A Cold Reflection on the Current Market RWA Boom

Source: Qipin’s Unpretentious Robot

Introduction: The core business logic of RWA is asset tokenization, which is a step forward from asset securitization. It uses tokens as a technological vehicle to carry various rights and risks associated with the underlying assets. Its significance lies in fully leveraging the technical advantages of blockchain infrastructure, such as reducing participation barriers for investors, increasing the turnover efficiency of financial products, and enhancing automation execution levels. However, RWA requires a high degree of datafication of business scenarios, and its application implementation is constrained by the principle of “going on-chain only after going live.” What specific factors can accelerate the transition of RWA from being praised to being popular? What pathways can effectively guide market resources into this field? Currently, what factors enable RWA to carve out its own space in the market? Here, we conduct some冷思考 (cold reflections) on the current RWA hot trend based on a deep recognition of its development trend, aiming to help sieve out falsehoods and eliminate distractions, so the industry can focus more efficiently on finding a development path for RWA.

Since this year, RWA has continued to be a highly关注的热点 (hot topic of concern) worldwide. On one hand, the US and EU continuously introduce policies to respond to and regulate innovative sectors like asset tokenization and stablecoins. For example, on April 3, the US House Financial Services Committee voted to pass the “STABLE Act,” which clarifies reserve and capital requirements for stablecoin issuance and anti-money laundering standards. On the other hand, many financial institutions and industry leaders have announced the launch of tokenization-related products, such as:

• Ondo Finance in the US tokenizes US short-term government bonds (T-Bills), allowing investors to hold and earn yields (about 4-5% annualized);
• Huaxia Fund(Hong Kong) launches the “Huaxia Hong Kong Dollar Digital Currency Fund,” becoming Asia-Pacific’s first tokenized fund targeting retail investors;
• Standard Chartered Bank and HKMA use the blockchain platform eTrade Connect to tokenize trade documents like LCs and bills of lading, enabling SMEs to quickly obtain financing;
• Woori Group launches Ethereum-based private equity fund tokens (VPF Token), investing in Hong Kong tech startups and Southeast Asian infrastructure projects, with investors able to redeem fund shares via tokens or transfer OTC;
• BlackRock in the US collaborates with Securitize to launch blockchain-based real estate investment funds, allowing investors to hold interests in commercial properties (e.g., NYC, San Francisco office buildings) via tokens (such as SEC-compliant Reg D securities);
• Maple Finance in Australia tokenizes SME loans, with investors earning fixed returns (8-12% annualized) via MPL tokens;
• Swiss Toucan Protocol tokenizes traditional carbon credits (e.g., Verra-certified carbon offset projects);
• Shell in the UK pilots energy companies trading oil futures contracts via blockchain;
• Sotheby’s auction house tokenizes high-end art pieces into NFT + RWA, allowing investors to purchase partial ownership.

These events not only support RWA becoming a focal point in the industry but also attract numerous asset owners to explore RWA as a means of financing, including many SMEs and individual entrepreneurs seeking funding based on physical assets. The main difference between physical assets and financial assets is that holding the former does not generate cash flow. However, the market response is very pragmatic: so far, RWA issuances globally are mostly based on financial assets (including commodities like gold, crude oil, which have financial and commodity attributes), and there are no successful cases of issuing based on physical assets. Even RWA projects based on financial assets are often led by top traditional financial institutions or industry leaders. The question remains: “When will the燕入寻常百姓家?” (when will it become commonplace among ordinary people?) — the answer is still unknown. With the technological advantages of RWA, how can it influence financial product innovation? What specific factors can accelerate or hinder its adoption? What pathways can effectively guide market resources into this field and close the business loop? This article aims to provide some冷静思考 (calm reflections) on this hot topic, hoping to support large-scale application and implementation of RWA.

1. Can everything become RWA?

RWA literally translates to “Real World Assets,” but its core business logic is asset tokenization, which is a step beyond asset securitization, employing tokens as a technological vehicle to represent various rights and risks of the underlying assets. The Hong Kong Securities and Futures Commission (SFC) defines tokenization as involving the process of recording asset rights on a programmable platform via Distributed Ledger Technology (DLT), which involves transferring traditional asset rights recorded in conventional ledgers onto such platforms.

The role and significance of asset tokenization lie in fully leveraging the technical advantages of blockchain infrastructure. Compared to existing financial infrastructure (digital finance and internet), it has inherent advantages such as lowering investment barriers (mainly reflected in global participation, self-service account opening, and 24/7 trading convenience), increasing turnover efficiency (mainly by eliminating intermediaries and settling instantly without clearing), and improving automation (reducing third-party involvement, operational risks, and costs). However, its disadvantages are also evident, primarily because asset tokenization demands a high level of datafication of the business scenario, constrained by the principle of “going on-chain only after going live.” For instance, in the financial industry, all factors affecting asset risk and return must be digitized, and real-time, comprehensive data must support risk and return assessments of financial assets to realize complete asset tokenization.

This requirement is obviously very high but is dictated by the technical nature of blockchain, which we must recognize. Put simply, blockchain is a database with built-in reconciliation mechanisms; it is “deaf and blind” externally, only capable of receiving external data inputs but unable to proactively fetch data. To proactively obtain data, IoT devices are needed as data sources. How to ensure that data collected by IoT devices can be 100% accurate and on-chain? One way is through technical means: if the entire business process is fully automated without human intervention, data can be trusted; another way is supervision by trusted third-party institutions providing a信用背书 (credit endorsement). The first method relies on the level of intelligence in the scenario, while the second, which combines trusted data sources, is an effective “临时权宜之计” (temporary expedient) for establishing trustworthy data for business models like RWA. Therefore, the marginal value of RWA business lies in obtaining trustworthy data. Given the current state, it is clear that not everything can be RWA.

Furthermore, since RWA’s essence is asset tokenization, its core logic reflects financial principles. The fundamental principle of risk and return matching in financial business should play a foundational role in RWA product design. This principle is also the core standard for prioritizing RWA implementation scenarios in the current market. We know that the primary risk-return characteristics of the underlying assets are an integrated reflection of various factors in the business scenario, and these do not change whether the carrier is a token or not. Therefore, whether enough trustworthy data can be provided to help eliminate information asymmetry among investors is an effective way to select priority scenarios for RWA. Industry practice shows that Ant Financial announced a focus on issuing RWA in the new energy sector because the industry chain—whether distributed power generation, charging stations, wind power, or energy storage—is generally operated based on intelligent systems with synchronized cash flow and information flow. Issuing RWA based on new energy assets greatly reduces information asymmetry, providing investors with transparent risk and clear returns. If charging stations, like traditional parking lots, relied on manual billing, then RWA for such assets would be meaningless.

This real-time data-driven risk control model clearly surpasses the scope of traditional financial institutions’ asset-mortgage-based risk management. From a risk controllability perspective, Ant Financial is willing to recommend these “digital investment banking” assets to clients; otherwise, traditional institutions relying on conventional risk control methods would have no reason to repackage assets into tokens and recommend them to clients.

Similarly, current technical conditions do not support on-chain valuation of physical assets’ main data, nor do they provide trustworthy data for risk control; overall, RWA based on physical assets has no effective pathway.

Certainly, if we use the “simultaneous data flow and cash flow” standard for selection, sectors like new energy are not the only priority. For example, autonomous vehicles—whether for leasing or shared mobility—can also serve as ideal base assets for RWA. As digitization in various industries advances, issuing RWA based on these scenarios will expand market imagination.

2. Should all traditional financial products be reconstructed with RWA?

Since RWA’s core logic primarily embodies financial principles, especially after the finance industry has undergone电子化 (digitization) and internetization, financial assets naturally exist in data form. The level of datafication in the financial industry chain has greatly increased. Compared to physical assets, financial assets are easier to tokenize for reducing participation barriers, increasing turnover, and automating processes. So, should all financial products be reconstructed with RWA? Clearly not. Based on previous analysis, if providing more trustworthy data cannot significantly improve financial institutions’ risk control, then “on-chain” is both not cost-effective and unnecessary. A more realistic path for financial asset tokenization is a “混搭方案” (hybrid approach): first, complete asset securitization through the expertise of financial institutions; then, anchor the securitized assets with specific tokens. This approach allows “on-chain” advantages at both the financing end and some operational aspects of financial assets. Next, we use REITs tokenization as an example to illustrate this model’s basic features.

FTJ Labs first proposed a compliant framework to connect traditional financial assets and on-chain liquidity through RWA projects like REITs. This project focuses on REITs listed on global exchanges, constructing a REIT investment portfolio via fund issuance, and issuing REITs tokens based on fund shares; each REITs token corresponds to a specific fund share; investors can buy REITs tokens by investing in the fund’s assets, fiat, or stablecoins, and trade them anywhere and anytime globally; these tokens can also serve as underlying assets for different yield-variant portfolios.

On-chain, the project develops REITs Protocol supporting automatic distribution, trading, dividends, etc., and uses On-Chain Data Analysis modules to extract data from blockchain public information for investor services. Off-chain, licensed institutions are entrusted with asset custody and provide real-time net asset value (NAV) data to support secondary market trading of REITs tokens, along with periodic custody reports to ensure on-chain assets match custody assets.

With these functions, tokenization grants REITs assets global liquidity, facilitating value discovery, and provides a unique risk-return investment target for a broader investor base. Previously, such portfolio operations required cross-exchange actions; now, they can be achieved with a single token.

Two design features stand out: First, asset custody institutions provide foundational support for REITs token value and anchor it to custody assets by regularly disclosing NAV based on their credit; second, the project only uses exchange-listed REITs as underlying assets. Asset custody institutions can refer to exchange prices for REITs tokens. If the project includes private REITs, the custodian cannot provide reference quotes, which impacts transparency and liquidity.

3. RWA—A Wealth Opportunity for the Public?

Currently, “Mainland assets + Hong Kong funds” is a relatively ideal model for RWA. However, HK SFC maintains a慎重态度 (cautious attitude) towards asset tokenization, with clear regulations on qualified investor recognition and fundraising methods to prevent excessive risk exposure among investors.

In 2019, HK SFC issued a “Statement on Security Token Offerings,” restricting distribution and promotion to “professional investors only” (personal financial assets ≥ HKD 8 million or licensed institutions). In Nov 2023, HK SFC issued two circulars—“Circular on Activities of Intermediaries Involved in Tokenized Securities” and “Circular on Recognized Investment Products for Tokenization”—removing the label of “complex products” from tokenized securities and no longer limiting their sale and marketing to professional investors; but it retains a regulation requiring intermediaries interested in tokenized securities activities to discuss their plans with SFC beforehand. Tokenized securities cannot be publicly issued to all investors directly.

In Dec 2023, Harvest International partnered with Meta Lab HK to tokenize its fixed-income funds, mainly targeting professional investors. On Sept 10, 2023, Taiji Capital launched Hong Kong’s first real estate fund security token (PRINCE Token), approved by HK SFC as the first fund tokenization project for fundraising, with a target of about HKD 100 million, minimum investment of HKD 1,000—much lower than the usual USD 1 million for private real estate funds. However, HK SFC regulations prohibit licensed Hong Kong exchanges from accepting Mainland Chinese users, and Mainland China explicitly bans institutions (serving Mainland residents) from virtual asset services. Even if Hong Kong licensed institutions offer virtual asset trading to retail investors, Mainland users cannot participate directly.

Moreover, successfully issued RWA products at this stage tend to have fixed income or income-sharing features, with relatively predictable yields suitable for large institutional allocations. Therefore, RWA is still far from being a wealth opportunity accessible to the general public.

4. RWA—An Ideal Financing Channel for SMEs?

If RWA cannot offer attractive returns on the funding side for the public, can it serve as an ideal channel for financing many SMEs on the asset side?

It’s well known that financing costs are a core factor influencing how enterprises choose financing channels. Market information suggests that the issuance costs of RWA in Hong Kong generally include issuance fees and capital costs. Capital costs depend mainly on the risk-return profile of the assets and current capital market conditions (predicted to be around 6-10% annualized). Issuance fees include due diligence, product design and development, cross-border fund channels, and ongoing management, totaling several million HKD. By analyzing issuance costs, we can estimate the lower limit of RWA underlying assets; obviously, issuing RWA for assets below HKD 100 million is uneconomical. Besides capital costs, there are also time costs. Using tokenized REITs issuance as an example, Table 1 shows asset screening criteria, main issuance processes, and timelines.

In summary, under current market conditions, RWA issuance faces high thresholds in both funding costs and time, making it an impractical channel for most SMEs. For large enterprises with financial indicators meeting or close to HKEX listing standards, the three main digital asset exchanges authorized by HK SFC (as of May 2025, 10 institutions authorized, but only 3 platforms available for trading) have some advantages in issuance costs but still suffer from clear disadvantages in capital costs and fundraising efficiency. Enterprises with relatively stable income and larger capital needs prefer to go public on HKEX. Only those whose financial metrics do not meet HKEX standards are willing to bear higher costs to issue via digital asset exchanges. This is a main reason why RWA landing in Hong Kong remains challenging.

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

Whether from HK SFC’s definition of tokenized securities or general market consensus, RWA based on financial assets has not changed its financial attribute; it simply materializes the original risks and returns of the underlying assets through tokens as a new technological carrier. Using tokens as the new medium, financial products exhibit unprecedented advantages in trading convenience, efficiency, and transparency. If we rewind centuries—when the Medici family in Florence first used bills of exchange in 1397 to initiate cross-border remittance; or in 1602 when the Amsterdam Stock Exchange launched the world’s first stock of the Dutch East India Company; or in 1844 when the Bank of England monopolized currency issuance, taking the first step for central banks globally—if asked to choose again, they would probably opt for distributed ledger technology as the underlying architecture of these pioneering financial instruments, given the clear cost and efficiency benefits.

But that’s a romantic hypothetical; time cannot be rewound. After hundreds of years of development, the financial industry has become deeply intertwined with the global economic system in terms of product forms, service breadth, and depth. It’s unlikely that RWA, starting from securities tokenization, will completely reconstruct all traditional financial products. Just like the internet’s penetration into society, starting from the most cost-effective and technologically advantageous sectors, RWA is more likely to find its own opportunities gradually.

Although AI has defeated humans in chess and Go, it’s unlikely to replace human providers of personalized financial services for all investors. The advantage of the internet is first reflected in serving large-scale long-tail users. Therefore, when traditional financial institutions dominate the market based on their experience serving top-tier clients, RWA—whose basic business logic is rooted in financial attributes—must leverage internet properties to find its own survival space.

In the short term, RWA must undergo market testing for minimum流量积累 (traffic accumulation). Validating specific product forms across various scenarios is a beneficial attempt, especially in sectors with good C-end user engagement and alignment with current industry trends, such as gaming and entertainment. In the medium to long term, when solar and wind energy supply can seamlessly connect with traditional grids and automatically provide charging services; when autonomous vehicles with self-driving features are significantly cheaper in total cost than personal cars; when AI agents can replace humans in executing more tasks, and computing power, models, and data become main production factors—at that point, RWA’s role will become irreplaceable. As an innovative financial service mode, RWA will grow into a mainstream form of financial services alongside the development of intelligent economy, sharing the same genetic traits. A good example is how after WWII, the US dollar replaced the British pound as the “global hard currency” due to America’s comprehensive national strength.

Final Words

Currently, RWA remains in the concept verification stage, but everyone agrees that trends point to the future. Our冷思考 on this hot trend does not deny RWA or its innovative exploration; quite the opposite. It is precisely because we deeply recognize its development trend that we are willing to sieve out falsehoods, eliminate distractions, and focus on finding more efficient development paths. As the old saying reflected in Gartner’s new technology adoption curve suggests, people tend to overestimate the short-term effects of new technology and underestimate its long-term impact. Using a prototype validation approach may better help RWA find a more suitable survival space at this stage!