Introduction
Recently, I've been deeply involved in several real-world asset (RWA) tokenization projects and conducted in-depth research on related businesses. To facilitate understanding, this article will share some of our core observations and reflections in the form of a FAQ (FAQ).
Q1: Why is RWA so popular recently?
The fundamental reason for the RWA boom is the official entry into force of the Hong Kong Stablecoin Ordinance on August 1, 2025. This marks the full compliance of stablecoins as anchor currencies for transaction settlement. With the Hong Kong government's strong support for the compliant issuance of virtual assets, a legally sound and compliant virtual asset market framework has taken shape. From a market perspective, many companies hope that Hong Kong RWA will open up a new, compliant financing channel, and some listed companies also hope to boost market confidence and stock prices by investing in this sector. This expectation is similar to some of the market sentiment during the early ICO boom. Q2: Is there any difference between Hong Kong RWA and Web3 RWA? The difference is significant; the two don't even have a direct business connection. The core of Hong Kong RWA is "full-chain compliance." The underlying assets must meet the legal requirements of both jurisdictions: compliance in their home country (e.g., mainland China) and compliance in Hong Kong. This compliance requirement goes far beyond the technical level of "consortium chain title confirmation" and must be based on clear, legally binding documentation and approvals. For example, data assets must complete compliant cross-border registrations, while physical assets must undergo compliant cross-border transfer procedures. A common market concept is to issue RWAs in Hong Kong after confirming the title of mainland real estate on-chain. However, this approach is completely unfeasible under the current framework. First, the Hong Kong Securities and Futures Commission (SFC) explicitly prohibits automated on-chain matching transactions. Second, the complete transfer of mainland real estate ownership to Hong Kong faces significant legal and practical obstacles. Currently, the Hong Kong Monetary Authority (HKMA) officially encourages RWAs primarily in the form of stablecoins and tokenized bonds (such as government-issued green bonds). The operational model for the broader physical RWA landscape remains unclear, but what is certain is that regulators do not accept issuance solely based on blockchain-based title confirmation. Assets must be fully regulated within Hong Kong's regulatory framework. Therefore, Hong Kong RWAs, in their application of blockchain technology, emphasize their nature as a "regulated distributed ledger" rather than the global free trade and circulation pursued by Web3 RWAs. Q3: How can Hong Kong RWAs be understood in a more general sense? At this stage, Hong Kong RWAs can be understood as a "futures market that allows private, compliant issuance." Just as crude oil futures require designated storage locations for the holding and delivery of physical crude oil, Hong Kong RWAs also require that their underlying assets be effectively regulated by Hong Kong's financial regulators. If the underlying physical assets of an RWA cannot be regulated, it is highly likely that it will not be approved for wholesale. For example, converting rental income from non-Hong Kong properties into RWAs is highly unlikely to be approved, as neither the properties themselves nor the leasing contracts are directly regulated in Hong Kong. In contrast, some intangible assets, such as entertainment copyrights, offer a greater potential. As long as the ownership of these assets is clear and compliant under mainland law, and the rights and interests can be legally transferred to a Hong Kong regulatory entity, their future income can potentially be used to issue RWAs. It is worth noting that the Hong Kong government currently does not require the underlying assets of RWAs to be located in Hong Kong; the key requirement is that the assets be "regulated by the Hong Kong government." Based on this, I predict that even if a high-quality asset is not located in Hong Kong, it may be approved for issuance if it can provide a comprehensive set of credible evidence that meets Hong Kong regulatory requirements (for example, ongoing audit reports from a "Big Four" accounting firm). Q4: Can RWAs be traded after issuance? No. Issuing RWA and trading RWA are two completely separate things. Issuing RWA is more akin to a fundraising exercise. Once the issuance application is approved, the issuer can raise funds from "qualified investors." However, this does not mean the tokens can be publicly traded. To achieve trading, according to regulatory red lines set by the Hong Kong Securities and Futures Commission (SFC), automated on-chain matching of RWA tokens is strictly prohibited. The only path is to apply for listing on a licensed virtual asset trading platform (VASP) in Hong Kong. Furthermore, these compliant virtual asset trading platforms are only open to qualified investors, essentially eliminating the possibility of attracting large numbers of retail investors through community marketing hype. This is in stark contrast to the operating model of some crypto assets, such as Memecoin. Furthermore, listing on a compliant platform is expected to incur significant fees. Q5: What about the issuance of compliant stablecoins in Hong Kong? Of all RWA categories, issuing compliant stablecoins offers the greatest feasibility, particularly those based on high-quality assets such as Hong Kong dollars, offshore renminbi, US dollars, or high-credit-rated bonds. Of course, the barrier to entry is also extremely high. Leaving aside the complex compliance process, the capital cost alone constitutes an extremely high barrier to entry for most startups. According to the Stablecoin Regulations, issuers must actually pay a minimum of HK$25 million in paid-in capital and be subject to centralized oversight by the HKMA. Furthermore, issued stablecoins must be 100% backed by high-quality liquid assets as reserves. Q6: Can consortium blockchain technology be used to issue Hong Kong RWAs? This is a common and significant misunderstanding. The application scenarios of domestic consortium blockchains (such as title confirmation and traceability) are completely unrelated to the compliance requirements of Hong Kong RWAs, yet some business leaders we've encountered often conflate the two. The legal validity of Hong Kong RWA projects relies entirely on the clarity of ownership and authenticity of the underlying assets. According to analysis by Hong Kong legal experts, issuers must fulfill strict verification obligations, including: 1. Legal document verification: Verify that the assets are free of any encumbrances through ownership registration documents, judicial declarations, and other means. 2. Financial penetration audit: Commission a licensed auditing firm to verify the assets' cash flow, liabilities, and other aspects to prevent financial fraud. 3. Independent third-party valuation: For non-standard assets, valuations must be backed by independent appraisal firms using multiple models. In short, the Hong Kong RWA program only recognizes legally binding documents and the review results of licensed third-party institutions, and does not accept technical "on-chain title confirmation" as a basis for legal validity. Q7: What is the purpose of issuing RWAs in Hong Kong? In my opinion, for legitimate enterprises, RWAs serve two key roles: first, they expand new compliant financing channels for high-quality assets; second, for listed companies, they can serve as a positive signal to boost market confidence. However, we must be vigilant: there are many participants in the current market who use RWAs as a speculative narrative. Their true purpose may not be to complete compliant issuances, but rather to capitalize on this hot concept for private placement financing or market speculation. This phenomenon is not uncommon in the industry and warrants high vigilance from investors and practitioners. In summary, RWAs in Hong Kong are a very new field, with only a handful of successful implementation cases. Therefore, the views expressed in this article may still have limitations, and I will continue to update my understanding as my understanding of the business deepens. This article serves only as a record of my personal experience at this point in time, and I hope it will provide valuable reference for those interested in this field.
Anais
Weatherly