Web3 Lawyer Interpretation: What Key Points Must Enterprises Pay Attention to When Planning RWA?

At the beginning of 2025, two “explosive” news pieces have already been released in the Hong Kong region. First, Huaxia Bank has launched the first retail tokenization fund in the Asia-Pacific region, which has landed in Hong Kong (you can check the crypto salad “The First Retail Tokenization Fund in the Asia-Pacific Has Landed in Hong Kong! Web3 Lawyers Explain the On-Chain Innovation of Fund Tokenization and the Future of RWA” for more details); second, the Financial Secretary of Hong Kong has announced that a second “Hong Kong Virtual Asset Development Policy Declaration” will be released soon, which aims to further innovate on how traditional assets can better integrate with virtual assets.

These two pieces of good news represent the implementation of RWA project compliance in the eyes of many. At the same time, combined with the news that the first RWA project in the agricultural field in the mainland - “Malu Grape” was successfully released on the Shanghai Digital Asset Exchange and successfully raised 10 million yuan, RWA tokenization seems to have completed the transformation from “concept” to “landing” at once. Therefore, whether it is the asset side, the intermediary service side or the primary investor side, the relevant work has been in full swing recently, and there are a large number of discussions and project inquiries almost every day.

Encryption salad has received a large number of project landing demands during this period, involving a wide range of underlying assets, including bonds, gold, rare metals, non-performing assets, agricultural products, property rents, bulk commodities, digital copyrights, fan economy…

As the discussions about various projects deepen, each project team ultimately returns to the starting point, continually asking themselves:

• Is my project suitable for RWA?
• If my project is not suitable for RWA, then what kind of project is suitable?
• What requirements does RWA have for underlying assets, and can all types of real assets be used?
• What type of token did I send? Is it a scam coin?
• If it is not a worthless coin, do people in the crypto space have the motivation to “speculate” on assets and ownership that are physically anchored (with relatively fixed value)?

…

Today, the encryption salad attempts to analyze these issues by combining our practical experience.

Let’s start with a conclusion:

The path exploration for RWA that can generate the maximum value and is most suitable for us must be the combination of mainland assets + data compliance for outbound + raising overseas funds, achieving controllable assets, trustworthy data, and fundraising capability.

1. How to understand RWA?

First, we need to clarify the definition of RWA. RWA stands for Real-World Assets Tokenization, which means packaging and storing the intrinsic value, operation, income, and other data of various assets from the real world on the blockchain, forming digital tokens (i.e., digital tokens), and then issuing financing to trade on-chain with investors.

Many enterprises are attracted to the “delicious cake” of RWA financing. So, let’s first talk about the characteristics of RWA in financing?

As the process of RWA “tokenization” is similar to the process of asset “securitization”, and also includes the ICO( initial public offering), which is similar to the IPO( initial public offering), we might as well compare them.

1. Focusing on underlying assets

The biggest difference between the two is that: RWA is centered around underlying assets, rather than being backed by nothing but air. We can refer to this type of Token as Asset-Backed Token (ABT).

Since the underlying assets are at the core, it means that its financing behavior is not based on the主体信用, but relies on the assessment of the value of the underlying assets. Therefore, whether a company is profitable in the long term is not the most critical factor for RWA; as long as a certain batch of assets owned by the company has value and potential, that batch of assets can be packaged on-chain and used for financing. This step undoubtedly brings more imagination and possibilities to the enterprise.

Which assets are suitable for RWA?

From the perspective of asset on-chain effects, the RWA project is tailored for high-value, high-quality projects that need to improve liquidity and lower investment thresholds. Some project types that are relatively easy to accept and understand include:

• Stablecoins: Issued with support from fiat currencies or cash equivalents, such as the earliest digital dollars USDT and USDC, can be considered the most successful RWA projects in the market.
• Bonds and Stocks: Tokenization of traditional financial assets such as bonds and stocks to enhance liquidity and market access, such as USYC backed by U.S. Treasury bonds.
• Real Estate: Lowering the investment threshold for real estate through tokenization, such as RealT.
• Commodities: Such as carbon credit certificates and precious metals, physical assets like PAXG, which is pegged to gold.

2. Financing Speed

RWA leverages blockchain technologies such as smart contracts to fully digitize the financing process on-chain, resulting in the structuring and standardization of data, making it a standardized product. From asset evaluation, Token issuance to fundraising, combined with the characteristics of blockchain being open, transparent, and on-chain traceable, the speed of financing can indeed achieve significant improvement.

3. Asset Liquidity

RWA tokenizes, fragments, and internationalizes these real-world assets through blockchain technology. For example, a house worth 50 million is unaffordable for most people, but by dividing it into a million fragments, everyone can afford it. It’s like putting “wheels” on the assets of a business, allowing them to move quickly in the market. Better liquidity provides every investor with the possibility of quick exits, making it easier for them to have the willingness to invest.

Although a coin can represent a fraction of a house worth hundreds of thousands or even billions, this difference is influenced by the emotional fluctuations of the secondary market. However, there is a relatively stable benchmark, which is the house itself, that is, the value of the underlying asset.

2. Challenges Faced by Enterprises in RWA

Since the benefits of RWA are so enticing, why are there still so few examples of mainland enterprises achieving RWA? Cryptocurrency Salad has summarized the two major challenges that enterprises most commonly face from practice:

1. Compliance Challenges

RWA tokenization is naturally inseparable from “coin”, but the mainland of our country explicitly prohibits virtual currency financing trading platform from exchanging, buying, or selling virtual currencies or providing pricing services. This is why compliance has a very high priority in RWA projects.

Article 3 of the “Notice on Further Preventing and Dealing with the Risks of Speculation in Virtual Currency Transactions”:

Activities related to virtual currency are considered illegal financial activities. Engaging in the exchange of legal currency for virtual currency, the exchange between virtual currencies, trading virtual currencies as a central counterparty, providing information intermediary and pricing services for virtual currency transactions, token issuance financing, and trading of virtual currency derivatives are all activities related to virtual currency that may involve illegal issuance of token vouchers, unauthorized public issuance of securities, illegal operation of futures business, illegal fundraising, and other illegal financial activities, which are strictly prohibited and will be resolutely banned in accordance with the law. Those involved in related illegal financial activities that constitute a crime will be held criminally accountable in accordance with the law.

Therefore, mainland enterprises must plan a complete compliance path to achieve RWA.

Tokens cannot be issued within China, the underlying assets can be located domestically or abroad, and the entire project can be linked between domestic and foreign markets, or it can be solely abroad, to meet the compliance requirements for issuing coins.

For cross-border projects, the first step that cannot be avoided is asset financialization.

Since RWA projects must interact with the regulations of each jurisdiction, if a company does not link its products to standard products (stocks, bonds, shares), it will affect the company’s legal rights. In an environment where global digital regulation is inadequate, the legitimacy of RWA depends on its adaptation to traditional legal frameworks. If it is not linked to standard products, it will not be able to leverage existing legal infrastructure to reduce regulatory friction and ensure the effectiveness of legal rights. Therefore, only after the financialization of assets can corporate assets be tokenized through smart contracts.

2. How to attract investors’ interest?

After the Token is issued, how to create value so that everyone is willing to pay for it is a real pain point and one of the most common questions companies consult with encryption salad.

To deeply understand this issue, we might as well start by learning some knowledge about digital currency.

First of all, can you talk about the differences between mainstream coins (like BTC), altcoins, air coins, shitcoins, Pixiu coins, meme coins, and other cryptocurrencies that we are familiar with?

These coins have subtle differences in nature, but the main difference is still the underlying mechanism:

Mainstream coins, such as BTC, have a fundamental mechanism of PoW (Proof of Work) competing for computing power. After ETH transitioned its underlying mechanism to PoS (Proof of Stake), the cost of issuance has already decreased by participating in validation through staking Tokens. Entering the Web3 era, the technical threshold and issuance costs for launching Tokens have dropped another level, leading to the emergence of standardized protocols, such as Ethereum ERC-20, which allows for quick issuance via code templates. In the past 2024, it was a typical era where countless air coins were flying around, with a large number of coins deployed on Solana and Base chains.

It is clear that issuing tokens in the Web3 world is really not difficult.

So issuing tokens is not difficult, but is it hard to get listed?

Encryption salad tells you that it is actually not difficult; at least achieving on-chain circulation is not hard. For enterprises that want to complete the listing on exchanges (referred to as “listing”), it is best to get listed on a mainstream exchange, which can be a bit challenging. However, from our experience, a token with sufficient influence is likely to be actively listed by mainstream exchanges, and a relatively less influential coin can also be listed on mainstream exchanges if it passes the listing compliance review.

However, since the issuance of licenses for compliant virtual asset exchanges in Hong Kong, companies have focused their attention on these licensed compliant exchanges. How to seize the opportunity to list tokens on compliant exchanges has become the most concerning issue for enterprises.

Here it is necessary for us to carefully define a concept, what exactly does compliance refer to?

Encryption Salad believes that **: A compliant exchange refers to an exchange that has obtained a virtual asset trading license under the regulations of its registered location. There is also a potential category of “compliant exchanges”, which means that the regulatory policy of the registered location remains neutral towards virtual assets and does not suppress virtual asset-related businesses. From the understanding of “what is not prohibited by law is permitted”, such exchanges cannot be defined as illegal exchanges. Of course, under the promotion of governments around the world led by the United States, the global framework for encryption regulation is becoming clearer, and the definition of “compliance” by various countries will become increasingly precise in the future. **

At this point, we have addressed the technical issues of issuing tokens and resolved the problem of compliance with trading exchanges. Thus, the tokens in the RWA project have finally arrived in the secondary market, ready for circulation. This brings us back to the question at the beginning of this section: Who will invest in such tokens?

Investors willing to purchase RWA Token need to meet two prerequisites: motivation to purchase + be a (foreign) qualified investor

In the Web3 world, the value of a Token is determined by its working principles, such as the way the Token is generated, Token economics, and circulation factors, among others. Most buyers entering the Web3 market aim to chase after “thousand times coins” or “hundred times coins”; the recent Trump coin is a typical example, with a maximum increase of 800% in just a few months. Ultimately, it is just an air coin, lacking fundamentals and difficult to value, merely relying on the players’ emotional frenzy to artificially drive up the coin.

In comparison, in RWA, tokens are anchored to assets. The value of assets is relatively stable and cannot surge a thousandfold or tenfold. At this point, if someone is willing to pay for RWA tokens, it is likely because they see the inherent high value of the tokens. Achieving this can only rely on the underlying assets themselves. At this point, we will find that when tokens are linked to assets, it somewhat contradicts the popular token mechanisms in the current Web3 world. The appreciation potential of RWA tokens themselves is limited, and investors will only enter the market if they are interested in the assets themselves.

Secondly, under the premise of compliance in secondary circulation, exchanges generally have entry requirements for investors with the attitude of protecting them. For example, the tokenized fund released by Huaxia Bank is only available for purchase by investors in Hong Kong.

While being interested, it is also necessary to meet the conditions of (overseas) qualified investors, which greatly reduces the range of investors.

3. How should RWA projects be implemented? What preparations should enterprises make? What can encryption salad do for you?

1. Preliminary screening of viable RWA projects

In practice, we have found that many companies are only interested in RWA projects, believing that they have assets capable of realizing RWA, but they cannot actually articulate what the underlying asset planning is, and they are even not very clear about their own asset situation.

Using a somewhat inappropriate metaphor, encrypted salad is like a child going abroad to study; before the parents look for an agency, they should first fully understand their child’s situation, determine a preliminary study abroad location and budget, and then match it with the agency’s resources to discuss the probability of success.

Therefore, enterprises should first comprehensively understand their asset situation and finalize the underlying assets, which must be linked to the enterprise’s operations. This places higher demands on the professionals within the enterprise; the enterprise must have cross-domain talents who understand both enterprise operations and the highlights of the enterprise and its assets, as well as the workings of Web3. Before starting a project, enterprises must first recognize that RWA is a comprehensive project that spans across industries, finance, and digital realms, and talents that are ‘well-rounded’ are essential.

2. Technology and compliance take precedence, bringing dual risks to the forefront.

Once the initial screening is completed, the encryption salad team will collaborate with business leaders to deeply study the RWA program. This includes designing the token economic model, developing the technical architecture for issuing tokens, data collection methods for the project, cost and cycle assessment during the process, as well as compliance pathways, etc. Due to the different nature of enterprises and assets, the compliance requirements for the operation and circulation of goods vary across regions, countries, and legal regulations. We help enterprises to prioritize technology and compliance, placing dual risks upfront.

3. Project implementation and completion of primary market fundraising.

Once the plan is completed, the project moves into the execution phase. The core goal of the encryption salad team at this stage is to assist enterprise projects in execution and implementation. This specifically includes in-depth due diligence, writing white papers, developing and deploying smart contracts, as well as a complete set of legal documents, and connecting with resource parties for the entire process of the RWA project. Ultimately, the project party will achieve asset tokenization.

4. As planned, carry out secondary market circulation and subsequent operational management.

At this stage, it is necessary to make subtle adjustments in conjunction with the policies at that time, the needs of enterprises, and changes among investors, to assist enterprises in completing the circulation in the secondary market. Our overseas partners are quite familiar with various licensed exchanges and mainstream exchanges. Meanwhile, as a Web3 legal team with long-term experience in investment and financing services for Chinese-funded enterprises, we will customize investment and financing legal documents for enterprises, synchronize regulatory policy changes in real time, and provide dynamic compliance adjustment plans.

5. Community contact and promotion, providing continuous comprehensive consulting services for enterprises.

In general, at this stage, enterprises need support for community operation plan design and execution, including building brand communities, configuring community management tools, and localizing multilingual content; they need to connect with media and KOL resources and adjust communication strategies accordingly. Enterprises need to monitor and optimize operational processes, such as regularly reporting on on-chain asset rates and utilizing tokenization release and destruction mechanisms, as well as implementing market value management strategies.

4. About Us

1. What kind of team is the encryption salad?

The Encryption Salad team is affiliated with Beijing Yingke ( Shanghai ) Law Firm, co-founded by senior partner Lawyer Sha Jun and several outstanding lawyers from different fields.

The Encryption Salad team has rich practical experience in blockchain technology compliance, legal regulation of digital assets, cross-border investment and financing structure construction, and legal consulting in emerging technology fields, having provided professional legal services to over 300 Web3, AI, and financial industry enterprises and more than 500 practitioners.

Yingke Law Firm was established in 2002 and is headquartered in Beijing. It has 123 branches in mainland China and 1 joint law firm in the Guangdong-Hong Kong-Macao Greater Bay Area. Yingke’s global legal service network covers 196 cities in 103 countries and regions, and has provided satisfactory legal services to 1.5 million domestic and overseas enterprises.

Therefore, the encryption salad team is one of the few professional Web3 teams on the market with complete experience in RWA, capable of accurately grasping the pain points and needs of enterprises, and providing one-stop full-port, full-link services.

2. Our team composition

• Legal Compliance Expert: Ensure the asset tokenization process is legal and compliant, review the legal validity of smart contracts, and establish a framework for investor rights protection to avoid regulatory risks.
• Trader and Strategic Consultant: Develop market strategies and capital operation plans, optimize asset liquidity and manage risks, and promote efficient project implementation.
• Blockchain Technology Expert: Responsible for building and maintaining blockchain infrastructure, from underlying architecture design to smart contract development, ensuring the precise mapping of on-chain data to off-chain assets.
• Financial Sector Experts: Provide asset valuation, financing strategies, and risk management analysis, design structured financial solutions, enhance asset liquidity and investment returns.

What complete instance experience do we have with RWA?

• A certain Hong Kong bond company project

Provided a complete bond tokenization design for a bond company in Hong Kong, helping clients achieve seamless integration between the traditional bond market and blockchain technology.

By tokenizing bonds, clients can enhance the transparency, liquidity, and efficiency of transactions. We have also designed a system for the issuance and trading of bonds, ensuring compliance, market-oriented operations, and efficient settlement.

• A certain Korean fashion platform project

Designed a set of NFT-RWA trading system for a fashion platform in South Korea, focusing on integrating the trading of fashion products and the certification and traceability of collectibles into blockchain technology.

This solution provides verifiable proof of product ownership and digital asset support for fashion platforms, allowing consumers to purchase and trade fashion brand products with confidence, while enhancing market transparency for brands and user trust.

• A certain Malaysian refinery company project

Designed an RWA solution for the Malaysian oil company for oil products, combining the futures concept with the oil processing workflow, and promoting virtual assets.

This plan enables the company to convert oil product futures contracts into tradable assets in the form of tokenization, while automating the management of asset trading, price adjustments, and risk control through smart contracts, thereby improving asset liquidity and enhancing market transparency.

Special statement: This original article only represents the personal views of the author and does not constitute legal advice or opinions on specific matters. For reprints, please feel free to contact Encryption Salad.