Unified Labs: What is the essence of RWA? The institutional game of traditional finance on the blockchain

Author | Wu Talks Blockchain

This article is from Unified Labs co-founder and CEO Bo Pan's sharing on Wu Talks Podcast. Bo Pan believes that the current RWA track shows a clear fragmentation: traditional financial institutions represented by BlackRock and others are accelerating their entry and pushing product implementation, while the crypto market side is filled with chaos and Ponzi schemes.

Bo Pan thinks that, in essence, RWA is an on-chain upgrade of the traditional financial system, a highly compliance-backed institutional game, with issuers lacking licenses having extremely low credibility. The core significance of asset onboarding is not hype, but breaking regional restrictions, achieving financial inclusion, and utilizing DeFi to remove traditional financial intermediaries, thereby enabling more efficient, low-cost on-chain financial scenarios such as collateralized lending. Bo Pan states that DeFi’s decentralization solves the determinism of code execution, while RWA’s centralized nature addresses asset rights confirmation and investor protection; combining both effectively improves efficiency.

Regarding risk management of on-chain assets, he mentions that most current RWAs are issued through overseas SPV (Special Purpose Vehicle) structures. If the underlying assets encounter problems, ordinary users face high cross-border rights protection and litigation costs, and local regulators find it difficult to intervene directly. On the regulatory front, he emphasizes paying close attention to the legislative progress of bills like the US CLARITY Act (Digital Asset Market Clarity Act). He expects that between 2027 and 2030, as regulatory frameworks in the US, Japan, Singapore, and others are substantively implemented, the RWA market will experience exponential growth.

In practice, Unified Labs aims to act as a “on-chain fund manager” for RWA assets by providing lending pools and decentralized vaults on Morpho architecture, solving the derivative financial liquidity needs after assets are onboarded. For ordinary investors, Bo Pan recommends maintaining a cautious stance until clear federal regulatory legislation is enacted.

Guest comments do not represent Wu’s views and do not constitute investment advice. Please strictly follow local laws and regulations. Audio transcription and translation are performed by GPT and may contain errors. Please listen to the full podcast:

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Track assessment: RWA is an institutional game; combining asset onboarding with DeFi is the key to breaking through

Bo Pan: I am the co-founder and CEO of Unified Labs, also a content creator. Glad to share the topic of RWA on Wu Talks Podcast. I entered the crypto space in 2021, deeply involved in founding and research of several well-known DAOs, writing many ten-thousand-word reports on DeFi, EVM systems, smart contract security, and oracles, building a comprehensive knowledge system.

In 2023, when studying in Australia, I had the chance to participate in the pilot project of the Australian Central Bank’s on-chain CBDC. We were among the few startups selected at that time, doing many innovative attempts in supply chain finance, such as solving bill forgery and accounts receivable financing issues. Due to the project’s innovation, we later collaborated with the Monetary Authority of Singapore and the Bank of Ghana on international trade pilot projects, exploring cross-border programmable payments and trade finance. This experience gave me the opportunity to interact with central bank regulators and traditional finance, learning how to genuinely integrate on-chain and off-chain systems, rather than blindly hype concepts.

At that time, I kept an eye on regulatory developments, seeing core institutions like IMF, BIS, Singapore MAS, and Bank of England frequently releasing tokenization policies and innovation projects in 2023-2024. This convinced me that the RWA track will definitely explode in the future, driven by regulatory push and policy alignment.

During this period, I also co-organized an RWA incubation camp, observing various projects’ business models and development, but I found many startups ultimately failed to survive.

I realized that RWA issuance is mostly an institutional game, with very limited entry points for startups. But with Trump’s rise, regulatory and legal environments fully liberalized, especially with significant progress on the CLARITY Act, I decided to personally step in at the end of last year and founded Unified Labs, focusing on combining RWA with DeFi.

The opportunity I see is that, although issuing RWA assets is difficult, once onboarded, they generate huge derivative financial demand, with the largest market being collateralized lending. As the first Chinese team to obtain Morpho whitelist approval focused on RWA + DeFi, we are committed to solving RWA liquidity issues. We customize lending pools for RWA issuers on Morpho, and also provide a Vault for on-chain wealth management users to deposit funds and enjoy the lending yields from RWA underlying assets. By directing liquidity into lending pools, we enable assets to be collateralized and loaned on-chain, empowering RWA assets—this is what we are doing now.

Track status: RWA shows fragmentation; compliance and regulation are the core foundation for asset onboarding

Maodi: Ordinary users are quite confused about RWA. Can you introduce the current progress and overall framework of the track?

Bo Pan: The perception of the RWA track within the industry is very fragmented. In 2023, Citibank published an RWA report predicting a trillion-dollar market by 2030, which truly ignited the track. Everyone was discussing onboarding everything, and many startups emerged. But from 2024 onward, you’ll see that traditional finance RWA has made significant progress, while in crypto, there are hardly any projects that have truly taken off.

Maodi: What are some of these progress points?

Bo Pan: First, Citibank’s 2023 report prompted many institutions to try. Industry insiders pay little attention to these, but many top traditional financial institutions started creating Digital Asset departments, doing internal pilots on consortium chains or in sandboxes, gradually onboarding assets. When I read their reports, I felt traditional finance folks understand crypto better than us—very professional. Firms like BlackRock, Franklin Templeton, OCBC Bank, and BNY Mellon have not yet launched products, but now almost all major financial institutions are involved, issuing or about to issue RWA assets.

Second, regulatory progress has also been substantial. After Trump took office, he personally pushed some bills and rules. I often review new SEC guidance and instructions—you can see regulators actively teaching how to issue RWA, clarifying frameworks and boundaries. These developments have accelerated rapidly in the past two years, and in the next one or two years, some countries will directly open certain restrictions on RWA for retail.

From a traditional finance perspective, it’s large-scale institutional entry, product deployment, and new regulation rollout. But on the crypto side, it was chaos at first. The market saw strange RWA issuers like wine, Hainan Huanghuali, and others scamming money, plus various Ponzi schemes claiming RWA to hold conferences and harvest investors.

Those who can truly implement RWA and survive are mostly teams with traditional finance backgrounds, like Securitize and some projects in the Chinese community. Very few purely crypto teams have succeeded. This shows the stark divide between the two fields. Many practitioners quietly push RWA forward but rarely promote themselves. That’s the current state of the track.

Maodi: Usually, in crypto or AI industries, products or demand appear first, then regulation catches up. Why does the RWA track seem to wait for regulation before subsequent products emerge? The situation appears reversed.

Bo Pan: RWA isn’t waiting for regulation to fully land before advancing; rather, regulation has provided a clear direction for imminent implementation, so everyone starts acting. In 2023, before Trump took office and before the CLARITY Act made breakthroughs, institutions already entered because they knew this was the future. Trump’s rise was a catalyst, accelerating this process. Once regulators made their stance clear, institutions began large-scale participation.

Why is regulation so important? Because RWA differs from the crypto track. Crypto is a hype-driven track issuing tokens to pump prices for profit, while RWA involves bringing traditional assets on-chain to upgrade the entire financial system. This process doesn’t create new assets but re-implements existing financial assets with new infrastructure. The logic has changed—on-chain assets are hard to hype, and since they are real assets, compliance is critical.

First, assets are held by financial institutions. To bring them on-chain, rights confirmation is needed. Without legal backing, what are users buying? Can anyone just issue and run away? That’s unreasonable, and risk controls won’t pass. Second, investor protection is essential. Buying tokens is speculative, but buying assets aims for annual returns, not to pump the price. Legal and regulatory compliance are crucial here.

Value redefinition: Combining RWA with DeFi will replace traditional financial intermediaries and reduce costs while increasing efficiency

Maodi: For blockchain users, does RWA really matter? For those wanting stable, modest-yield assets, they are usually high-net-worth individuals who can already buy through traditional channels. Why bother with on-chain methods? Is there really an audience for such stable-yield distribution channels in crypto?

Bo Pan: If you pursue high yields on-chain, that’s another story. But for global investors and ordinary people, the first point is lowering the barrier to access, achieving global financial inclusion.

USD stablecoins are actually the most successful RWA—they expand the distribution of USD worldwide, allowing regions without financial services to hold on-chain digital dollars. For them, local banks may be absent, but with a wallet, they can hold digital USD and access assets previously unreachable. With digital USD, they can buy quality US assets.

Second, for high-net-worth professional investors who can already buy assets through traditional channels, why buy on-chain? The core is that on-chain can do things traditional finance can’t. For example, DeFi collateralized lending—some assets have almost no such use case in traditional finance. Take gold: in traditional finance, it’s hard to directly use gold as collateral; banks and brokerages rarely offer such services due to custody, appraisal, and logistics complexities, and the absence of a central clearinghouse. Only private banking clients with over 50 million USD can usually access this.

Traditional fund lending is similarly complicated. Usually, only high-quality funds can be borrowed, with lengthy processes of one or two weeks, and share transfers require registration with Transfer Agency, with unfavorable interest rates. On-chain, anyone who owns the asset can directly borrow from DeFi pools, saving intermediaries, gaining instant liquidity, and enjoying better rates.

This allows professional investors to leverage on-chain infrastructure for higher yields or to experience DeFi innovations like PT and YT, which traditional finance doesn’t offer. So, RWA creates a channel for global access to quality assets and enhances yields through on-chain facilities. That’s the real significance of RWA for most people—not just hype or making money from assets, which is a common misconception.

Maodi: Do RWA assets require legal ownership verification via KYC? Otherwise, they might violate SEC or CFTC regulations and can’t be integrated with DeFi; but if they do meet KYC, isn’t that returning to traditional finance’s old path? Is this a paradox?

Bo Pan: I see it more as an ideological issue. If you are a crypto purist advocating absolute decentralization and no regulation, you might see it that way. But pragmatically, decentralization doesn’t mean eliminating all intermediaries and centralized mechanisms—that’s unrealistic. The distinction is: God’s domain belongs to God, Caesar’s to Caesar. Decentralization and centralization each solve different problems.

DeFi removes middlemen and legal enforcement in traditional finance, automating processes via code. But DeFi isn’t fully decentralized; many smart contracts still retain owner privileges, and some projects have rug-pulled. True decentralization relies on distributed nodes and code-based rule consensus—what the code states is what executes, ensuring determinism.

RWA’s centralization addresses trust issues. These assets are issued by traditional finance; without institutional endorsement and legal frameworks, RWA assets are no different from meme coins. Only when institutions directly put them on-chain and legal protections are in place do investors dare to buy. Combining both, it’s like building traditional finance on blockchain infrastructure.

When RWA assets use DeFi services on-chain, they bypass traditional intermediaries, achieving higher efficiency and lower costs. That’s the core understanding of RWA, not a paradox from a purely decentralization perspective.

RWA essentially returns the layered fees and profits of traditional finance to users. For traditional institutions, doing this is a form of self-revolution—they have no choice but to do so, or they’ll be eliminated. So, they must proactively enter to seize the narrative. That’s the main motivation I see for their involvement.

Risk control: RWA product categories, yield expectations, and DeFi portfolio strategies

Maodi: Repeated collateralization on-chain might amplify systemic risks. How should the risk management of RWA track be viewed in the future?

Bo Pan: I previously worked on related innovations in central bank pilot projects, using ERC-3525 standards to tokenize CDOs. The 2008 financial crisis was caused by nested mortgage derivatives, where the underlying assets were unknown, and after widespread sale, the underlying assets defaulted, triggering chain reactions.

Blockchain can address this well because transparency is its key feature. If you put products fully on-chain as MBS and CDOs, you can see the underlying assets. In traditional finance, you can’t; on-chain, you can.

If those 2008 products had been issued on blockchain, the crisis might have been avoided. The critical part is the off-chain component. If the product is packaged off-chain and then tokenized on-chain, the underlying details are hidden. But if the entire process is on-chain, you can trace all sources. So, the real solution is improving off-chain transparency.

Maodi: What are the main RWA products now? Are there other products related to ordinary users?

Bo Pan: From the asset side, it’s mainly these: standardized USD, US Treasuries, money market funds, fixed income funds, private credit, and gold. Many non-standard assets still face unresolved issues. The US stock market is an interesting category; many tokenized US stocks are not real stocks but derivatives pegged to stock prices, not classified as securities.

Recently, the SEC issued guidelines for tokenized assets, establishing rules for the US stock tokenization track. The SEC assesses the nature of the underlying; if it’s stock, it’s regulated as a security; if it’s a derivative, it follows derivative rules.

Previously, many US stock tokens had no clear regulatory framework. Now, with new rules and major exchanges like NYSE and NASDAQ involved, their stock tokenization bases are genuine stocks. This shows that RWA issuance is truly an institutional game.

Maodi: What exactly does your team do in RWA projects? Can you explain in plain language?

Bo Pan: Briefly, Unified Labs acts as a Risk Curator, which can be understood as an on-chain fund manager. We handle on-chain financial services, and on Morpho, we are qualified to do two things.

First, after RWA assets are onboarded, we can create lending pools for these assets, allowing them to be collateralized and loaned, creating demand.

Second, we build a Vault similar to an on-chain Yu’e Bao—non-custodial, flexible deposit and withdrawal. Users can deposit stablecoins anytime to earn stable annual yields, sourced from lending stablecoins to RWA holders.

In simple terms, we enable assets to be borrowed against and users to earn yields. The entire process is realized through Morpho architecture; we do not hold or misuse user assets.

Maodi: What’s the typical annual yield for reliable RWA products?

Bo Pan: It depends on the underlying assets. Currently, there are roughly three yield ranges. The safest, like USD money funds, US Treasuries, low-risk fixed income, are around 3-5%.

Next, about 8-9%, with underlying assets like secure supply chain receivables or cross-border bridge loans.

Higher, around 12-13%, private credit, such as Southeast Asian credit loans or SME private loans, with redemption periods about a month.

Yield alone indicates risk level; to judge reliability, you need to look at the issuer and asset composition. For example, private credit should be checked for the industries they lend to.

Recently, BlackRock faced liquidity issues in private credit because AI-driven software companies saw cash flow decline sharply, affecting the entire portfolio. Users should evaluate issuer backgrounds and asset components to assess reliability.

Maodi: Where can ordinary users buy these RWA yield products?

Bo Pan: Usually through distribution channels like centralized exchanges. Many retail investors don’t buy RWA directly but prefer packaged stable-yield tokens, which is a peculiar phenomenon. Alternatively, they can buy directly from official websites, but KYC is generally required.

Maodi: If KYC is not possible or not done, can they only buy on-chain via DEX?

Bo Pan: Usually not.

Maodi: Is that because it doesn’t meet regulatory requirements?

Bo Pan: Yes, since KYC is required, transfers need whitelists, so liquidity on DEX is limited. Currently, some projects package RWA as stable-yield tokens to attract retail.

Maodi: Is retail interest driven by limited participation channels, only able to access this way?

Bo Pan: Partly, and also because crypto-native users really like these products. Historically, the industry has been familiar with stable-yield tokens for yield farming and DeFi activities.

Regulatory framework: US CLARITY Act will be a key node for RWA explosion around 2027

Maodi: If the assets backing an RWA product encounter issues, how can asset holders protect their rights? Do they have to wait for regulators to intervene or go through lengthy legal proceedings to recover assets?

Bo Pan: You’ve pointed out a key pain point. Currently, many RWA assets issued on-chain represent not the assets themselves but the SPV’s claim rights. An SPV (Special Purpose Vehicle) is a legal entity established for specific purposes, often in Cayman or BVI.

It’s like setting up an SPV in BVI to hold the underlying assets, then tokenizing the SPV’s shares. Investors buy these tokens, which are essentially claims. To redeem, legally, you request the SPV to return the assets it owns. SPVs usually have bankruptcy isolation protections. If the SPV goes bankrupt, theoretically, you can pursue legal action to recover.

But in reality, cross-border legal issues make this complicated. The underlying assets might be in the US or elsewhere, but the lawsuit is in BVI courts. You need to sue in BVI, which is costly and time-consuming—potentially years and hundreds of thousands of dollars.

Regulators can’t help much because you buy BVI rights, not assets issued under local jurisdictions like Hong Kong or the US. Local regulators can’t directly intervene. This is a pain point with no standard solution yet. The reason is that the actual regulatory framework is still being developed; currently, only intermediate measures are possible.

In the future, once legal frameworks are established, assets can be issued within local jurisdictions, directly representing the assets themselves, and local regulators will assist in rights protection.

For now, everyone bears risks and should choose reputable tokenization issuers (Wrappers). For example, Securitize is backed by BlackRock; DigiFT has obtained Singapore regulatory sandbox licenses. Large institutions with licenses are relatively reliable, while wild teams have very low credibility and are prone to scams.

Maodi: Are there key milestones or legal frameworks to watch? When will there be formal channels for rights protection?

Bo Pan: I strongly recommend focusing on the recent major breakthrough—the US CLARITY Act (Digital Asset Market Clarity Act). Once the US passes it, other countries will follow quickly. This bill clearly defines which regulator oversees securitized tokens and commodity tokens.

In the past, US regulatory boundaries were unclear; SEC and CFTC were vying for jurisdiction over Ethereum. Without resolving this, institutions hesitate to issue securities directly, fearing regulatory crackdowns with government changes. Only federal legislation will provide a clear framework for RWA. Once the CLARITY Act passes, it will become a key node in global regulatory acceleration.

Currently, the bill addresses disputes between banking and crypto sectors, mainly whether stablecoins can generate yields. The compromise is that holding stablecoins alone doesn’t entitle yields; only participating in actual activities does.

The legislation is expected to be enacted in the coming months, with full implementation around 2027. I’ve also observed other countries: Singapore MAS has detailed RWA issuance guidelines, and Japan is expected to have substantive legislation by 2027, opening the stablecoin and RWA markets. So, from 2027 to 2030, the RWA market will explode exponentially.

Maodi: Do institutions have specific preferences for blockchain platforms when issuing RWA assets?

Bo Pan: Mainstream assets are mostly issued on Ethereum or Solana, with some on Arbitrum, Avalanche, and Monad. Chains with strong institutional ties tend to have more RWA issuance—e.g., Avalanche has direct projects with large Japanese firms; many Wall Street institutions issue RWA on Monad because of its strong institutional background. The choice still depends on the chain’s core attributes.

Track outlook: RWA has high entry barriers; US CLARITY Act will determine the next four to five years’ direction

Maodi: Any advice or angles for ordinary users wanting to participate in RWA?

Bo Pan: RWA is fundamentally an on-chain upgrade of traditional finance. For ordinary people, besides investing, entrepreneurship is also an option. The real opportunity lies in solving the derivative needs and pain points generated after assets are onboarded. Providing services during the on-chain financial transformation of institutions is one of the few opportunities for ordinary entrepreneurs now. But purely issuing tokens has limited space.

Maodi: But such entrepreneurship requires specific qualifications or experience, right? The entry barrier is high?

Bo Pan: RWA entrepreneurship generally requires teams with a hybrid background in traditional finance and Web3. Founders need to bridge both worlds or solve pain points from a technical perspective. The industry’s entrepreneurial threshold is rising; the era of raising millions with just a PPT is over, and early-stage funding is cold. Many sectors like Perp DEX and prediction markets are highly competitive, with many projects proven false. RWA is one of the few remaining sectors with potential.

Maodi: Although hype is high, RWA is still early-stage. The best advice for ordinary users is to observe cautiously and wait for regulation to land before investing?

Bo Pan: Policy uncertainties remain high. Will the US CLARITY Act finally pass? If not, with government changes, current policies could be overturned. While the stablecoin bill has been enacted, future administrations could easily halt RWA development.

Maodi: Pessimistically, if the bill doesn’t pass, the track might not develop for a few years, and it will take a long time to find a way forward?

Bo Pan: Exactly. In the US legal system, SEC’s plans, rules, and even presidential executive orders are not permanent; they can be overturned by future governments. Only laws enacted at the federal level are stable. Whether the CLARITY Act passes will directly influence the next four to five years of RWA’s development—this is crucial.