Lawyer's sharing: My understanding of RWA

Hello everyone, I am lawyer Liu Honglin, founder of Mankiw LLP. We are the first law firm in China to focus on the new economy of Web3.0 and the blockchain track. We currently have teams in Shanghai, Shenzhen and Hong Kong.

Friends who are familiar with us should know that Mankiw lawyers share a lot of popular legal articles and short videos related to the Web3.0 industry on a daily basis, and also organize some online and offline activities. The original intention of continuing to do these things is very simple, that is, we have set a goal for ourselves since the beginning of our business: Ensure that Web3.0 occurs legally in China.

The theme of today's meeting is "AI + RWA". I would like to take this opportunity to share some of our observations and thoughts on the RWA track from the perspective of our lawyers.

My own understanding of this track is that the crypto world and the traditional capital market are experiencing a kind of

"two-way rush".

What does it mean? We can see that many assets in the traditional capital market, such as stocks, funds, bonds, and even real estate, are being brought to the chain or to centralized exchanges in a tokenized way, expanding its original audience and adding a distribution and circulation channel.

On the other hand, we also see that on-chain assets are beginning to move closer to the traditional market. For example, many projects will try to turn tokens into products that can be freely traded in securities accounts, such as Bitcoin ETF, Ethereum ETF, etc., which are slowly moving towards the form of traditional financial compliance products.

I think this "two-way rush" is a very certain trend, and its market growth space will also be very large.

At this intersection, there is a relatively clear track, which is RWA.

In the past year or so, we have been exposed to a lot of consultations on RWA projects, and the types are also very rich. Generally speaking, I will classify them into three categories.

The first category is our very popular model in the North American market, such as buying and entrusting stocks such as Tesla and Apple, and then mapping them through on-chain technology to become a structure that can be used for cross-chain lending, mortgage and other operations on the chain. This type of project is characterized by clear underlying assets, clear custody, and relatively complete contract arrangements. Basically, the entire process is completed simultaneously on or off the chain. In terms of compliance and transparency, we think it is the most representative direction.

The second type is a method that appears more frequently in Hong Kong. But it is not really a public market model, but more like an extension of traditional private equity. For example, we will see some projects that "complete the transaction first and then package it on the chain", that is, investors first invest money, and then allocate tokens or rights later. This type of project is usually only for qualified investors or institutions, and is not sold publicly. I would say that it is more like a "marriage first, then get a certificate", which is a relatively "low-key" way of playing. This path is actually of particular interest to many small and medium-sized enterprises in the mainland, who think "if they can do it, can I do it too?" But I think the core issue is whether its secondary market can flow, which is still a bottleneck. I am personally optimistic about the flow of the secondary market for this type of asset, it is just a matter of time.

The third category is the most common and complex one we see in the Greater Bay Area. I call it "training institution-style RWA". This is often dominated by some third-party service providers or some "exchanges". They will find potential companies that want to raise funds, such as a tea garden, a piece of real estate, or even some non-performing assets, and say that they can help them list and issue funds on overseas exchanges, especially in the offshore market, and package them into a tradable RWA product.

To be honest, many of these are half-true and half-false. They may have indeed made some compliance-level designs, but from our professional perspective, many projects are not solid. For example, the core issue is, after you tokenize a domestic asset, who is the buyer? If the buyer is really an institution or individual overseas, it is still reasonable. But if your ultimate sales target, publicity goal, and marketing path are still for mainland users, then we, as Chinese lawyers, must remind you that legal and financial risks will eventually fall back on mainland entrepreneurs. This is the most common type of project we see now, and the one that needs the most vigilance.

From my personal point of view,In the future, there are two core criteria for judging whether RWA can do well:

The first is whether the data can be truly

The second is whether the value can really flow. If you still rely on email notifications, offline payments, and paper contracts to distribute profits after tokenization, then the advantage of "automatic circulation of value" brought by blockchain will not be fully utilized. What you really should do is to distribute the profits directly to the holders through stablecoins or project tokens in the form of smart contracts. In my opinion, this is the value of RWA.

I personally believe that the compliance path of this industry in the future must also revolve around these two links: one is the path for data to be uploaded to the blockchain, and the other is the path for the flow of value.

If you can connect these two links, the project will naturally have vitality. If you just make a "financial product packaging", then no matter how cool it is, it will only look like a blockchain.

Finally, I want to say that I understand that everyone is very excited about the combination of RWA, AI and other new technologies and new business models, including the prospect of asset digitization in the next stage. But the more such times, the more calm we should be, and the more we should see clearly the underlying structure, legal boundaries, data flow and capital chain.