The fragmented Web3 world has at least three types of RWA.

So what kind of RWA are you referring to?

Written by: Liu Honglin

Recently, Lawyer Honglin was chatting with friends, and the topic, as always, revolved around Web3. Someone asked me if I had been working on RWA lately. Upon hearing these three letters, I hesitated to respond immediately and first asked, "Which kind of RWA are you referring to?"

It's not that I want to create suspense, but there are too many people in the industry talking about "RWA" right now, and everyone's understanding of its meaning is quite different. You say RWA is about issuing tokens, he says it's about creating concepts for PR, and some say it's about digital goods pre-sales or crowdfunding. If you express opinions easily without clarifying, the subsequent conversation can easily offend people, and the friendship boat might capsize. The opportunity to collect legal fees can be completely lost.

Today, let's seriously discuss the RWA projects currently available on the market that Honglin Law Firm is aware of. They can be mainly divided into three types of models. Each one claims to be 'on-chain real assets', but the underlying logic, legal risks, and business purposes are completely different.

The First Gameplay: Asset On-chain + Financial Compliance, is the "Regular Army" of the DeFi World

The core logic of this type of RWA can actually be summarized in one sentence: making traditional financial assets into programmable on-chain tokens.

For example, the short-term Treasury bonds that you originally needed to open an account at a traditional financial institution and submit a bunch of KYC documents to purchase can now be directly bought as tokenized T-Bill notes through on-chain platforms like Swarm, Ondo, Matrixdock, etc. These assets are backed by real Treasury bonds, loans, notes, or fund shares, held by custodians, and issued as RWA tokens through blockchain, allowing users to utilize them in DeFi protocols, such as for staking, lending, or yield aggregation.

The reason this type of RWA is called "regular army" is that the operations behind it must meet at least the following three conditions:

First, the underlying assets exist in reality and are legally custodied by financial institutions off the chain;

Second, the token issuance process is compliant and transparent, typically needing to meet financial regulatory requirements such as those of the U.S. SEC, Singapore MAS, and EU MiCA.

Thirdly, the entry threshold for investors is relatively high; not just anyone can purchase, and it is often accompanied by a whitelist system or accredited investor restrictions.

The biggest challenge for this type of project is the high regulatory costs, complex operational processes, and extremely high compliance qualifications required for the team. It's not something you can just launch whenever you want. But the benefits are also very clear: transparent use of funds, real assets, and controllable returns, making it suitable for prudent investors who want to participate in on-chain finance without taking excessive risks.

Currently, institutions such as Circle, Franklin Templeton, and Securitize are all laying out plans in this direction. For those who want to move Web2 financial traffic onto the chain, this is the most certain path for RWA.

The Second Gameplay: "Chain Reform 2.0" in the Capital Market, Telling Stories is More Important than Making Products

Let’s talk about the second type, which also looks quite "real", but the underlying layer is not "assets", but "market value management". This is a typical Hong Kong approach: listed companies use a series of "RWA press releases" to tell a story of blockchain empowering the real economy, attracting the market to speculate on stock prices.

Many people should have seen similar tactics: a Hong Kong-listed company whose main business is about to burn out suddenly announces its entry into Web3, releasing a bunch of news saying it has signed a strategic cooperation agreement for digital assets with a certain platform, planning to "tokenize" its projects or assets on the blockchain, and will carry out global allocation through the RWA model in the future. When you check the white paper, it is full of fanciful nonsense, and there are dozens of press releases, beautifully taken photos, and media coverage everywhere.

Why do this? Because such operations usually do not serve the on-chain ecosystem, but rather create momentum for the capital market. By telling the RWA story to raise valuations, securing shareholders, and seeking financing, it essentially means 'packaging traditional assets with blockchain and then leveraging the capital market for arbitrage.' Some companies even haven't issued any Tokens at all; they just changed the color of their website and launched a page, and then started claiming to be 'a benchmark enterprise for Web3 transformation.'

Strictly speaking, these types of RWA projects do not actually have real assets on-chain, nor do they have a design for token holder rights. For the project parties, their task is more about aligning with the rhythm of capital operations to narrate a "digital" future, rather than achieving digitalization itself. For ordinary investors, these projects essentially do not participate in on-chain circulation, have no tradable tokens, and the likely outcome is: you think you are investing in Web3, but in fact, you are buying a junk stock.

Third Method: Mainland Exclusive "Token + Pre-sale" Option, Highest Legal Risk

The last type of gameplay to mention can be said to be "highly enthusiastic" in the Greater Bay Area, especially in the Shenzhen/Fujian region. You often hear narratives like this in Web3 startup groups, fintech discussion groups, and investment promotion conferences:

Our project is an RWA project, using tokens to anchor real commodities such as red wine, white wine, green tea, property income rights, and machinery rental rights... When users buy tokens, it means they have locked in future profits in advance.

It sounds very much like a combination of NFT and RWA, but in fact, it is more about the old story of "crowdfunding + pre-sale" dressed in the guise of blockchain. Common tactics for this type of project include:

1. There is no compliant custody mechanism, the authenticity of assets relies on verbal assurance;
2. Tokens connect directly with individual users, with no investment threshold;
3. Promising high returns, casually saying "double in six months" and "it's not a dream for the Token to increase tenfold upon listing";
4. The project documentation is rough, mostly consisting of offline PPT and PDF files, lacking on-chain data and code audits.

More importantly, most of these types of projects essentially constitute illegal public deposits or disguised fundraising. Even if the underlying assets truly exist, if the tokens are tradable, promise returns, and are sold to unspecified members of the public, they violate the red line of illegal fundraising under mainland China's criminal law. Not to mention that some project parties purely use RWA to commit fraud.

In recent years, law enforcement trends show that public security agencies, market regulation bureaus, and financial regulatory bureaus have begun to closely monitor projects that claim to be "blockchain", "digital goods", or "RWA innovation". So, while you may see people in your friend circle sharing these projects claiming "this is RWA+ new productive force", stepping into it could lead you into illegal fundraising.

So which type of RWA are you referring to?

Looking at RWA from today's perspective, the concept has completely become "polysemous." Some are engaged in true financial asset tokenization, some are harvesting from the capital markets, while others are simply playing a game of hot potato.

The most ironic thing is that Lawyer Honglin often encounters these three groups of people in the same situation, and surprisingly, they can still support each other and team up for roadshows. The result is that the RWA circle appears to be lively, but in reality, it is chaotic internally, with a fragmented understanding.

All of this is thanks to the "RWA consultants" in the market. They help clients come up with a Token plan, go through the investment promotion process, connect with government resources, and attend exhibitions, everything is covered. For these friends exploring financial innovation, as a lawyer who particularly hopes for the positive and compliant development of the industry, Lawyer Honglin has a few small suggestions. I hope everyone asks at least these four questions when engaging in RWA:

First, are your assets real, custodial, and auditable?

Second, does your Token design circumvent the attributes of securitization?

Third, is your target audience qualified investors or the general public?

Fourth, do you have sufficient legal advice and regulatory response plans?

If these four deep soul questions cannot be answered directly, it is advisable not to casually mention "RWA" and even less to use it as a banner for financial innovation.

We need the concept of RWA and hope it can be implemented. But we need someone to walk this path clearly, legally, and sustainably, rather than stumbling into regulatory minefields and dragging your clients down with you. The consulting fees may benefit the service providers, but the result buries the client.

So, when the RWA expert around you talks about poetry and the distance, please ask them to confirm:

Which type of RWA are you referring to?