innovation into a tool for monetary pricing power competition within the global system. The research finds that China’s phased tightening of RWA is not aimed at the technology itself, but at the threefold systemic external risks it may trigger: issuance of asset-backed securities, expansion of cross-border capital flows, and embedding within the dollar-denominated pricing system. In the regulatory evolution path, RWA has gradually risen from a fintech pilot to a macro issue involving financial stability and monetary sovereignty. Meanwhile, the global RWA market shows a highly consistent dollarization path: stablecoins dominate settlement systems, US debt anchors yields, and DeFi takes over liquidity distribution, causing non-dollar assets on-chain to be systematically incorporated into the dollar pricing framework. This structure results in RWA not weakening the dollar system, but rather strengthening its central role in global asset pricing. Against this background, the path of RMB internationalization conflicts structurally with the RWA system: RMB assets find it difficult to complete on-chain closed-loop pricing and liquidity building within the existing financial structure, and instead face spillover risks of “asset RMBization and dollarized pricing.” Hong Kong plays a buffering role in this system but has not changed the overall dollar-led pattern. Ultimately, the paper proposes three evolutionary paths: full dollarization, offshore RMB system, and dual-currency model. Among these, the dual-structure of RMB assets + dollar liquidity, which has potential for institutional balance, depends on the coordinated reconstruction of regulation, capital, and monetary systems. The conclusion states that the ultimate competition of RWA is not limited to technological architecture, but further depends on the capacity to reshape monetary and regulatory systems; fundamentally, it is a process of global reallocation of asset pricing power.

Note: The term “pause” in this paper does not refer to explicit policy bans, but to a state of project contraction, slowed progress, and phased stagnation at the level of regulatory enforcement and market behavior.

Keywords: RWA, dollarization and pricing system, asset securitization and regulatory restructuring, RMB internationalization and structural conflicts, cross-border capital flows and stablecoin mechanisms, global asset pricing power competition

China’s Policy Logic and Practical Constraints on RWA Suspension

1.1 From Encouragement to Cautious Tightening: The True Path of China’s RWA Regulation Evolution

If one simply interprets China’s phased slowdown or contraction of RWA as a regulatory tightening, it may underestimate the institutional level adjustments reflected by this change. Combining the progress of various RWA projects in mainland China and Hong Kong over the past two years, a relatively consistent regulatory evolution trend can be observed: China’s attitude toward RWA has not suddenly shifted, but as RWA gradually acquires cross-border asset pricing and capital allocation functions, regulatory authorities have begun to significantly strengthen prudential constraints.

Therefore, from public policy texts, no single explicit prohibition clause has been formed, but at the level of regulatory enforcement and market behavior, a convergence has emerged: most RWA projects have experienced a significant slowdown in progress, with some entering phased stagnation.

To understand this change, one cannot look at a single policy point but must view it within a longer timeline.

From this timeline, a very critical shift can be seen: the regulatory focus is undergoing three leaps—from technological feasibility, to financial attributes, to capital flow and monetary influence.

In the early stage (2019–2021), regulators’ attitude toward blockchain was clear and positive. Whether it was supply chain finance, electronic bills, or judicial evidence storage, blockchain was seen as a foundational infrastructure tool to improve efficiency. But this stage carried an implicit premise: blockchain could transform processes but not change the financial structure. Moving into 2022–2023, a clear change began to appear. Some institutions started tokenizing assets like accounts receivable, rent rights, and introduced investor participation. During this phase, RWA shifted from a technical application to a financial product. The regulatory stance also shifted accordingly. In 2024, the China Securities Association issued the “Guidelines for Blockchain Application in Asset Management (Draft for Comments),” explicitly emphasizing asset authenticity, data traceability, and regulatory transparency[2]. The core significance of this document is that it did not deny RWA but drew a boundary: all on-chain assets must return to the existing financial regulatory system and cannot form outside-system finance. The real inflection point appears from late 2024 to 2025.

At this stage, we can clearly feel a shift in regulatory focus from the asset itself to the structure: multiple regulators, through window guidance, have required that domestic assets not be tokenized and mapped via offshore SPVs; some Chinese securities firms have slowed or suspended RWA-related activities in Hong Kong; many tech platforms have actively shrunk stablecoin and on-chain financing layouts.

These changes have not formed a unified public document but have produced highly consistent market results: RWA projects have shifted from rapid experimentation to overall contraction.

Entering 2025–2026, this trend is further reinforced, not only reflected in window guidance but also in systematic strengthening of cross-border asset tokenization review and stablecoin risk alerts (e.g., increased filing requirements for offshore tokenized securities). In actual compliance communication and regulatory feedback, the focus has gradually shifted to three core dimensions: whether it constitutes a de facto securities issuance, whether it creates new cross-border capital flow channels, and whether it leads to RMB assets being incorporated into the dollar-based pricing system.

Especially in projects supported by offshore issuance + domestic assets, regulators no longer discuss technical paths but return to a more fundamental question: does this structure change the way capital flows and the currency logic of pricing?

This change indicates that: the positioning of RWA within China’s regulatory framework has shifted from a fintech application issue to a structural issue involving macro financial stability and monetary system security.

From this perspective, the current regulatory tightening becomes clearer: what regulators are blocking are not RWA per se, but three key paths behind it: asset splitting and securitization, stablecoin-driven cross-border capital flows, and dollar-anchored asset pricing. These three paths constitute the core operational mechanism of the current global RWA system.

Therefore, a more accurate judgment is that China is not opposed to developing RWA, but does not allow it to grow at this stage by bypassing regulation, crossing borders, and dollar-based pricing. This definition also provides a key premise for subsequent analysis: the constraints faced by RWA in China are likely related to whether it touches the boundaries of financial structure, capital flows, and monetary sovereignty.

1.2 The Issue Is Not on the Chain, But in the De Facto Financialization: Why RWA Naturally Touches Regulatory Red Lines

In actual project implementation, a very typical misjudgment is that many teams believe the problem lies in blockchain or tokens. But regulators’ real concern is never about the form of the product, but about the essence of the financial structure.

If we decompose RWA projects appearing in China’s market, they are essentially concentrated in three types of assets:

(1) Accounts receivable, factoring assets (credit-like)

(2) Real estate rent rights (REITs-like)

(3) Supply chain financial debt (ABS-like)

These assets share a common point: in traditional finance, they are all heavily regulated assets.

Once entering the RWA structure, three key changes occur:

(1) Asset splitting: assets originally belonging to a single debt claim or real estate income are divided into tradable shares, approaching securitization.

(2) Investor expansion: from banks and trusts to potential global investors.

(3) Liquidity activation: on-chain trading endows assets with quasi-secondary market attributes.

These three steps, when superimposed, show that RWA is not merely digitalization of assets but more akin to an on-chain securitization process. This is one of the most sensitive areas for Chinese regulators. More critically, China’s regulatory system adheres to a core principle of penetrative supervision: regardless of whether you package as tokens, points, or digital certificates, as long as it involves fundraising + profit distribution, it is essentially a financial product. This is why some RWA projects, even without using public chains, are still halted.

A deeper contradiction: Shadow banking and cross-border capital

Further penetration reveals that RWA touches not only securitization issues but also two systemic risks:

First, shadow banking restructuring. Structurally, RWA is very similar to past trust, asset management, and ABS: bundling underlying assets, establishing SPVs, layered issuance, and investor subscription. The only difference is that the issuance vehicle has shifted from asset management plans to tokens.

But from a regulatory perspective, this structure can easily bypass constraints such as capital adequacy ratios, disclosure rules, and investor suitability management.

Therefore, in some regulatory analyses, such structures are considered to have shadow banking characteristics, potentially forming outside-the-system credit expansion and risk transmission mechanisms.

Second, the technical channel for capital outflows. More sensitive is cross-border. When RWA structures combine with stablecoin systems, the capital path may evolve into: domestic assets → offshore SPV, investors subscribing with USDT/USDC, and yields distributed in USD. This can form a new structural path: domestic asset yields converted into USD-denominated rights via stablecoins, then circulating cross-border on-chain.

In this structure, regulatory focus is on whether it forms a cross-border capital cycle outside the existing foreign exchange and securities regulatory systems. By 2026, relevant regulatory documents explicitly require strengthening filing and review of offshore issuance and tokenized securities backed by domestic assets to prevent disorderly expansion[1]. From this perspective, the issue with RWA is not the assets themselves but how it changes the flow and pricing of capital.

1.3 The Same Asset, Two Systems: Mainland China’s Regulatory Tightening and Hong Kong’s Structural Divergence

Shifting the perspective from mainland China to Hong Kong reveals a typical institutional mismatch. On one side is mainland China’s tightening and prudential constraints; on the other is Hong Kong’s active promotion. This divergence is not policy conflict but institutional division of labor.

Hong Kong’s policy stance shows clear differences. Over the past two years, Hong Kong’s actions in RWA have been very explicit: promoting stablecoin licensing (e.g., HKMA’s stablecoin regulatory framework draft), pushing green bonds and government bond tokenization pilots (e.g., Hong Kong government green bond token issuance), and encouraging institutions to issue on-chain assets. Essentially, Hong Kong is building a system centered on a dollar (or dollar-pegged) on-chain financial market. Why do the same country have two paths?

The reason is simple: fundamentally, there are two sets of financial logic:

This means: under different institutional environments, the regulatory attributes and market positioning of the same asset show significant differences.

Even without considering regulatory attitudes, from a practical operation perspective, mainland China’s RWA faces four fundamental constraints:

(1) Capital account not open → cannot freely cross-border finance

(2) Data export restrictions → conflicts with on-chain transparency and regulation

(3) Asset rights confirmation system inconsistent → insufficient legality for on-chain assets

(4) Token legal attributes unclear → lack of investor protection

These issues cannot be solved in the short term. For this reason, regulators choose not to loosen for trial-and-error, but to strengthen risk constraints before the system is complete.

1.4 Two Typical Project Reviews: Why Looks Compliant but Ultimately Fails

Over the past two years, we have closely tracked multiple RWA projects. A very typical feeling is: most projects in the design phase have strong compliance logic, but face obstacles at key points during implementation. The core reason is not a single link problem but that as the structure advances, projects gradually touch higher-level regulatory constraints. We can abstract this process as a typical path: asset digitization → income rights splitting → investor introduction → liquidity design → cross-border capital path formation → regulatory redefinition.

The following two cases essentially follow the same path but stop at different stages.

The first project is in supply chain finance, with underlying assets being accounts payable of a core manufacturer. The project team was very cautious at the design stage: selecting assets with clear payment terms and very low default risk—core enterprise debt; introducing SPV for isolation; even setting up buyback and gap-filling mechanisms. From a traditional finance perspective, this is a standard ABS-like structure, almost impeccable.

The real change occurs at the funding end. To improve financing efficiency and reduce costs, the project chose to issue tokens via offshore SPV and attract Southeast Asian funds using stablecoins. At this moment, the project’s nature fundamentally changes: it is no longer just a supply chain financing tool but becomes a securitized asset targeted at global investors, denominated in USD.

Regulatory focus also shifts accordingly. Initially, the discussion centered on asset authenticity and risk control models, but soon regulators began to ask repeatedly: how does the capital flow back after entering the chain? How to identify offshore investors? Does profit distribution form a cross-border capital cycle? These questions have technical explanations but lack compliance answers within the regulatory framework.

Eventually, this project was deemed an unapproved cross-border securitization, not because the assets are non-compliant, but because the capital flow has escaped the controllable scope of domestic financial regulation.

In contrast, the second project’s starting point is more straightforward: splitting rental income from a first-tier city office building, and selling it to investors via tokens. From a business logic perspective, this is almost the easiest and most attractive RWA model: stable cash flow, clear assets, predictable returns.

But because it is so standard, problems are exposed even faster. During project advancement, several key designs gradually accumulated: lowering participation thresholds; introducing secondary trading to enhance liquidity; front-loading profit distribution. Each design individually is reasonable, but combined, they form a very clear structure—divisible, tradable, publicly solicited income rights.

In the regulatory context, this is almost equivalent to securities. China already has clear institutional arrangements for such assets: if it is based on real estate, publicly solicited, funds raised from the public, and profit distributed, then the only compliant path is to enter the public REITs system. Any structure bypassing this system, no matter how advanced the technology, is essentially an outside-the-system securitization.

It is precisely at this point that the project has no room for adjustment and must ultimately terminate. Looking at these two cases together reveals a very critical but often overlooked commonality: project failure is not due to non-compliance, but because they cannot be integrated into the existing regulatory system.

In other words, the problem of these projects is not what they did wrong, but that they attempted to do something that the current system is not yet prepared to accommodate. The first case stops at cross-border capital flow, triggered by foreign exchange and capital flow regulation; the second at income rights structure, triggered by securities issuance regulation. But the core is the same: when RWA begins to simultaneously possess asset splitting + investor expansion + liquidity design, its nature shifts from a product realization issue to a structural issue involving the financial system and regulatory framework.

It is precisely at this moment that structures that seem compliant are re-dismantled and reclassified within the existing regulatory framework. This is also why, based on practical experience, the most common way for RWA projects to end in China is not explicit rejection, but inability to complete filing, lack of channel support, or failure to establish a capital flow cycle.

Ultimately, projects are passively terminated or suspended during compliance promotion. From this perspective, the value of these cases is not in failure but in their clear revelation of one key point: at this stage, China’s real constraints on RWA are not on the asset side or the technology side, but on whether it changes the capital flow and asset pricing in the currency domain. If the answer is yes, the project is very likely to be unable to proceed further. From these cases, it is evident that regulatory restrictions focus not on asset digitization itself, but on the structural changes it may trigger in the financial system. The real concern is not whether the technology is feasible, but whether, after tokenization, assets can bypass existing financial regulation and form outside-the-system finance.

1.5 Summary: Tightening Is Not a Denial, But a Forward-Looking Defense Against the Risk of Externalized Pricing Power

Abstracting the analysis in this chapter, it can be summarized as: China’s cautious attitude toward RWA is not due to insufficient technological maturity, but because its potential impact has touched three key systemic constraints: asset pricing, capital flows, and monetary sovereignty.

Specifically, at the financial level, RWA may reconstruct shadow banking; at the capital level, it may open cross-border channels; at the monetary level, it may cause RMB assets to be priced in USD. Therefore, this policy adjustment is more like a proactive risk prevention measure rather than a simple market contraction. The core issue is not whether to develop RWA, but whether, without overly relying on the dollar system, an autonomous asset pricing and capital circulation mechanism can be established.

Dollar Asset Pricing in RWA and Global Dominance

2.1 Why RWA Is Naturally Dollarized: Asymmetric Pricing Structures from the Start

From a technical perspective, RWA is neutral—any country’s assets can theoretically be tokenized, split, and traded. But in practice, since the early projects’ landing, RWA has shown a prominent dollar-dominant feature, especially evident in mainstream issuance and funding structures. The root cause of this phenomenon is not the assets themselves but the embedded pricing and liquidity structure. From existing projects, the prices of RWA assets are not solely determined by underlying cash flows but are jointly driven by yield, risk, and liquidity factors. For example, in US debt RWA projects (such as Ondo Finance’s short-term US debt products), although yields come from US Treasury interest, actual pricing still depends on on-chain stablecoin demand and redemption liquidity. Similarly, some emerging market real estate RWA projects, despite stable rental income, often require higher yields due to insufficient dollar liquidity on-chain.

In traditional finance, these three layers usually form a closed loop within the same currency system. But in RWA, the latter two—especially liquidity premiums—are almost entirely determined by on-chain dollar funds.

This means: even if the underlying assets originate from non-dollar economies, their pricing process still needs to be expressed and matched through the dollar liquidity system. In other words, RWA has not achieved asset globalization but has realized: asset yields are incorporated into a unified dollar-based pricing framework.

2.2 How the Dollar Is Embedded in RWA: From Settlement Tool to Yield Anchor via Three Control Layers

Further decomposition reveals that the dollar in RWA is not a single role but completes control over the entire system through three layers—settlement, pricing, and liquidity.

First layer: Stablecoins, locking settlement currency

According to RWA.xyz and CoinGecko data as of April 2026[3], about 83% of RWA-related transactions are completed via stablecoins (on-chain transactions and protocol interactions), mainly USDT and USDC.

Stablecoins in RWA serve not only as settlement tools but also as core carriers for yield valuation and fund anchoring. They essentially determine: the currency of investor returns, the asset’s valuation method, and the market’s benchmark unit. Once RWA projects raise funds via stablecoins, their liabilities are denominated in USD, passively converting asset yields into USD at the distribution stage—this completes the first layer of dollarization.

Second layer: US Treasury yields, the global unified pricing anchor

In all RWA product designs, an almost unmentioned but always-present variable is the risk-free rate. In the current system, this anchor is only US Treasuries.

This means: all RWA assets are implicitly compared to US Treasury yields.

The result is a very clear ranking logic:

(1) Below US Treasuries → unattractive

(2) Slightly above US Treasuries → low-risk assets

(3) Far above US Treasuries → high-risk assets

This mechanism brings all global assets into the same dollar yield curve.

Third layer: DeFi system, the final allocator of liquidity

If the stablecoin solves how money enters, and US Treasuries define how yields are priced, then the DeFi system determines: where does the capital finally flow?

The current mainstream path can be broken down as: RWA on-chain → collateral in lending protocols → attracting stablecoin liquidity → leveraging collateral/re-collateralization to amplify funds. In this process, assets no longer exist as independent income entities but are embedded in on-chain collateral and liquidity systems, participating in the overall capital cycle.

The core assets of this network remain stablecoins (USD) and collateral assets like ETH.

This means: the liquidity source of RWA assets fundamentally depends on the size and activity of on-chain USD stablecoin pools. A complete closed loop thus forms: stablecoins (settlement) → US Treasuries (pricing) → DeFi (distribution).

2.3 From Model to Reality: How the USD Gains Pricing Priority in RWA

When these three layers stack, the pricing logic of RWA undergoes a key change:

Where:

(1) CF: underlying asset cash flows

(2) r_UST: US Treasury yield (risk-free rate)

(3) RP: credit and default risk premium

(4) LP: on-chain liquidity premium (determined by stablecoin supply and demand)

Compared to traditional DCF models, this pricing structure has two core differences: in traditional DCF, the risk-free rate is usually based on the local currency yield curve; in RWA, this variable is uniformly replaced by the USD rate (US Treasury yield). Traditional asset liquidity is mainly determined by local market depth, but RWA asset liquidity depends on on-chain USD fund supply. As a result, the asset’s pricing power shifts from the local market to the global USD liquidity system.

This difference has already formed a clear stratification in the actual market:

(1) US Treasury RWA products: supply is tight

(2) Emerging market assets RWA: financing difficulties

The fundamental reason is not asset quality but whether they are inherently embedded in the USD system.

Practical examples from three projects have repeatedly validated this logic:

(1) Ondo Finance: by tokenizing short-term US debt, creating on-chain quasi-risk-free assets, attracting stablecoin funds to prioritize allocation, reinforcing USD yield anchors

(2) MakerDAO: by including real assets (like US debt) into DAI collateral, making stablecoin credit directly depend on USD assets, structurally expanding USD influence

(3) BlackRock BUIDL: by institutional funds bringing USD assets on-chain and connecting with compliant on-chain liquidity, further embedding traditional USD assets into Web3

Although these cases differ in paths, their conclusions are highly consistent: they show that RWA does not weaken the USD system but extends its pricing and liquidity boundaries under new technological architectures.

2.4 Overlooked Reality: Why Non-Dollar Assets Are Systematically Underestimated

In practice, a very common but easily misjudged phenomenon is that non-dollar assets are not of lower quality but are re-priced within a USD-centric pricing system. This issue mainly manifests in two aspects.

First, exchange rate fluctuations directly impact investors’ real returns, especially when non-dollar assets raise funds via stablecoins. For example, in Southeast Asian real estate RWA projects, even if local currency rental yields reach 6–8%[10], converting to USD and considering exchange rate volatility significantly reduces actual returns, increasing financing difficulty. When an asset priced in RMB or other currencies raises funds in USD stablecoins, investors’ actual returns must deduct exchange rate risk. If depreciation is expected, investors will demand higher yields as compensation, which directly depresses asset valuation. Second, non-dollar assets often face obvious liquidity discounts. They tend to have less investor recognition, limited trading depth, and unclear exit paths, requiring higher yields to attract capital.

The ultimate result is: the same asset may be priced differently in USD and non-USD systems, with systemic biases.

2.5 Summary: USD Is Not Only a Unit of Account but Also the Core Carrier of RWA Yield Distribution

This chapter shows that the dollarization of RWA is not merely a market choice but is jointly determined by the settlement, pricing, and liquidity structures: stablecoins lock in settlement currency, US debt defines yield benchmarks, DeFi distributes liquidity, forming a dollar-led structure. The three layers together mean that the USD not only participates in pricing but also controls the entire yield distribution process. Therefore, the real power of RWA is not on the asset side but on the currency side: in this system, USD liquidity determines pricing power and further influences the distribution of global asset yields.

RMB Internationalization Path and Structural Conflict with RWA

3.1 The Existing Path of RMB Internationalization: A Controlled and Phased Approach

Viewing RWA within a broader framework reveals a fundamental premise: RMB internationalization is not a fully market-driven process but a highly cautious, phased institutional project. Over the past decade, the core path of RMB internationalization has mainly advanced through trade settlement, cross-border investment and financing, and offshore financial markets, evolving further into a multi-polar settlement network + reduced SWIFT dependence + digital RMB cross-border pilot expansion by 2025–2026 as a structural phase.

According to SWIFT’s cross-border payment data in 2025[5], Q1 2026 data shows RMB’s share in global payments is about 3.13%–3.46%, a slight increase from 2025 but still far below the over 50% of USD. The key change in RMB internationalization during 2025–2026 is no longer in share growth but in the layered structure of settlement networks + regional clearing + partial embedding of energy and commodities pricing power: including CIPS system expansion, increased RMB settlement in Middle Eastern energy trade, and bilateral or dual-currency settlement mechanisms in some Belt and Road countries. Meanwhile, offshore RMB (CNH) markets are expanding, but liquidity remains highly policy-dependent. This system is characterized by controlled expansion rather than free flow. Under this premise, the emergence of RWA begins to bring structural shocks.

3.2 The Theoretical Fit: Why RWA Seems to Accelerate RMB Internationalization

On the surface, RWA and RMB internationalization appear highly compatible.

First, RWA can directly map domestic assets (such as new energy plant rights, supply chain receivables) onto on-chain markets, allowing RMB assets to enter the global allocation system as tokenized cash flows. Second, through on-chain structures, assets can bypass traditional financial intermediaries, achieving more efficient capital matching. Further, if combined with digital RMB (e-CNY) or offshore RMB stablecoin pilots, a RMB-denominated on-chain asset market could theoretically be built, but only if RWA settlement can form a closed liquidity pool within the RMB system.

From this perspective, RWA has three potential values in the context of RMB internationalization: enhancing RMB asset global accessibility (asset side), increasing RMB usage in cross-border pricing (pricing side), and creating a new offshore RMB asset application layer (liquidity side). But the problem is that this logic assumes RWA can complete a closed loop within the RMB system. The reality is quite the opposite: current RWA systems operate almost entirely within the USD system. This fundamental mismatch creates a direct conflict.

3.3 The Conflict Unfolds: When RMB Path Encounters USD-Dominated RWA Structures

In actual project development, this conflict does not remain abstract but gradually manifests at each structural level. Based on multiple project experiences, this conflict can be summarized into three typical structural dislocations.

First, settlement system dislocation. Current RWA issuance almost inevitably relies on USDT, USDC stablecoins, meaning funds enter and exit in USD. For example, in Ondo Finance’s US debt RWA, funding and yield distribution are done via USDC, forming a USD settlement cycle. In the RMB context, capital account restrictions mean cross-border flows require approval, creating asymmetry: one side is freely flowing USD stablecoins, the other is controlled RMB flows. This asymmetry makes it impossible to use RMB for valuation without liquidity, and using USD directly abandons RMB pricing power.

Second, asset and data cross-border dislocation. RWA requires transparent on-chain asset info and cash flow data, but China’s strict restrictions on cross-border data transfer create a dilemma: not on-chain means no participation; on-chain risks breaching data export restrictions. In many projects, this issue is not technical but regulatory, often leading to outright rejection during compliance review.

Third, investor structure dislocation. RWA’s core advantage is connecting global capital, but Chinese assets are long dominated by domestic institutions. For example, in some Hong Kong green bond tokenization pilots, domestic participation is below 20%, with international institutions and crypto funds as main investors. Introducing foreign investors involves FX management, suitability, AML, and source of funds reviews. This creates a typical contradiction: assets are domestic, funds are offshore, but no institutional bridge exists.

This comparison shows: RWA is not simply about putting assets on-chain but about integrating assets into a dollar-unified financial system.

3.4 Hong Kong as a Buffer Layer: Practical Solutions and Boundary in Structural Mismatch

When the above conflicts cannot be resolved in the short term, Hong Kong has gradually become a key intermediary.

Its core role can be summarized as: providing a connection point for Chinese assets to access global capital without changing the mainland’s financial system.

(1) Two key institutional tools in Hong Kong

First, stablecoin regulatory framework. Hong Kong is advancing a stablecoin licensing regime (HKMA framework), allowing compliant institutions to issue fiat-pegged stablecoins, with RWA pilots already underway.

Second, RWA pilot projects. Including Hong Kong government green bond tokenization and real estate income rights tokenization (via SPV issuance), these are the main offshore RWA experiments, mainly attracting international investors.

(2) A typical case: Hong Kong green bond RWA

In such projects, the structure usually involves assets from mainland or Chinese background, issued via Hong Kong SPV, denominated in USD or HKD, targeting international investors. The investor structure is clearly international: dominant institutional investors, rising crypto fund participation, limited domestic involvement. Even if the assets originate from China, the pricing power remains with the Hong Kong SPV + USD-based system, effectively separating asset location from pricing.

(3) Practical issues with offshore SPV paths

Another common path is Chinese firms establishing SPVs in Singapore or Hong Kong to map domestic assets on-chain.

In practice, this path faces multiple issues: compliance of asset transfer, FX remittance for returns, tax and regulatory uncertainties. The typical outcome is: structures can be designed but are difficult to sustain long-term.

3.5 Summary: RWA Can Both Promote RMB Internationalization and Accelerate Dollar Embeddedness

This chapter shows that RWA impacts RMB internationalization in two ways: it can enhance RMB asset liquidity globally and also reinforce dollar dominance in on-chain asset pricing. Ideally, RWA could improve RMB asset accessibility and expand RMB’s role in asset pricing. But in the current structure, RWA is more likely to result in: RMB assets being incorporated into dollar-based pricing, with yields distributed in USD, and pricing power shifting offshore. This deepens the fundamental conflict: prioritizing monetary sovereignty or enhancing asset liquidity? Maintaining financial stability or accelerating financial opening? At this stage, China’s core choice is a structural trade-off: stability (monetary sovereignty) vs openness (asset liquidity). But this does not eliminate the problem; it means that all future RWA paths will involve ongoing institutional rebalancing between financial openness and monetary system security.

Conflicting Paths and Structural Solutions

4.1 Three Practical Paths: Not a Choice but Optimal Solutions Under Different Constraints

The previous analysis confirms a basic fact: the RWA system is already dollar-dominated, while the RMB system remains in a controlled, phased opening. Under this premise, there is no perfect solution; three feasible paths exist, each representing a trade-off under different constraints.

The first path, the current mainstream—full dollarization.

Its logic is straightforward: assets are packaged via offshore SPV, raising funds in USD stablecoins, with yields paid in USD. This path benefits from ample liquidity, broad investor base, and mature pricing, almost directly connecting to existing RWA markets. But the problem is also clear: asset pricing and yield distribution are fully externalized.

The second path, increasingly discussed—offshore RMB RWA system.

This relies on Hong Kong or Singapore, issuing in CNH (offshore RMB). Theoretically, this can preserve some RMB pricing power and avoid direct domestic capital controls. But practical challenges include limited offshore RMB liquidity, small investor base, and lack of mature yield curves. This path is more suitable for pilot projects than large-scale commercialization.

The third, most promising in research—dual-currency RWA structure.

The core idea is to keep assets in RMB, finance in USD, and bridge the two via structural design.

This involves:

(1) Underlying assets → RMB-denominated

(2) Investment funds → USD inflow

(3) Yield distribution → dual-currency design

While complex, this path aims to balance sovereignty and liquidity, and is currently the most feasible for achieving a stable equilibrium between the two.

4.2 Key Structural Designs: From Feasible to Sustainable—Three Core Modules

In actual RWA project implementation, choosing the right path is only the first step. Whether the project can operate sustainably depends on whether its structural design can balance regulatory compliance, capital flow, and yield distribution constraints. These three must not only cooperate but also be sustainable to adapt to future policy and market changes.

(1) SPV architecture: bridging domestic assets and offshore operations

The main model today is using SPVs to map cross-border assets. The process is as follows:

This structure effectively avoids direct asset outflow by transferring income rights, enabling domestic assets and offshore funds to connect. But the key is ensuring compliant capital return. Many projects fail not because of poor structural design but because they cannot convincingly explain how capital flows back legally. Clear capital return paths and multi-layer SPV structures are necessary to isolate legal risks.

(2) Yield distribution mechanisms: re-splitting RMB and USD

In dual-currency RWA, yield design is critical. Typical schemes include: locking local currency yields + FX hedging, layered RMB and USD yields, preset exchange rate ranges for distribution.

For example, investors subscribe in USD, but the project’s income is generated in RMB and hedged via derivatives. But note that exchange rate volatility is not just a technical issue but a cost issue. High volatility increases hedging costs, impacting overall returns.

Estimated hedging costs are roughly:

This shows that if the underlying yield cannot cover hedging costs, the attractiveness of the RWA structure diminishes, especially at low yields, risking capital outflows.

(3) Technical layer: multi-currency and on-chain financial tools

With technological advances, RWA projects are increasingly mature in areas like multi-currency stablecoins, on-chain lending and liquidity pools, and FX and interest rate derivatives. These tools support liquidity management and risk hedging: multi-currency stablecoins (USD + CNH), on-chain lending, derivatives.

For example, in DeFi ecosystems, liquidity pools can be used for yield redistribution, and derivatives for risk hedging. These reduce traditional frictions and increase asset liquidity and flexibility.

However, technical solutions cannot eliminate institutional differences. Especially in cross-border projects, regulatory compliance, data privacy, and legal issues remain significant.

4.3 RMB Real Estate RWA: Offshore Issuance Paths and Constraints

Instead of abstract modeling, examining existing or ongoing market structures reveals a typical real-world path: using domestic real estate cash flows as underlying assets, issued via offshore SPV in Hong Kong or Singapore, denominated in USD stablecoins, as the main fundraising and settlement tool. Such structures have appeared in pilot projects from 2024–2026, especially in Hong Kong RWA pilots and offshore financing by Chinese institutions. For example, Hong Kong’s green bond tokenization pilot (HKMA’s Project Genesis framework) and some real estate income rights projects show similar features.

Structurally, these projects usually do not directly issue real estate tokens but adopt a three-layer nested structure for compliance:

First layer: domestic asset layer. Assets are typically commercial real estate or industrial parks in first- or second-tier cities, held by domestic operators, generating stable rental cash flows. Legally, these do not cross borders.

Second layer: offshore SPV. Usually set up in Hong Kong or Singapore, the SPV holds the income rights or contractual rights to the domestic assets, not the assets themselves. The legal ownership remains domestic; only cash flow rights are transferred offshore.

Third layer: on-chain issuance. The SPV tokenizes future cash flows and issues tokens to global investors, denominated in USDC or USDT, not RMB.

In actual fund flows, this structure often forms a closed loop:

Investor uses USD stablecoins to buy tokens → funds flow into offshore SPV → SPV acquires domestic rental income rights via agreements → domestic assets generate RMB cash flows → through FX mechanisms, converted into USD → distributed to investors.

The key point: RMB only exists at the asset level, not in circulation or pricing.

From yield perspective, this structure differs significantly from surface expectations.

Taking a typical commercial real estate cash flow model[6] as reference:

But once such assets enter the RWA structure, three systemic costs are added:

First, FX hedging costs. Since investors are USD-based, RMB cash flows must be converted into USD for distribution, usually via forward or options, with costs around 3–5%[7]. Second, structural financing costs, including SPV setup, legal structuring, cross-border compliance, and custodial costs, typically around 1–2%[8]. Third, liquidity discounts. Due to limited secondary market depth, early-stage projects often need to offer extra yield compensation, implying a discount of about 1–3%[9].

Overall, a core yield of 5–6% RMB real estate assets, after entering the USD-dominated RWA system, is often compressed to about 1–3% net yield for investors.

This is a very typical but often overlooked phenomenon: asset quality remains unchanged, but systemic structural re-pricing occurs. Meanwhile, three unresolvable constraints exist:

First, asymmetric FX risk. RMB assets in USD systems must bear exchange rate risk, but yields may not fully cover hedging costs, inherently compressing the yield curve.

Second, uncertainty in capital return paths. Although SPV structures can be designed, actual returns depend on FX management and foreign exchange control, with significant jurisdictional uncertainties.

Third, investor perception mismatch. Global RWA investors are more familiar with US debt, sovereign bonds, and money market funds, but lack a unified