RWA is not just about issuing a coin: There are five major pitfalls that enterprises must avoid when engaging in RWA.

Written by: bull Xiaojing Lawyer

With the rise of the RWA (Real World Asset Tokenization) concept, more and more companies are thinking about:

Can I also move my assets on-chain? Can I also raise funds, provide liquidity, and attract global investors?

But the reality is: RWA is far from being as simple as imagined.

From asset structure design, legal compliance, regulatory filing, to smart contract deployment and token issuance and circulation, this is not a "token issuance" project, but a comprehensive system engineering that spans on-chain and off-chain.

This article will help you see clearly at a glance:

The 5 key issues that enterprises need to address when dealing with RWA

What difficulties can a lawyer help you solve at every step?

Why these pitfalls must be avoided sooner or later

The first pitfall: assets are not just something you have; you need to first "depict" them.

Many projects claim they want to do RWA right from the start, but —

Not clear about your underlying assets?

Is it a revenue right, a debt right, or a security?

Does it have sustainable returns? Can it be legally transferred?

If these issues are not clear, then the project cannot be launched. What needs to be done at this stage is an asset eligibility analysis.

This step can help you with the lawyer:

Sort out what "tokenizable" assets you actually have.

Assess its revenue structure, risk level, and compliance suitability.

Preliminary identification of whether it involves financial, securities, and commodity regulatory red lines.

This step is actually very simple; it is to help you clarify whether your assets can be utilized and why you should do it. For example: if you want to send your child abroad for studies, you need to first understand his academic background, areas of interest, and budget capabilities. You can't just pay the tuition without even deciding on a major.

RWA is the same - not all assets are suitable for being on-chain, and not all on-chain assets have financing value.

Second pitfall: A dual approach of technology and law, don't let the project die structurally.

RWA is not as simple as "on-chain registration"; it is a full-chain design that achieves clear legal ownership, a closed-loop of technical logic, and compliance from a regulatory perspective. You need to address at least three issues:

Are the ownership and transfer of assets legal? Is it transferable? Are there any restrictions?

How is the legal nature of tokens defined? Is it possible for them to constitute security tokens?

Does the technical architecture support on-chain compliance? Can it meet regulatory requirements (such as traceability, black and white lists, etc.)?

In this step, the legal team is not the "token issuance stamp person", but rather the structural designer + regulatory translator + compliance liaison.

1. Compliance Architecture Design

Design optional structural schemes based on different asset forms, target investors, and business regions, such as:

Cayman Fund + BVI SPV (suitable for overseas financing and redistribution)

Singapore VCC + MAS exemption path

Trust structure + domestic asset custody + overseas token mapping

These structures must not only consider tax compliance and regulatory penetration, but also avoid triggering unnecessary cross-border financial regulatory obligations.

2. Token Classification

This is the easiest place to "flip", where we will combine the asset foundation, issuance purpose, investor rights, and regulatory classification standards to determine that the token belongs to:

Security Token: Whether it possesses typical characteristics such as "investment contract," "efforts of others," and "profit expectation" (refer to Howey Test / MiCA / SFC Guidelines);

Utility Token: Is it limited to usage rights only, and does not promise returns;

Payment Token: Whether it has currency substitutability or widespread trading use.

In addition, it is necessary to further determine whether the token legally constitutes:

Debt certificates (such as accounts receivable/profit distribution rights)

Fund shares (triggering fund law or investment company law)

Trust beneficiary rights (requires endorsement by the trustee)

Forward Revenue Contract

Each type of legal attribute corresponds to completely different methods of issuance, trading, and tax treatment. If misjudged as "functional type" when it is essentially "securities type", the project may trigger the risk of illegal securities issuance, leading to the project being delisted or investigated.

3. Technology + Compliance Linked Mechanism

Lawyers also need to delve into the technical team and participate in the following compliance embedding:

Legal review of the white paper and token economic model

KYC/AML mechanism design (including extraterritorial personal information protection systems, such as GDPR, PDPA)

Data on-chain and off-chain information synchronization structure (IPFS, Merkle Tree or zk proof)

Whitelist management, address filtering, transaction limit design (e.g., compliance with OFAC or FATF requirements)

Third pitfall: Don't let the project "get stuck" on the launch line.

You have completed the structure design and prepared the assets, so the next step is the token issuance.

Lawyers can help you get it done:

Full set of documents including token subscription agreements, profit agreements, custody agreements, private placement documents, etc.

Connect with third-party institutions (evaluation companies, custodians, accountants, etc.)

Review the key terms of the smart contract to ensure that the on-chain logic matches the legal logic.

Assist in planning private placement paths and whitelist rules

Many projects get stuck at this step: rough contracts, vague rules, and incomplete documentation, resulting in problems during fundraising and a lack of protection for investors' rights.

Pit 4: Launching ≠ Free Trading, RWA liquidity is not necessarily "free".

Many project teams mistakenly believe: "Once my RWA token is launched, it can start trading."

In fact:

Whether it can be launched depends on whether it triggers securities issuance regulation.

Different countries/platforms have varying degrees of acceptance for RWA-type assets.

Is your asset transparent, has a pricing mechanism, and has reliable returns?

Common reasons for limited liquidity include:

The asset's basic information is not transparent (does not conform to the trust logic of the DeFi market)

Lack of oracle support

No on-chain real earnings or buyback mechanism, difficult to value.

Asymmetric risk leads to difficulties in over-the-counter circulation.

At this stage, lawyers can:

Prepare the compliance opinions, risk control disclosures, and investor brochures required for the exchange.

Design token locking, phased release, and other circulation mechanisms

Connect with compliant platforms both domestically and internationally, providing legal support.

Regularly update regulatory policy analysis and adjust circulation strategies.

Without a compliance opinion letter, not to mention being listed on the platform, you may even be denied access to the DID entrance.

Pit 5: Sending is not the end, but the beginning.

A successful RWA project is more like an on-chain operated REIT; it is not a "one-off" but requires long-term operation and continuous compliance.

The lawyer will also assist you afterwards:

Establish a synchronous disclosure mechanism for asset on-chain and off-chain.

Optimize the logic of token release, destruction, and buyback (in conjunction with market value management)

Build an investor relations management and compliance complaint channel

Track regulatory changes and continuously optimize structural design.

A truly qualified RWA project should possess the same level of prudent operational awareness as a "public company."

Summarize a table: What can lawyers do at different stages of the RWA project?

Conclusion:

RWA is not a "new bottle for old wine" in blockchain; it is a challenge and opportunity deeply intertwined with law, finance, and technology.

If you are really ready to take this path, please remember:

Compliance must come first; don't use the project as a trial and error.

The legal structure must be rigorous, leaving no compliance loopholes.

The technical implementation must "understand the language of the law"; do not let the contract cause problems in return.

As lawyers, we are not just the ones who "stamp and sign" but also the ones who bridge the gap between you and the law, regulations, and the market.

After saying so much, you may ask a question:

"RWA is so complicated and the compliance costs are so high, why should I go through all this trouble? Isn't it better to stay in a familiar field?"

This problem is quite normal. After all, RWA, as an emerging concept, inherently comes with cognitive barriers, structural difficulties, and technological iterations. However, historically, every paradigm shift—whether from carriages to cars, or from paper money to electronic payments—initially seemed "troublesome, unnecessary, and inefficient." Until one day, we realized: the new paradigm is not meant to replace a portion of people, but to rewrite the entire market's rules of the game.

RWA is the same.

It is not just a technological innovation, but the beginning of how traditional assets are repriced in the global financial infrastructure. For enterprises, it means a fundamental reshaping of financing logic, liquidity management, and the way investors are reached.

The earlier you understand and layout, the more likely you are to secure your own place in the new rules.