Author: Liu Honglin
Recently, Lawyer Honglin and his friends were discussing Web3. Someone asked me if I was working on RWA recently. When I heard these three letters, I didn’t dare to answer immediately. I asked first: “What kind of RWA are you talking about?”
I don't mean to create suspense. There are too many people talking about "RWA" in the circle now, but everyone understands it differently. You say RWA is issuing tokens, he says it is creating concepts and doing PR, and some say it is pre-sale or crowdfunding of digital products. If you express your opinions without asking clearly, it is easy to offend people in the subsequent conversation, and the friendship will be overturned at any time, and the lawyer fees that you might have collected will be completely lost.
Today, let’s talk seriously about the RWA projects currently on the market that Lawyer Honglin knows about. There are three main ways of playing. Each one is under the banner of "real assets on the chain", but the underlying logic, legal risks and commercial purposes are completely different.
The first way to play: asset chain + financial compliance, is the "regular army" in the DeFi world
The core logic of this type of RWA can actually be summarized in one sentence: turning traditional financial assets into programmable on-chain tokens.
For example, you originally needed to open an account at a traditional financial institution and submit a bunch of KYC information to buy short-term treasury bonds. Now you can directly buy tokenized T-Bill notes through on-chain platforms such as Swarm, Ondo, Matrixdock, etc. Behind this asset are real treasury bonds, loans, notes or fund shares, which are held by custodians, and RWA tokens are issued through blockchain, which then allow users to use them in DeFi protocols, such as staking, lending or income aggregation.
This type of RWA is called "regular army" because the operations behind it must meet at least the following three conditions:
First, the underlying assets really exist and are legally managed by financial institutions off-chain;
Second, the token issuance process must be compliant and transparent, and usually needs to comply with financial regulatory requirements such as the US SEC, Singapore MAS, and EU MiCA;
Third, the entry threshold for investors is high, and not just anyone can buy it. It is often accompanied by a whitelist system or qualified investor restrictions.
The biggest challenge for this type of project is the high regulatory costs, complex operational procedures, and extremely high compliance requirements for the team. You can’t just issue it if you want to. But the benefits are also obvious: transparent use of funds, real assets, and controllable returns. It is suitable for prudent investors who want to participate in on-chain finance but don’t want to play all-in.
At present, institutions including Circle, Franklin Templeton, and Securitize are all planning in this direction. For those who want to move Web2 financial traffic to the chain, this is the most certain RWA path.
The second way to play: "Chain Reform 2.0" in the capital market, storytelling is more important than product development
The second type also looks quite “real”, but the underlying concept is not “assets” but “market value management”. This is a typical Hong Kong practice: listed companies use a series of “RWA press releases” to tell a story about blockchain empowering entities and attract market speculation on stock prices.
Many people must have seen similar routines: a Hong Kong-listed company whose main business is about to die suddenly announced its entry into Web3, released a bunch of news saying that it had signed a digital asset strategic cooperation agreement with a certain platform, and planned to "on-chain tokenize" the company's projects or assets, and will be globally configured through the RWA model in the future. When you check the white paper, you will find that it is full of wild and unrestrained nonsense, more than a dozen press releases have been issued, the pictures are beautifully taken, and the media releases are overwhelming.
Why do this? Because this type of operation usually does not serve the on-chain ecosystem, but builds momentum for the capital market. By telling the RWA story to increase valuations, secure shareholders, and obtain financing, the essence is "packaging traditional assets with blockchain and then using capital market arbitrage." Some companies did not even issue tokens, but just changed the color of the official website and launched a page, and then began to claim to be "a benchmark enterprise for Web3 transformation."
Strictly speaking, these RWA projects do not have real assets on the chain, nor do they have a design for the rights of token holders. For the project parties, their task is more to cooperate with the rhythm of capital operation to talk about a "digital" future, rather than to achieve digitalization itself. For ordinary investors, these projects basically do not participate in the circulation on the chain, and there are no tradable tokens. The result is likely to be: you think you are investing in Web3, but in fact you are buying a junk stock.
The third way to play: The mainland is limited to "Token + pre-sale" and has the highest legal risk
The last type of gameplay I want to talk about is very popular in the Greater Bay Area, especially in Shenzhen and Fujian. You can often hear such narratives in Web3 startup groups, technology and finance exchange groups, and investment promotion conferences:
Our project is an RWA project, which uses tokens to anchor actual commodities, such as red wine, white wine, green tea, property income rights, machinery and equipment leasing rights... When users buy tokens, it means they have locked in future income in advance.
It sounds like a combination of NFT+RWA, but in fact it is more of an old story of "crowdfunding + pre-sale" covered with blockchain. Common routines of such projects include:
- Without a compliant custody mechanism, the authenticity of assets depends on word of mouth;
- Tokens are directly connected to individual users, with no investment threshold;
- Promising high returns, often saying "double in half a year" or "tenfold after Token listing is not a dream";
- The project documents are rough, mostly PPT and PDF offline files, lacking on-chain data and code audits.
More importantly, most of these projects are essentially illegal absorption of public deposits or disguised fundraising. Even if the underlying assets are real, if the token is tradable, promises returns, and is sold to the general public, it touches the red line of illegal fundraising in mainland China's criminal law, not to mention that some project owners simply use RWA to defraud.
Judging from the law enforcement trends in recent years, public security organs, market supervision bureaus, and financial supervision bureaus have begun to pay close attention to projects under the banner of "blockchain", "digital goods", and "RWA innovation". So don't just look at people forwarding these projects in your circle of friends saying "this is RWA + new quality productivity", you will end up with illegal fundraising once you step in.
So which type of RWA are you talking about?
Looking at RWA at this point in time, the concept has become completely "multifaceted". Some people are doing real financial asset tokenization, some are doing capital market harvesting, and some are simply playing the game of passing the parcel.
The most ironic thing is that lawyer Honglin often meets these three groups of people in the same occasions. They even support each other and form teams for roadshows. As a result, the RWA circle looks lively, but in fact it is internally chaotic and cognitively fragmented.
All this is thanks to the "RWA consultants" on the market. They help clients come up with a token plan, run the investment promotion process, connect with government resources, and attend exhibitions. For those friends who are exploring financial innovation, as a lawyer who particularly hopes that the industry will develop in a positive and compliant manner, Lawyer Honglin has a few small suggestions. I hope that everyone will at least ask these four questions when doing RWA:
First, are your assets real, custodial, and auditable?
Second, does your token design circumvent the securitization attributes?
Third, are your sales targets qualified investors or public users?
Fourth, do you have adequate legal advice and regulatory response plans?
If you cannot answer these four soul-deep questions directly, then I suggest you don’t mention “RWA” easily, let alone use it as a name for financial innovation.
We need the concept of RWA and hope it can be implemented. But we need someone to make this path clear, legal and lasting, rather than walking into a regulatory minefield and dragging your clients into it. The service provider earns consulting fees, but the client is buried in the end.
So, when the RWA expert around you talks to you about poetry and distant places, please ask him/her to confirm:
What kind of RWA are you talking about?
