The Wave of Real-World Asset Tokenization: A Complete Guide to RWA Issuance

RWA (Real World Assets) is evolving from a niche topic into a focal point of finance and industry. The concept itself is not new, but driven by new regulatory frameworks and technological advancements, it has finally entered mainstream view. Simply put, RWA involves converting tangible assets—such as real estate, art, bonds, stocks—into digital tokens on the blockchain, enabling easier trading and circulation of these assets.

Why Has RWA Suddenly Become an Industry Focus?

In August 2024, the Hong Kong Monetary Authority launched a sandbox program called “Ensemble,” which is seen as a milestone for RWA development. This sandbox is dedicated to researching and testing tokenization applications related to real-world assets, covering areas like fixed income, investment funds, green finance, and supply chain financing. This move sends a strong signal to the market: regulators not only recognize the value of RWA but are actively embracing this new sector.

From a technical perspective, the feasibility of RWA hinges on three key features of blockchain technology. First, blockchain can record every transaction, ensuring clear, authentic, and traceable asset ownership. Second, smart contracts can automatically execute transaction terms, significantly reducing costs and risks. Third, distributed ledger systems inherently support global transactions, breaking down geographical barriers. These features combined turn assets that were previously difficult to circulate into efficient, tradable digital assets.

A $15 Billion Market Has Already Formed

Data speaks volumes. By the end of 2024, the total value locked (TVL) in the global RWA market reached $15 billion, a more than tenfold increase from $1.22 billion at the start of the year. This growth is not just numerical; it indicates that institutional investors and professional funds are entering this market in large numbers.

The industry generally categorizes the RWA market into six segments based on asset types: stablecoins, private credit, government bonds (especially U.S. Treasuries), commodities, real estate, and equity securities. Among these, stablecoins are the largest in scale, but private credit and government bonds are the fastest-growing sectors.

Market research forecasts are even more optimistic. A report by Boston Consulting Group (BCG) in October 2024 called RWA tokenization “the third revolution in asset management.” They project that within the next seven years, tokenized funds could manage assets amounting to 1% of global mutual funds and ETFs, meaning by 2030, this market could surpass $600 billion in assets under management. Additionally, research from State Street Global Advisors suggests that bonds, due to their maturity and complexity, are most likely to adopt tokenization on a large scale first.

It is expected that in 2025, this market will continue to grow strongly, potentially surpassing $50 billion. As regulated stablecoins, tokenized deposits, and CBDC projects are implemented across regions, the entire ecosystem infrastructure will improve, attracting more participants.

What Can RWA Actually Solve?

For the financial system, RWA offers benefits in three main areas.

First, significant expansion of asset types. Traditional financial markets mainly deal with standardized products like stocks, bonds, and futures. RWA breaks these limitations, bringing assets like real estate, art, intellectual property, gaming rights, and carbon trading quotas onto the blockchain. For example, a office building can be divided into thousands of tokens, allowing small investors to participate in high-value assets. A famous painting can be co-owned by multiple parties, with liquidity rising from near zero to tradable at any time. This diversification enriches investor choices and opens new financing channels for asset owners.

Second, acceleration of financial product innovation. With RWA, financial institutions can design products previously impossible. For instance, accounts receivable can be quickly securitized, providing SMEs with early cash flow; data rights can be tokenized to fund tech startups; REITs can be efficiently traded on-chain. These innovations create opportunities for investors and generate new revenue streams for financial institutions, such as asset valuation, risk management, and advisory services.

Third, improved market efficiency. Blockchain technology can significantly enhance the speed and reduce the costs of asset registration, trading, settlement, and clearing. Transactions that once took days can now be settled in minutes. Intermediary steps involving multiple large institutions are replaced by smart contracts, lowering fees. Transparency is also increased, as every transaction is recorded immutably.

For the real economy, RWA also plays a vital role.

Diversified financing channels. SMEs and emerging industries often face funding difficulties. RWA allows them to convert assets like fixed assets, IP, and receivables into tradable tokens, opening new financing avenues. A tech company with valuable patents can securitize them to raise R&D funds; a supplier with stable receivables can tokenize these to get early cash, easing liquidity pressure.

Full digitalization of assets. RWA promotes comprehensive digitalization of asset creation, management, and trading, improving efficiency and reducing risks. Real estate and art, traditionally traded offline, can be quickly queried, accurately appraised, and easily traded on-chain. Supply chain assets like receivables and inventories can also be digitized, boosting the entire supply chain finance system.

Enhanced economic resilience. Traditional financial markets tend to have high asset concentration, increasing systemic risk. RWA’s diversification allows investors to allocate assets more flexibly, reducing exposure to single investments. When risks are spread across different investors and asset types, the overall resilience of the economy improves.

The Triangular Relationship of RWA, Digitalization, and the Metaverse

These three concepts may seem independent but actually form a closed loop.

From a digitalization perspective, RWA acts as a bridge. It anchors physical or traditional financial assets (real estate, art, commodities) and, through AI, smart contracts, and other digital technologies, gives these assets new life in the digital world. Digitalization provides efficient trading and management methods for RWA, enabling global circulation and expanding markets.

From a blockchain perspective, it is the underlying technology foundation of RWA. Blockchain tokenizes asset rights, transforming physical or financial assets into digital tokens. This process not only changes the form of assets but also introduces new rights expression methods. The decentralized and distributed nature ensures authenticity and traceability, while smart contracts enable automatic execution, greatly reducing costs and risks. These features make RWA highly efficient to circulate and attract broader investor participation.

From a metaverse perspective, RWA connects virtual and real-world economies. The metaverse is essentially a virtual digital universe that interacts with the physical world. In the metaverse, brands can buy virtual land (a form of RWA) to build brand experience stores; virtual goods can interact with real-world collectibles. This fusion of virtual and real creates new economic activities and blurs the boundaries between the physical and virtual economies. For example, a virtual outfit might generate real licensing revenue, or a virtual land parcel could be jointly developed by real companies.

What Does Hong Kong’s RWA Regulatory Framework Look Like?

As an Asian financial hub, Hong Kong’s approach to RWA regulation is highly representative. The HKMA began efforts early in 2024, establishing a relatively comprehensive regulatory framework.

Core principles include:

First, clear definition of RWA and tokenized products. In February 2024, HKMA issued standards that explicitly define the scope of regulated tokenized products, excluding those already covered by the Securities and Futures Ordinance (SFO), and clarifying that stablecoins are not included (as they have separate regulation).

Second, the “existing rules apply” principle. This means that rules and protections for traditional financial products are equally applicable to tokenized products if their features and risks are comparable. This ensures consistent investor protection and avoids regulatory overlap.

Third, strengthened due diligence. Licensed entities must conduct comprehensive investigations into the nature, features, and risks of the products before sale, and assess the qualifications, track record, and risk levels of issuers and third-party service providers. This acts as a strict “entry review.”

Fourth, disclosure and risk management. Firms must fully disclose key product terms, features, and risks—including technical risks, hacking threats, and legal ownership uncertainties. They must also establish comprehensive risk management frameworks, including policies, internal controls, complaint handling, compliance, audit, and business continuity plans.

Fifth, sandbox testing. Through the Ensemble project, HKMA provides a relatively relaxed environment for qualified institutions to test RWA businesses, providing real data to refine policies.

Sixth, linkage with stablecoins and RWA. HKMA emphasizes stablecoin regulation, as most RWA transactions are expected to use compliant HKD stablecoins. Effective regulation of stablecoins is crucial for a healthy RWA ecosystem.

Who Is Qualified to Issue RWA in Hong Kong?

Based on institution types, the main categories include:

Licensed financial institutions. Banks, securities firms, and asset managers leverage their capital strength, risk management, and broad client base to issue RWA. For example, banks can tokenize high-quality corporate loan portfolios; securities firms with Type 1 license can underwrite RWA offerings; asset managers with Type 9 license can bundle and tokenize various assets into funds.

Licensed virtual asset trading platforms. Approved platforms in Hong Kong serve as infrastructure for RWA issuance and trading. They verify asset legality and compliance, ensuring transparent and fair trading environments.

Fintech companies. Those with advanced blockchain technology and innovation capabilities can support RWA issuance, including building blockchain platforms, developing smart contracts, and digitizing assets. For example, Ant Group’s Hong Kong-issued RWA of new energy physical assets is a successful case.

How to Issue RWA from Mainland China Assets in Hong Kong: Conditions and Procedures

Pre-issuance Conditions

Asset compliance. Assets must meet both mainland and Hong Kong legal requirements. Certain industries like arts, finance, and energy may need special approvals. Environmental assets must comply with relevant regulations.

Clear ownership. Asset owners must demonstrate legal, undisputed ownership. Real estate requires full title deeds; receivables need clear contractual and transaction records.

Valuation expertise. Valuations must be performed by qualified, experienced appraisers using scientific methods, with detailed reports explaining value components and basis.

Reliable technical support. Tokenization must rely on secure, transparent, and tamper-proof blockchain technology, capable of recording ownership and transactions accurately and safely.

Risk control compliance. Must adhere to foreign exchange controls, AML, and anti-terrorism financing regulations. Customer identification, transaction monitoring, and compliance systems are essential.

Specific Issuance Process

1. Select suitable assets. Based on their financial status and needs, enterprises choose assets with stable cash flows and compliance, such as real estate, receivables, or equipment.

2. Develop issuance plan. Collaborate with Hong Kong financial institutions, lawyers, and auditors to prepare detailed plans covering asset info, tokenization method, approval procedures, issuance scale, price, and use of funds.

3. Assessment and audit. Engage qualified valuation and audit firms to verify asset value and compliance, forming the basis for issuance.

4. Build technical platform. Choose or partner with blockchain providers to develop a secure, scalable tokenization platform.

5. Obtain regulatory approval. Comply with mainland legal procedures; submit RWA issuance applications to HKMA and relevant authorities, including plans, valuation, audit, and technical documents.

6. Issue and trade. After approval, tokenize assets and list on Hong Kong trading platforms. Investors buy tokens, with ownership and income rights recorded on-chain.

7. Ongoing management. Post-issuance, manage assets, investor relations, disclosures, and periodically assess asset value and risks to protect investor interests.

Legal and Compliance Key Points for RWA Issuance

Full Asset Legality Check

Assets must be legally compliant in mainland China. For example, corporate assets should follow the Company Law and Securities Law; real estate must meet Land and Property regulations.

Ownership must be clear and undisputed. Before issuance, verify ownership rights, mortgages, pledges, and other rights, providing legal documentation. Rectify issues if necessary. This process directly impacts the legality and investor protection of RWA.

Cross-Border Legal Complexities

Understanding Hong Kong regulations. Hong Kong has strict virtual asset regulations. RWA issuance must comply with HKMA and SFC requirements, including disclosure, investor protection, AML.

Handling legal conflicts. Differences between mainland and Hong Kong law may require satisfying both jurisdictions. Conduct comprehensive legal assessments and consider cross-border legal solutions.

Adherence to international standards. If involving international investors or cross-border transactions, comply with global standards like AML, sanctions, and anti-terrorism laws.

Contracts and Agreements

Contracts with asset owners, platforms, and investors should specify rights, obligations, asset details, issuance terms, and profit sharing. They must conform to both mainland and Hong Kong laws, including formalities, signatures, and dispute resolution.

For intellectual property (patents, trademarks, copyrights), registration in Hong Kong may be necessary to avoid infringement and protect rights. Contracts should specify licensing scope, usage, and duration. Similar principles apply to data products.

Tax Compliance in Both Jurisdictions

Mainland China. Asset transfer or income distribution may trigger corporate or individual taxes. Clarify tax obligations with authorities beforehand.

Hong Kong. RWA issuance may incur profits tax, stamp duty, etc. For example, income from RWA may be taxable under Hong Kong profits tax; platform services may attract applicable fees.

Double Taxation Agreements. Use HK-China tax treaties to optimize tax structures, avoid double taxation through transfer pricing, structuring, and incentives.

Work with legal and tax professionals to develop compliant tax strategies, ensuring proper reporting and payment.

Summary

RWA signifies a revolution in asset management and trading. Financial institutions, enterprises, and investors all stand to benefit from this transformation. However, successful RWA issuance is not merely a technical challenge; it involves complex legal, tax, compliance, and governance considerations. Cross-border RWA issuance requires meticulous design within both mainland and Hong Kong legal frameworks. Only by fully understanding market dynamics, regulatory requirements, and legal constraints can participants navigate this new track steadily and sustainably.