Overnight, why are exchanges all "killing" RWA?

Author: Punk Source: @punk2898

Finally, Gate US stocks are also online, not RWA, not tokenization, but direct connection to brokers.

Looking at the entire industry, the direction is already clear: the path of RWA US stocks (basically the Ondo plan) is narrowing, and direct connection to brokers is the end goal. But Gate's approach this time is different from most platforms on the market.

Outline of this article:

Why did Gate take a different route?

Why is trading US stocks a prisoner’s dilemma?

Three fatal flaws that killed RWA (Ondo model)

The last straw that broke the camel’s back: dividends

One tiger falls, thousands rise

I. Why did Gate take a different route?

Most platforms offering US stocks on the market follow the on-chain route—tokenizing US stocks, turning them into RWA, so what you buy is essentially a certificate linked to the stock price.

This time, Gate is different. It didn’t do on-chain tokenization but directly connected to the exchange—partnering with compliant brokers holding US Broker-Dealer licenses (Alpaca supports this, which is worth a deep dive, but that deserves a separate article). What you get is a real share, not a shadow on the chain.

Even with the same broker, there are two completely different paths: one moves US stocks on-chain, the other directly connects you inside the exchange.

The path is different, and the experience is worlds apart.

So here’s the question: wasn’t RWA touted as a "trillion-dollar track" back then? How did it become so widely criticized in less than two years?

The answer is simpler than you think.

Because everyone who has used it knows how terrible the RWA US stock experience is.

II. Prisoner’s dilemma: the more lively, the more dangerous; but if not lively, it’s just waiting to die

There’s a brutal game here: the more active you are in US stock trading, the greater the policy risk. Regulatory scrutiny is only a matter of time. How did Tiger and Futu get restricted back then? Because they were too lively.

But what if you don’t do it?

Users will go elsewhere. Want to keep users? You can’t. Crypto users have no loyalty; whoever offers more assets, lower costs, and better experience, that’s where the money flows.

This is the prisoner’s dilemma—

Everyone knows there’s a minefield ahead, but no one dares to stop.

After Tiger and Futu were restricted, where did Chinese retail investors go to trade US stocks? That created a huge vacuum. Crypto exchanges saw this, and they have an advantage that traditional brokers don’t: global users + crypto deposits and withdrawals + 24/7 trading habits.

In short, the pit where Tiger fell, crypto exchanges just fill it.

And they fill it more ruthlessly—directly connecting to brokers, not the second-hand RWA scheme.

III. Three fatal flaws that killed RWA (Ondo model)

RWA didn’t die today. It was doomed by three fatal flaws, each more deadly than the last.

First flaw: Liquidity

The biggest lie of RWA is "on-chain US stocks." Sounds sexy, but in practice—what about depth? What about order books?

Nothing.

Hundreds of people trading on it is just a drop in the ocean compared to real market liquidity. So what’s the solution? Only contracts. Some play perpetual contracts on RWA, but think about it: you wanted to buy Tesla spot, but you’re forced into a contract. I just want Tesla spot, but end up holding a long contract.

And behind contracts, there’s also counterparty risk. Who’s on the other side? Is clearing reliable? Who sets the price anchor? Every step questions "Do you trust me?"

Asking "Do you trust me?" in crypto is a joke in itself.

Second flaw: Asset count

RWA can handle a few hundred assets at most. Tesla, Apple, Nvidia, Microsoft, plus a few ETFs—that’s about it.

But direct connection to brokers? Access to NYSE, NASDAQ, NYSE Arca, NYSE American, BATS—over ten thousand stocks to choose from.

Hundreds vs over ten thousand—this isn’t just a volume difference, it’s a gap in quality.

Want to buy a more niche stock? Not available on RWA. Want to do sector rotation? RWA can’t handle it. Your strategic options are deadlocked by just a few hundred assets.

Third flaw: Holding costs

This is the most disgusting.

RWA stock contracts charge you whether you go long or short. Where does this fee come from? Because RWA contracts are derivatives—essentially a linked equity certificate—you hold it without real ownership or voting rights. Service providers need to lock positions, hedge, and charge your "overnight fee."

Spot? You buy and hold, no fee.

Long positions cost money, short positions cost money. The longer you use RWA, the more you bleed. Users aren’t fools—they can do the math.

With these three flaws, it’s a miracle RWA still survives.

IV. The last straw that broke the camel’s back: dividends

The first three problems are nasty but somewhat tolerable.

Dividends, however, directly affect user interests.

Why are dividends a death knell for RWA? Returning to that earlier point—what you hold isn’t real stock, but a linked certificate. Real stock dividends are paid by the listed company to shareholders, but you’re not on the shareholder register at all. How that money gets to you depends entirely on the service provider’s discretion.

How does RWA handle dividends? Two schemes, both fail.

Scheme 1: Add to the price.

After dividends are credited, the service provider adds the dividend amount to the stock price. Sounds reasonable? But the problem is—after that, your price decouples from the real market. The same stock outside is at 180, here it’s 182. Who makes up the difference? Arbitrageurs. After arbitrage, who loses? Everyone—things get chaotic.

Scheme 2: Distribute directly to accounts.

This scheme is theoretically cleaner, but execution is a mess. The service provider must reconcile with each exchange, distribute, and confirm—any hiccup means your dividend gets stuck. Some exchanges delay for a month or two, and when you contact customer service, they say "We’re communicating with the service provider."

You buy stocks, but can’t get your dividends.

Can you tolerate this?

Direct connection to brokers solves this problem outright. You buy real shares, money is held by licensed brokers and clearinghouses, and your account is protected by SIPC. Just like Tiger and Futu—dividends go straight to your account, no middlemen, no reconciliation, no waiting.

This single difference is why RWA should die.

V. One tiger falls, thousands rise

Looking back at this whole story—

Tiger and Futu were restricted, Chinese retail investors’ access to US stocks was blocked.

Crypto exchanges saw this gap and jumped in.

First, they explored with RWA, but found it unviable—poor liquidity, few assets, costly holdings, dividend disputes.

Then, they switched to a different approach—directly connecting to brokers, with the same underlying logic as Tiger and Futu. Behind Tiger was Interactive Brokers; behind these exchanges are licensed broker-dealers like Alpaca—essentially the same.

Technically, connecting to the five major exchanges with over ten thousand stocks is straightforward.

In terms of experience, no holding costs, dividends go straight to your account, SIPC protection, no difference from traditional US stock platforms.

Users have no reason not to choose you.

The entire industry is making a clear statement: RWA US stocks are dead, direct broker connection is the future.

Tiger may fall, but the demand for trading US stocks won’t disappear. Gate isn’t picking up Tiger’s corpse; it’s picking up the users Tiger lost on the ground.

That’s all.