Cool reflections amidst the current market RWA craze.

Source: Seven Bottles of Bots that Don't Get Carried Away

Reading guide:RWA's core business logic is asset tokenization,That is, on the basis of asset securitization, go one step further,Use the technical form of the token as a carrier to carry various rights and interests and risks of the connotation of the underlying asset,Its significance lies in giving full play to the technical advantages of the underlying architecture of the blockchain,It has inherent advantages in cost and efficiency in reducing the threshold for investor participation、Improve the turnover efficiency of financial products and improve the level of automated execution,But RWAThe requirements for the degree of data in business scenarios are relatively high,Application landing The constraint of "to go on the chain, go online first". What are the specific factors that can accelerate RWA from applause to applause? What are the specific paths that can guide the effective investment of market resources? In the current market, what factors can RWA rely on to gain its own living space? Here, based on the in-depth recognition of the development trend of RWA, we make some cold thinking about the RWA boom in the current market, in order to play the role of removing the false and retaining the true and eliminating interference, so that the industry can focus on finding the development path of RWA more efficiently.

For example, on April 3, the Financial Services Committee of the U.S. House of Representatives voted to pass the "Stablecoin Transparency and Accountability for a Better Ledger Economy" (referred to as the STABLE Act), and clarified the reserve and capital requirements and anti-money laundering standards required for the issuance of stablecoins; On the other hand, many financial institutions and industry leaders have announced the launch of tokenization-related products, such as:

• Ondo Finance in the U.S. tokenizes U.S. short-term Treasury Bills (T-Bills), allowing investors to hold and earn Treasury yields (approximately 4-5% annualized);
• Huaxia Fund ( Hong Kong ) launched the "Huaxia Hong Kong Dollar Digital Currency Fund", becoming the first tokenized fund for retail investors in the Asia-Pacific region;
• Standard Chartered Bank and the Hong Kong Monetary Authority (HKMA) utilize the blockchain platform eTrade Connect to tokenize trade documents such as letters of credit (LC) and bills of lading, allowing small and medium-sized enterprises to quickly obtain financing;
• Wisdom Group launched a private equity fund token (VPF Token) based on Ethereum, with investment targets including Hong Kong technology startups and Southeast Asian infrastructure projects. Investors can redeem fund shares through the token or transfer them in the over-the-counter (OTC) market;
• BlackRock in the US has partnered with Securitize to launch a blockchain-based real estate investment fund, allowing investors to hold a share of commercial real estate (such as office buildings in New York and San Francisco) through tokens (such as SEC-compliant Reg D securities);
• Australia’s Maple Finance tokenizes loans for small and medium-sized enterprises, allowing investors to earn fixed income (8-12% annualized) through MPL tokens;
• The Swiss Toucan Protocol tokenizes traditional carbon credits (such as Verra certified carbon offset projects);
• Shell Oil in the UK pilots energy company trading oil futures contracts through blockchain.
• Sotheby's auction house tokenizes high-end artworks through NFT + RWA, allowing investors to purchase partial ownership.

The above events not only support RWA becoming the focus of the industry but also attract numerous asset parties to turn their attention to RWA in hopes of obtaining financing through this innovative format, including many small and medium-sized enterprises and individual operators who wish to secure financing based on physical assets. The main difference between physical assets and financial assets is that holding the asset does not yield a certain cash flow. However, the market's reaction is very realistic; so far, the RWA issuances that have emerged globally are all based on relevant cases of financial assets (including categories like gold and crude oil that have both financial and commodity attributes), and there have yet to be successful issuances based on physical assets. Even RWA projects based on financial assets are often led by top institutions in traditional finance or industry leaders, "When the swallows fly around the halls of Wang and Xie, when will they fly into the homes of ordinary people?" remains unknown. With the technological advantages of RWA, how can it influence financial product innovation? What specific factors can accelerate or hinder the transition from popularity to market success? What specific paths can guide the effective allocation of market resources and achieve a commercial closed loop? This article aims to conduct some calm reflections on the hot topic of RWA in hopes of supporting its large-scale application.

1. Can everything be RWA?

RWA is directly translated as real-world assets, but its core business logic is asset tokenization, which means taking a step further on the basis of asset securitization by using token technology as a carrier to represent various rights and risks associated with the underlying assets. The Hong Kong Securities and Futures Commission defines tokenization as the process of recording asset rights previously recorded in traditional ledgers onto a programmable platform using DLT.

The role and significance of asset tokenization lies in the fact that it can give full play to the technical advantages of the underlying architecture of the blockchain, and lower the threshold for investor participation (mainly reflected in the participation of global investors, self-service account opening and 7*24 all-weather trading convenience) compared with the existing financial infrastructure (financial electronic and Internet), Improving turnover efficiency (mainly reflected in the settlement without the participation of intermediaries) and improving the level of automated execution (reducing the participation of third-party institutions to reduce operational risks and operating costs) have inherent advantages from the perspective of cost and efficiency, but their disadvantages are also very obvious, mainly reflected in the fact that asset tokenization has relatively high requirements for the dataization of business scenarios, and is constrained by the constraints of "to be on the chain, go online first", for example, in the financial industry, all factors that can affect the risk and return of assets are required to be digitized. In addition, it can provide full-dimensional and real-time continuous data for the risk-return assessment of financial assets as support, so as to achieve complete asset tokenization.

This requirement is obviously too high, but it is determined by the technical characteristics of the blockchain, and it is also a reality that we must recognize. To put it in layman's terms, the blockchain is just a database with its own reconciliation mechanism, which is deaf and blind to the outside world, and can only receive external data input, but cannot actively obtain data. What if you want to take the initiative to get your data? Then IoT devices must be needed as a source of data collection. How to ensure that the data collected by IoT devices can be 100% authentic on the chain? One approach is technology, if the entire business process is fully automated and does not require human involvement, then the data is of course credible; Another way to do this is to endorse your credit through oversight by a trusted third party. The first method obviously depends on the intelligence of the business scenario, and at this stage, the second method, that is, first relying on a "mix and match" scheme to achieve data trustworthiness, and then establishing a business model such as RWA based on trusted data is an effective "expedient measure". Therefore, the margin of RWA business lies in the acquisition of trusted data, and in the current state, it is obvious that not everything can be RWA.

Further, since the essence of RWA is asset tokenization, its core logic is embodied in financial logic, and the basic principle of matching risk and return emphasized by financial business should play a fundamental role in the design of RWA products, and this principle is also the core criterion for selecting RWA priority landing scenarios in the current market. We know that the main risk-return characteristics of the underlying asset are a comprehensive reflection of the changes of various factors in the business scenario, and will not change in any way because of whether its carrier is a token or not. In industry practice, Ant Financial announced that it will give priority to the issuance of RWA in the new energy track, because the new energy industry chain, whether it is distributed generation or charging piles, but also includes wind power generation and energy storage, is generally based on intelligent systems to carry out operations, with the characteristics of synchronous cash flow and information flow, and the issuance of RWA based on new energy basic assets will greatly reduce the information asymmetry faced by investors, which in turn can provide investors with an investment opportunity with clear returns and transparent risks. If charging piles are also charged manually like traditional parking lots, then the RWA of such assets will be meaningless.

This model of risk control through real-time data clearly surpasses the scope covered by traditional financial institutions, which are adept at methods like asset collateralization. Therefore, from the perspective of manageable risk, Ant Financial is willing to recommend assets categorized as "digital investment banks" to its clients. Otherwise, why would Ant Financial provide a different tokenized packaging for assets that traditional financial institutions cannot achieve risk control objectives with their conventional risk control methods?

For the same reasons, the existing technical conditions cannot enable the on-chain of the main data required for the valuation of physical asset value, and cannot provide reliable data to support risk control. Overall, there is no effective path for the RWA of physical assets.

Of course, following the standard of "synchronizing data flow and cash flow," not only can the new energy industry be a priority scenario for the implementation of RWA, but also cars with autonomous driving functions, whether for financing leasing or shared mobility, can be ideal underlying assets for RWA. As the digitalization level of various industries increases, issuing RWA based on these industry scenarios will give the market greater imaginative space.

2. Are all traditional financial products worth reconstructing with RWA?

Based on the core logic of RWA, it is mainly reflected in the premise of financial logic, especially after the financial industry has experienced electronicization and Internet, financial assets naturally exist in the form of data, and the degree of digitization of the financial industry chain has been greatly improved. Apparently not. According to the above analysis, in the case that the risk control capabilities of financial institutions cannot be significantly improved by providing more credible data, the benefits of "going on the chain" outweigh the losses and are meaningless, and a more realistic path for the tokenization of financial assets is the "mix and match scheme", that is, the asset securitization is completed based on the professional capabilities of the financial institution, and then the securitized assets are anchored to specific tokens, so as to obtain the advantages of "going on the chain" on the capital side and part of the operation side of financial assets. In the following, we use the tokenization of REITs as an example to illustrate the basic characteristics of this model.

FTJLabs has proposed the world's first RWA project REITs based on a compliant framework that bridges traditional financial assets and on-chain liquidity. This project focuses on globally listed Reits assets, constructing Reits investment portfolios through fund issuance, and issuing REITs Tokens based on fund shares as the underlying asset. Each REITs Token corresponds to a specific share of a fund product. Investors can obtain REITs Tokens through investments in the corresponding Reits assets, fiat currency, or stablecoins, and can trade them anywhere and at any time globally. Additionally, different investment portfolios with varying yield characteristics can be constructed based on these tokenized assets.

On the chain, the project develops REITs Protocle, supports the automatic execution of REITs Token distribution, trading, dividends and other functions, and extracts data for blockchain public information through the On-Chain Data Analysis module to serve investors. Off-chain, the project selects licensed institutions to undertake the on-chain custody function of assets, and issues real-time fund net value data to provide reference for REITs Token secondary market transactions, and regularly issues asset custody reports to ensure that on-chain assets and custodial assets are equivalent.

Based on the above features, tokenization grants global liquidity to REITs assets, making value discovery easier, while also providing a unique investment target with distinct risk-return characteristics for a broader range of investors. Investment portfolios that previously required cross-exchange operations can now be achieved with just one token.

In this product, two designs can better reflect the characteristics of the product design. First, the asset custody institution plays a fundamental supporting role in the value realization of REITs Token. The asset custody institution discloses the net value of the custodial assets through regular reports based on its own entity credit, ensuring that the value of the REITs Token is equivalently anchored to the custodial assets. Second, this project only takes the REITs listed on the exchange as the underlying assets. The asset custody institution can provide reference prices for the REITs Token based on the price information provided by the exchange. If the underlying assets of this project also include private placement REITs products, the asset custody institution will not be able to provide reference quotes for the REITs Token, thus failing to ensure the asset transparency of the REITs Token and further impacting its liquidity.

3. RWA, a wealth opportunity for the masses?

Under the current circumstances, the "Mainland assets + Hong Kong funds" model is relatively ideal for conducting RWA business. However, the Hong Kong Securities and Futures Commission (SFC) maintains a cautious attitude towards asset tokenization, having made clear regulations on the identification of qualified investors and fundraising methods to avoid excessive risk taking by investors.

In 2019, the SFC issued the Statement on Security Token Offerings, imposing a restriction on the distribution and promotion of security tokens "to professional investors (personal financial assets ≥ HK$8 million or licensed institutions)". In November 2023, the SFC issued two more circulars, the Circular on Intermediaries Engaging in Tokenised Securities-related Activities and the Circular on Tokenised SFC-Authorised Investment Products, which no longer treat tokenised securities as "complex products" and no longer limit their offering and marketing to professional investors. However, the SFC retains a provision in the 2019 Statement that intermediaries intending to engage in activities related to tokenised securities should discuss their business plans with the SFC in advance. Tokenized securities are not directly available to all investors.

In December 2023, Harvest Global Investment and Meta Lab HK collaborated to tokenize their fixed income fund products, mainly targeting professional investors. On September 10, 2023, Taiji Capital launched Hong Kong's first real estate fund security token (PRINCE Token) aimed at "professional investors". This token is the first fund tokenization fundraising product approved by the Hong Kong Securities and Futures Commission, with a fundraising target of approximately 100 million, and a minimum investment standard of 1,000 HKD, which is significantly lower than the 1 million USD generally required to invest in private real estate funds. However, according to relevant regulations from the Hong Kong Securities and Futures Commission, licensed digital asset exchanges in Hong Kong cannot accept registrations from mainland users, and mainland China has explicitly prohibited related institutions (for mainland residents) from providing virtual asset trading services. Even though Hong Kong allows licensed institutions to offer virtual asset trading services to retail investors, mainland users cannot directly participate.

In addition, the RWA products that have been successfully issued at this stage often have the characteristics of fixed income or profit-sharing rights, and the relatively fixed expected yield is more suitable for large-scale institutions for asset allocation. Therefore, at this stage, there is still a significant gap between RWA and the wealth opportunities envisioned by retail investors.

4. RWA, the ideal channel for SMEs to obtain financing?

If RWA cannot provide the imagined returns for retail investors on the funding side, can it provide an ideal channel for financing for a wide range of small and medium-sized enterprises on the asset side?

As everyone knows, the cost of financing is a core factor affecting the choice of financing channels for enterprises. According to market news, the issuance cost of RWA in Hong Kong generally includes two parts: issuance fees and capital costs. Among them, capital costs are mainly determined by the risk-return characteristics of the assets and the capital market environment at the time of issuance (currently, market forecasts generally range from an annualized 6-10%); while issuance fees include due diligence costs, product design and development costs, cross-border funding channels, and subsequent management costs, with the total issuance fees amounting to several million. Based on the issuance costs, the lower limit of the RWA underlying assets can be inferred. Obviously, issuing RWA with an asset scale of less than 100 million is not economical. In addition to capital costs, there are also time costs. This article takes the issuance of tokenized REITs as an example, outlining the asset selection criteria, main issuance processes, and time cycles as shown in Table 1:

To sum up, in the current market environment, RWA issuance has a high threshold in terms of financing cost and financing time, and is not an ideal channel for most SMEs to obtain financing. For large enterprises whose financial indicators have reached or are close to being listed on the Hong Kong Stock Exchange, the three digital asset exchanges, which are currently the main channels for RWA issuance in the Hong Kong market (as of May 2025, a total of 10 institutions have been authorized by the Hong Kong Securities and Futures Commission to engage in digital asset trading-related business, but there are only 3 platforms that have been launched and can provide trading to the outside world). Enterprises with large capital needs prefer to give priority to listing and issuance on the Hong Kong Stock Exchange, and only enterprises whose financial indicators cannot meet the issuance standards of the Hong Kong Stock Exchange are more willing to spend higher costs to choose digital asset trading platforms for RWA issuance. This is also the main reason why it is difficult to implement RWA in the Hong Kong market.

5. Finance or Internet? The Survival Path of RWA in the Current Market!

Judging from the definition of tokenized securities by the Hong Kong Securities and Futures Commission and the general consensus of the market, RWA based on financial assets does not change its financial attributes, but only materializes the original risk and return characteristics of the underlying assets with tokens as a new technical carrier. With tokens as a new carrier, financial products have unprecedented advantages in terms of transaction convenience, transaction efficiency and process transparency, if you go back hundreds of years, in 1397, the Florentine Medici family was the first in Europe to use bills of exchange to create cross-border exchange business; In 1602, when the Amsterdam Stock Exchange launched the world's first stock, the Dutch East India Company; Or, in 1844, when the Bank of England monopolized the power to issue notes in Britain and took its first steps towards global central banks, they should have chosen the distributed ledger as the underlying architecture for these groundbreaking financial instruments, given the obvious advantages of cost and efficiency.

But this is just a romantic assumption; time cannot flow backward. After hundreds of years of accumulation, the financial industry has profoundly bound itself to the global economic system in terms of product forms, service breadth, and depth. It is unlikely that RWA, which starts with the tokenization of securities, will completely reconstruct all traditional financial products; just as the internet permeated traditional society, RWA is more likely to find its own opportunities by starting from the areas that offer the best cost-effectiveness and showcase technological advantages.

Although artificial intelligence has already defeated humans in specialized fields such as chess and Go, it is unlikely to replace humans in providing personalized financial services to all investors. The advantage of the internet is first reflected in its ability to serve a large number of long-tail users. Therefore, while traditional financial institutions have occupied a major market share based on their service experience with top clients, RWA, which is fundamentally based on financial attributes as its business logic, has to rely on the properties of the internet to find its own space for survival.

In the short term, RWA needs to meet the minimum requirements for traffic accumulation initiated by the market. Verifying specific product forms in various scenarios is a beneficial attempt, especially by selecting tracks with good participation from C-end users that align with current industry development trends, such as opportunities in gaming and entertainment; In the medium to long term, when new energy power supply from solar and wind can seamlessly connect with traditional power grids through intelligent systems and automatically provide charging services; when taxis equipped with autonomous driving functions have significantly lower overall usage costs compared to purchasing a family car; when AI-supported Agents can replace humans in executing more tasks, and computing power, models, and data become the main production factors, humans will no longer need to directly participate in production, the role of RWA will be irreplaceable. As an innovative financial service model, RWA will inevitably grow into a mainstream form of financial services alongside the development of the intelligent economy, which shares the same genes and is closely integrated. A good example of this is the rise of the US dollar, which replaced the British pound as the "global hard currency" following World War II due to the rise of America's comprehensive national strength.

Final Thoughts

The current RWA is still in the proof-of-concept stage, but we all recognize that the trend represents the future. Here, we engage in some rational thinking regarding the RWA craze, not to deny RWA and its innovative exploration; on the contrary, it is precisely based on our deep acknowledgment of its development trend that we are willing to discern the truth from the false, eliminate distractions, and focus on finding a more efficient development path for it. As the saying reflected in Gartner's new technology adoption curve goes, people often overestimate the short-term effects of a new technology while underestimating its long-term effects. Following the idea of validating product prototypes, perhaps we can find a more suitable living space for RWA in the present!