There are at least three types of RWA in Web3, which one are you playing?

Question

Recently, Lawyer Honglin communicated with his frens, and the topic, as always, revolved around Web3. Someone asked me if I had been working on RWA recently. As soon as I heard those three letters, I didn't dare 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" now, and everyone's understanding of its meaning is quite different. You say RWA is issuing tokens, he says it's about creating concepts for PR, and some others say it's about digital goods presale or crowdfunding. If you express opinions easily without clarifying, the subsequent conversation can easily offend people, and the little boat of friendship can capsize at any moment, leading to the loss of potential lawyer fees.

Today, let's have a serious discussion about the RWA projects currently on the market that Honglin Law Firm is aware of. They can be mainly divided into three types of gameplay. Each of them claims to be "on-chain real-world assets," but the underlying logic, legal risks, and business purposes are completely different.

The first method: 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: turning traditional financial assets into programmable on-chain tokens.

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

Second, the Token issuance process is compliant and transparent, and usually needs to meet financial regulatory requirements such as those of the US SEC, Singapore MAS, and EU MiCA.

Thirdly, the entry threshold for investors is relatively high, and it is not something that just anyone can purchase, 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 processes, and the 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 looking to move Web2 financial traffic onto the blockchain, this is the most certain RWA path.

Second gameplay: Capital market's "Chain Reform 2.0", telling stories is more important than making products.

Let's talk about the second type. It also looks quite "real", but the underlying layer is not "assets", but rather "market value management". This is a typical Hong Kong method: a listed company tells a story of blockchain empowering the entity through a series of "RWA press releases", attracting the market to speculate on the stock price.

Many people should have seen similar tactics: a Hong Kong stock company whose main business is about to fizzle 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" the projects or assets under the company on-chain, and will carry out global allocation through the RWA model in the future. When you check the white paper, it's full of fanciful nonsense, dozens of press releases have been issued, the pictures are beautifully taken, and media coverage is overwhelming.

Why do this? Because such operations usually do not serve the on-chain ecosystem, but rather create momentum for the capital markets. By telling the RWA story to boost valuations, securing shareholders, and seeking financing, the essence is "to package traditional assets with blockchain and then leverage the capital markets for arbitrage." Some companies even haven't issued any Tokens; they just changed the color of their official website, launched a new page, and started claiming to be a "model enterprise for Web3 transformation."

Strictly speaking, this type of RWA project does not have real assets on-chain, nor does it have a design for token holder rights. For the project parties, their task is more about aligning with the rhythm of capital operations to tell a "digital" future, rather than achieving digitization itself. For ordinary investors, these projects basically do not participate in on-chain circulation, have no tradable tokens, and the result is likely: you think you are investing in Web3, but in fact, you are buying a worthless stock.

Third gameplay: Mainland exclusive "Token + Pre-sale" model, with the highest legal risk.

The last type of gameplay I want to mention can be described as "highly enthusiastic" in the Greater Bay Area, especially around Shenzhen / Fujian. In Web3 startup groups, tech finance communication groups, and investment promotion meetings, you often hear narratives like this:

This is our RWA project, which uses tokens to anchor real products, such as red wine, white wine, green tea, property income rights, machinery rental rights, etc. When users buy tokens, it means they have locked in future earnings in advance.

Sounds a lot like the combination of NFT and RWA, but it's actually more of the old story of "crowdfunding + presale" dressed in blockchain attire. Common tactics for such projects include:

There is no compliant custody mechanism, and the authenticity of the assets relies on words.
Token directly connects with individual users, without investment thresholds;
Promising high returns, casually stating "doubling in six months" or "it's not a dream for the Token to increase tenfold after listing";
The project documents are rough, mostly offline files in PPT and PDF formats, lacking on-chain data and code audits.

More critically, such projects essentially constitute illegal fundraising or disguised capital-raising. Even if the underlying assets genuinely exist, if the Token is tradable, promises returns, and is sold to an unspecified public, it crosses the red line of illegal fundraising as defined by mainland Chinese criminal law. Not to mention that some project parties simply use RWA to commit fraud.

In recent years, law enforcement trends indicate that public security agencies, market regulation bureaus, and financial regulatory agencies have begun to closely monitor projects that claim to be "blockchain", "digital goods", and "RWA innovation". So don't be fooled by friends sharing these projects saying "this is RWA+ new productive force"; stepping into it could lead to illegal fundraising.

So what kind of RWA are you talking about?

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

Ironically, Lawyer Honglin often encounters these three groups of people in the same settings, and they surprisingly support each other and team up for roadshows. The result is that the RWA circle appears 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 solution, navigate the investment promotion process, connect with government resources, and organize 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, when working on RWA, at least asks these four questions:

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

Second, does your Token design avoid securities attributes?

Third, are your sales targets qualified investors or public users?

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

If these four deep-seated questions cannot be answered directly, then it is advisable not to casually mention "RWA", let alone use it as a title for financial innovation.

We need the concept of RWA and hope it can be implemented. But what we need more is for someone to walk this path clearly, legally, and sustainably, rather than stepping into regulatory minefields along the way and dragging your clients down with you. The consulting fees 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?