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

Introduction: The core business logic of RWA is asset tokenization, which takes a step further from asset securitization by using token technology as a carrier to bear various rights and risks inherent in the underlying assets. Its significance lies in fully leveraging the technical advantages of blockchain's underlying architecture, which has inherent cost and efficiency advantages in lowering the participation threshold for investors, improving the turnover efficiency of financial products, and enhancing the level of automated execution. However, RWA has relatively high requirements for the level of dataization in business scenarios, and its application landing is constrained by the principle of "going on-chain requires going online first." What specific factors can accelerate the transition of RWA from popularity to practicality? What specific paths can guide the effective allocation of market resources? In the current market, what factors can RWA rely on to secure its survival space? Here, based on a deep recognition of the development trends of RWA, we conduct some rational reflections on the current RWA craze in the market, aiming to clarify the essential aspects and eliminate distractions, so that the industry can concentrate its efforts more efficiently in finding the development path of RWA.

Since the beginning of this year, RWA has continued to be a highly focused hot topic globally. On one hand, the United States and the European Union have continuously introduced relevant policies to respond to and regulate the innovative business models emerging in areas such as asset tokenization and stablecoins. For example, on April 3, the U.S. House Committee on Financial Services voted to pass the "Stablecoin Transparency and Accountability Framework for a Better Ledger Economy" (referred to as the STABLE Act), which clarifies the reserve and capital requirements needed for stablecoin issuance and anti-money laundering standards. On the other hand, many financial institutions and industry-leading companies have announced the launch of tokenization-related products, such as:

• Ondo Finance in the United States tokenizes U.S. Treasury Bills (T-Bills), allowing investors to hold and earn returns on the bonds (annualized around 4-5%);
• 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.
• Huili Group launched a private equity fund token based on Ethereum (VPF Token), 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 U.S. 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 SME loans, allowing investors to earn fixed returns (8-12% annualized) through MPL tokens;
• The Swiss Toucan Protocol tokenizes traditional carbon credits (such as Verra certified carbon offset projects);
• Shell Oil Company in the UK pilots trading oil futures contracts through blockchain;
• Sotheby's auction house tokenizes high-end artworks through NFT + RWA, allowing investors to purchase fractional ownership.

The above events not only support RWA's emergence as an industry focus but also attract many asset holders to turn their attention to RWA in hopes of obtaining financing through this innovative format, including a large number of small and medium-sized enterprises and individual entrepreneurs who wish to obtain financing based on physical assets. The main difference between physical assets and financial assets is that holding a physical asset does not yield a certain cash flow. However, the market's response is very realistic; so far, the issuance of RWAs globally has been based on related cases of financial assets (including categories like gold and crude oil that have both financial and commodity attributes), and there have been no successful issuance cases based on physical assets. Even RWA projects based on financial assets are often led by top traditional financial institutions or industry leaders, "When the swallows fly in front of Wang Xie's hall, when will they fly into the homes of ordinary people?" remains unknown. With the advantage of technology, how can RWA influence innovation in financial products? What specific factors can accelerate or hinder the transition from being popular to being profitable? What specific pathways can guide effective market resource investment and achieve a commercial closed loop? This article aims to provide some calm reflection on the hot topic of RWA in order to support the large-scale application and implementation of RWA.

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 based on asset securitization, using the technical form of tokens as a carrier to hold various rights and risks represented by the underlying assets. The Hong Kong Securities and Futures Commission defines tokenization as the process of recording asset rights recorded in traditional ledgers onto a programmable platform using DLT.

The role and significance of asset tokenization lie in fully leveraging the technological advantages of the underlying blockchain architecture. Compared to existing financial infrastructure (financial electronicization and internetization), it has inherent advantages in cost and efficiency in lowering the participation threshold for investors (mainly reflected in global investor participation, self-service account opening, and 24/7 trading convenience), improving turnover efficiency (mainly reflected in the elimination of intermediaries and settlement upon clearing), and enhancing the level of automated execution (reducing the participation of third-party institutions lowers operational risks and costs). However, its disadvantages are also very apparent, primarily reflected in the high degree of data digitization required for business scenarios in asset tokenization, constrained by the principle of 'going on-chain requires first going online.' For example, in the financial industry, all factors that can affect the risk and return of assets must be digitized, and there must be full-dimensional and real-time continuous data available to support the risk-return assessment of financial assets to achieve complete asset tokenization.

This requirement is clearly too high, but it is determined by the technical characteristics of blockchain, which is a reality we must recognize. To put it in simpler terms, blockchain is just a database with a built-in reconciliation mechanism, deaf and blind to the outside world, only capable of receiving external data input and unable to actively retrieve data. How can we actively obtain data? We definitely need IoT devices as the source for collecting data. How can we ensure that the data collected by IoT devices can be 100% authentic on-chain? One method is through technical means; if the entire business process is fully automated, with no human involvement, then the data is certainly trustworthy. Another method is through supervision by trusted third-party institutions as a credit endorsement. The first method clearly depends on the level of intelligence of the business scenario, while currently, the second method, relying on a "hybrid solution" to achieve data trustworthiness, and then establishing business models like RWA based on trusted data, is an effective "stopgap measure." Therefore, the marginality of RWA business lies in the acquisition of trustworthy data. Under the current circumstances, it is clear that not everything can be RWA.

Furthermore, since the essence of RWA is asset tokenization, its core logic is reflected in financial logic. The fundamental principle of matching risk and return emphasized in financial operations must play a foundational role in the design of RWA products. This principle is also the core standard for selecting priority landing scenarios for RWA in the current market. We know that the main risk-return characteristics of the underlying assets are a comprehensive reflection of various factors in the business scenario and will not change regardless of whether their carrier is a token. Therefore, the ability to provide sufficient credible data to help eliminate information asymmetry for investors becomes an effective method for selecting priority landing scenarios for RWA. In industry practice, Ant Financial announced a focus on the issuance of RWA in the new energy sector. This is because the new energy industry chain, whether it is distributed generation or charging piles, and certainly includes wind power generation and energy storage, generally operates based on intelligent systems, with the characteristics of synchronized cash flow and information flow. Issuing RWA based on new energy underlying assets will greatly reduce the information asymmetry faced by investors, thereby providing investors with a clear return and transparent risk investment opportunity. If charging piles were to charge fees manually like traditional parking lots, then the RWA of such assets would be meaningless.

This model of risk control through real-time data clearly surpasses the scope covered by traditional financial institutions that excel in methods such as asset collateralization. Therefore, from the perspective of controllable risk, Ant Financial is willing to recommend assets of the type "digital investment bank" to its clients. Otherwise, if traditional financial institutions are unable to achieve risk control objectives based on traditional risk control methods, what reason would Ant Financial have to recommend a different token packaging to its clients?

For the same reasons, the existing technological conditions cannot put the main data required for the valuation of physical assets on the chain, nor can they provide reliable data to support risk control. Overall, there is no effective path for the RWA of physical assets.

Of course, filtering according to the standard of "synchronizing data flow and cash flow" is not limited to the new energy industry as a priority scenario for RWA implementation. For example, cars equipped with autonomous driving capabilities, whether in financing leasing or shared mobility, can also serve as ideal underlying assets for RWA. As the digitalization level of various industries increases, issuing RWA based on these industry scenarios will provide greater imaginative space for its market.

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

The core logic based on RWA mainly reflects the premise of financial logic, especially after the financial industry has undergone digitization and internetization, financial assets naturally exist in the form of data, and the degree of datafication in the financial supply chain has greatly improved. Compared to physical assets, financial assets are more likely to achieve the goals of reducing participation thresholds, improving turnover efficiency, and enhancing automation levels through tokenization. So, is it worth reconstructing all financial products using RWA? Clearly not. According to the previous analysis, when it is not possible to significantly enhance the risk control capabilities of financial institutions by providing more credible data, "on-chain" is both a loss and meaningless. A more realistic path for tokenizing financial assets is the "mix-and-match solution," which means first completing asset securitization based on the professional capabilities of financial institutions, and then anchoring the securitized assets with specific tokens, gaining the advantages of being "on-chain" at the funding end and part of the operational end of financial assets. In the following text, we will use the tokenization of REITs as an example to illustrate the basic characteristics of this model.

FTJLabs has globally proposed the RWA project REITs based on a compliance framework that connects traditional financial assets and on-chain liquidity for the first time. This project focuses on globally listed Reits assets, constructing Reits investment portfolios through fund issuance, and issuing REITs Tokens based on fund shares as underlying assets; each REITs Token corresponds to a specific share of a fund product. Investors can obtain REITs Tokens by investing in the corresponding Reits assets, fiat currencies, or stablecoins, and can trade them anywhere and at any time globally, as well as build investment portfolios with different yield characteristics based on these tokenized assets.

On-chain, the project develops the REITs Protocol, which supports the automatic execution of functions such as distribution, trading, and dividends of REITs Tokens, and provides data services for investors through the On-Chain Data Analysis module that extracts data from publicly available blockchain information. Off-chain, the project selects licensed institutions to undertake the asset custody function for on-chain assets and provides real-time net asset value data to serve as a reference for the secondary market trading of REITs Tokens, while also regularly issuing asset custody reports to ensure that on-chain assets and custodial assets are equivalent.

Based on the above functions, tokenization provides global liquidity to Reits assets, making it easier for value discovery, while also offering a unique investment target with risk-return characteristics to 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 of REITs Token. The asset custody institution discloses the net value of the custody assets through periodic reports based on its own subject credit, ensuring that the value of REITs Token is equivalently anchored to the custody assets. Second, this project only uses publicly listed Reits on exchanges as the underlying asset. 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 the project also include private placement Reits products, the asset custody institution will be unable 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 public to participate?

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 stance on asset tokenization, having established clear regulations regarding the identification of qualified investors and the forms of fundraising to prevent investors from taking on excessive risks.

In 2019, the Hong Kong Securities and Futures Commission (SFC) issued a statement on the issuance of security tokens, imposing restrictions on the distribution and promotion of security tokens to "professional investors only (individual financial assets ≥ HKD 8 million or licensed institutions)." In November 2023, the SFC issued two circulars, namely the "Circular on Intermediaries Engaging in Activities Related to Tokenized Securities" and the "Circular on Tokenized Investment Products Recognized by the SFC," stating that tokenized securities would no longer be regarded as "complex products," nor would their sale and marketing be limited to professional investors; however, the SFC retains one provision from the "2019 Statement," which requires intermediaries intending to engage in activities related to tokenized securities to discuss their business plans with the SFC in advance. Tokenized securities cannot be publicly issued directly to all investors.

In December 2023, Harvest Global Investments collaborated with Meta Lab HK to tokenize its fixed income fund products, primarily 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 HKD 100 million and a minimum investment standard of HKD 1,000, significantly lower than the USD 1 million typically required for investing in private real estate funds. However, according to regulations from the Hong Kong Securities and Futures Commission, licensed digital asset exchanges in Hong Kong cannot accept registrations from mainland users, and similar institutions within mainland China are explicitly prohibited from providing virtual asset trading services to mainland residents. 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 fixed income or revenue-sharing attributes. The relatively fixed expected return 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 the general public investors.

IV. 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 large number of SMEs on the asset side?

Everyone knows that 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, the capital cost is mainly determined by the asset risk-return characteristics and the capital market environment at the time of issuance (currently, the market prediction is generally an annualized rate of 6-10%); while the 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, one can deduce the lower limit of the underlying assets for RWA; clearly, issuing RWA with an asset scale below 100 million is uneconomical. In addition to the capital cost, there is also a time cost. This article takes the issuance of tokenized REITs as an example, outlining the asset selection criteria, main issuance process, and time cycle as shown in Table 1:

In summary, under the current market environment, the issuance of RWA has high thresholds in terms of financing costs and financing time, making it not an ideal channel for most small and medium-sized enterprises to obtain financing. For large enterprises whose financial indicators meet or are close to the listing standards of the Hong Kong Stock Exchange, the three digital asset exchanges (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 businesses, but only 3 have launched and can provide trading platforms to the outside world) that are currently the main channels for RWA issuance in the Hong Kong market have certain advantages in terms of issuance costs, but they clearly have significant disadvantages in terms of capital costs and fundraising efficiency. For assets with relatively stable returns and large capital needs, they would prefer to choose to issue through the Hong Kong Stock Exchange, while only those 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 RWA implementation is relatively difficult in the current Hong Kong market.

5. Finance or Internet? The Survival Strategy of the RWA Market Today!

Whether from the Hong Kong Securities and Futures Commission's definition of tokenized securities or the general consensus in the market, RWA based on financial assets has not changed its financial attributes, but rather has materialized the original risk and return characteristics of the underlying assets with tokens as a new technological carrier. Using tokens as a new carrier, financial products demonstrate unprecedented advantages in trading convenience, trading efficiency, and process transparency. If we could turn back time several hundred years, to 1397, when the Medici family in Florence was the first in Europe to use bills of exchange to establish cross-border remittance operations; or in 1602, when the Amsterdam Stock Exchange launched the world's first stock, the Dutch East India Company stock; or in 1844, when the Bank of England monopolized the issuance of banknotes in the UK, taking the first step towards becoming a global central bank, if they could make a choice again, they would likely choose distributed ledger technology as the underlying architecture for these pioneering financial instruments, as the advantages in cost and efficiency are evident.

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

Although artificial intelligence has already defeated humans in specialized fields like chess and Go, it is unlikely to replace humans in providing personalized financial services to all investors. The advantages of the internet are primarily reflected in serving a large number of long-tail users. Therefore, while traditional financial institutions have occupied a major market share based on their service experience with head clients, RWA, whose basic business logic is based on financial attributes, has to leverage the characteristics of the internet to find its own space for survival.

In the short term, RWA needs to meet the minimum requirements for traffic accumulation driven by market initiation. It is beneficial to verify specific product forms in various scenarios, especially by selecting opportunities in tracks such as gaming and entertainment, where C-end user participation is relatively good and aligns with current industry development trends. In the medium to long term, when renewable energy sources like solar and wind power can seamlessly connect with traditional power grids through intelligent systems and automatically provide charging services; when taxis with autonomous driving capabilities have significantly lower overall usage costs than family-owned cars; and when AI-supported agents can replace humans in executing more tasks, with computing power, models, and data becoming the main production factors, and humans no longer needing to directly participate in production, the role of RWA will become irreplaceable. As an innovative financial service model, RWA will irreversibly 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 how the US dollar replaced the British pound as the "global hard currency" following World War II, thanks to the rise of American comprehensive national power.

Writing at the End

The current RWA is still in the proof-of-concept stage, but we all recognize that trends represent the future. Here, we engage in some cold reflection on the RWA craze, not to deny RWA and its innovative explorations, but precisely because we deeply recognize its development trend, we are willing to discern the true from the false, eliminate distractions, and focus on finding a more efficient development path for it. It’s still that old saying reflected in Gaitner's new technology application curve: for a new technology, people often overestimate its short-term effects while underestimating its long-term effects. Following the idea of validating product prototypes, it may be more suitable to find a living space for RWA at present!