Author | Ye Kai
What are the future trends of RWA, the specific procedures for licensed and compliant RWA in Hong Kong, and how to design unlicensed alternative investment RWA?
01
A multipolar context?
It has been quite lively recently, whether it is the hot spots in the crypto, such as the rise and adjustment of BTC, the charge of runes, stones and memecoin, and the topics and traffic brought by Bitcoin ETF, etc.; there are also hot spots in the international situation, such as the older Russia-Ukraine and Israel-Palestine conflicts, as well as the assassinations in Saudi Arabia and Slovakia in the past two days, the crash of the Iranian presidential helicopter, etc. Entering the year 2024 of Lihuo Jiuyun, there is chaos.
The decoupling of China and the United States is a fact, and international conflicts highlight the trend of multipolarization, which will inevitably bring about the decoupling and reconstruction of the international monetary system. Since internationalization has retreated to a regionalized multipolar strategy, digital currency will become a key link, which in turn must be linked and anchored to the physical world.
At the same time, more and more traditional institutions, mainly Wall Street in the United States, have begun to talk about the future trend of tokenization. The future trend of the physical world will be tokenization. However, this future requires a cycle, and the popularization of tokenization, promotion of education, and conversion and migration of inclusive people require the emergence of real RWA. The RWA track is not only centralized traditional financial tokenization, but also decentralized native tokenization, and perhaps even more novel and radical gameplay.
In fact, the development momentum of Bitcoin ETF has proved the direction of the RWA track, because only by connecting with financial institutions and industrial capital in the physical world can it bring about a sudden change in scale and new incremental users. At the same time, after runes and memecoin, more and more voices and opinions are beginning to point to the next more sustainable hot spot, which will be the RWA track.
Judging from ROOTDATA's RWA track project list, most of the current RWA track projects are still more focused on the Defi product model of traditional financial products as interest-bearing mortgage assets, and there are no real RWA tokenized products in the strict sense.
02
Future Trends of RWA in Hong Kong
Since the 2023 Hong Kong Web3 Conference and the promulgation of a series of new virtual asset regulations, especially the development of No. 7 virtual asset exchanges and the promulgation of security token regulations, many people believe that Hong Kong will become the core base of RWA.
As a transformation of mainland funds, there are a large number of high-quality corporate asset resources as well as securities, funds, insurance funds and other resources. Naturally, they are very optimistic about this direction, so they have been paying attention and communicating closely from the first time. Since last year, they have been communicating closely and discussing projects with licensed securities firms, asset management companies, exchanges and even offshore exchanges in Hong Kong. In the end, they found that this was not the case. They can only say that "ideals are full and reality is skinny."
We have summarized a future strategy for Hong Kong RWA: "Licensing and compliance to the right, retail tokens to the left, and stock-to-coin products to the linkage."
Licensed and compliant RWAs rely on licensed exchanges, tokenize financial products, and focus on debt or equity designs. They are relatively conservative and tend to be traditional financial institutions and regulatory models. They are mainly based on the institutional market (2B), with a moderate issuance scale but weak liquidity, representing the attributes of corporate financing.
RWA that takes the unlicensed compliance route relies on offshore RWA exchanges or alternative investment OTC and Swap exchanges to tokenize physical assets. It will not focus on equity-based design, integrate native token models, avoid traditional securities supervision, and focus on the retail market (2C retail investors). It has a flexible issuance scale, draws on the token economic model, pursues liquidity, and represents the attributes of retail investment (cryptocurrency speculation).
The key to the success of Hong Kong RWA lies in: how to realize the transition from 2B market to 2C market?
This is not a question of whether it can be transformed, but whether traditional financial institutions and interest groups are willing to share power and profits or be overthrown?
Although Hong Kong's Web3 ecosystem is currently very loud, in reality it is still the regulators and various traditional financial interest groups that are fighting for power. Take the current Hong Kong Bitcoin spot ETF, a good RWA product that is a bellwether, for example, but it has become such a mess that it is not given to a licensed virtual asset exchange but is still on the traditional Hong Kong Stock Exchange. A group of old financial institutions are dividing the pie, there is no trading volume, and the ecosystem has not been driven.
If there is no revolution and innovation, Hong Kong's licensed and compliant RWA products will sooner or later become like this. Licensed virtual asset exchanges are only OTC for RWA product transactions and redemptions. The core is still in the interest groups of securities companies, asset management companies and various institutional markets.
[Principle 1] RWA product design can be more innovative. Although it is currently packaged into securities products and then tokenized in traditional financial ways, innovative designs can be made in OTC or ATS outside the body, just like GameFi, where the game is played in Game but the incentives are in Fi. Tokenized securities products may lack liquidity, so liquidity incentives can be made outside the body.
Licensing and compliance: conservative route to the right
You may not be able to imagine how conservative the licensing and compliance of RWA (or STO) under Hong Kong regulation is. Basically, everyone thinks that once the exchange license has been issued and the regulations have been promulgated, they can start working quickly, right?
In fact, this is not the case. For the issuance of securities tokens in Hong Kong, which is currently under the premise of being licensed and compliant, the asset package needs to issue a fund first, which requires a Type 9 asset management license; then the issuance and underwriting of RWA products requires a Type 1 brokerage license (usually a securities firm), and the securities firm needs to find a Hong Kong financial institution to share the quota; RWA products are generally equity-based and must be traded on a Type 7 license exchange. Unlicensed exchanges will gradually be unable to conduct business in Hong Kong, especially they cannot list securities tokens.
Many people are interested in the issuance process of RWA/STO in Hong Kong, so we will explain it in detail here for your reference.
1) As a project party, if you are the asset party or a third-party entity serving the asset party, the first step is to find an experienced brokerage firm with a No. 1 brokerage license (the key is to have financing channels and PI resources), and discuss with the asset-owning enterprise and the underlying asset package whether to design it in a simple or complex manner. According to the regulatory guidelines of the Hong Kong Securities and Futures Commission, the simple type is the debt type, and the complex design is similar to complex models such as ABS or REITs. The latter has not yet issued specific guidance on supervision;
2) A third-party institution is required. You need to find a law firm with Crypto business or license to issue legal opinions on product structure or SPV, Fund structure, etc. You need an asset appraisal report of the asset package from an accounting firm. If it is a corporate credit bond model, you also need a credit rating report from an internationally recognized rating agency;
3) According to regulatory requirements, the basic product of RWA needs to issue a Fund, that is, your asset package or credit bond needs to use the No. 9 asset management license to issue a fund product for filing (or review). It can be a closed-end fund (filing) or an open-end fund (the difference is that the open-end fund can be publicly raised but has more regulatory requirements). If there is a series of issuance plans, you can first lay out the umbrella structure of the fund at the time of issuance; the license can be self-held. In theory, because it is a fund of RWA physical assets (not 100% digital assets), it can be a non-uplift No. 9 license. If not, you need to find a No. 9 license asset management institution to be the investment manager. Of course, the uplift No. 9 license is best, which means that having Crypto experience may be conducive to regulatory approval;
4) The process of RWA tokenization is actually the tokenization of fund products, that is, the core of securities tokens is actually the tokenization of financial products. It is necessary to select a public chain platform (currently generally the Ethereum chain) and a designated digital wallet, and put the fund products on the chain and tokenize them according to the issuance scale, minimum share, minimum transaction amount, etc. of the fund products, and prepare guidance manuals and customer service websites, etc. This technical work may be the easiest;
5) The most difficult part is institutional market distribution, which tests the brokerage business capabilities of your securities firm. Do you have a mature distribution channel or a PI customer base for a series of investment products? Do you have Hong Kong financial institutions that often conduct roadshows and cooperation to carry out underwriting or distribution? Do you have some specific fund institutions to conduct OTC market and block transactions? Remember, as I said in my previous article, the essence of RWA products is corporate financing, and the essence of corporate financing is the institutional market. Underwriting and distribution need to be negotiated in advance. It is not that you will get money immediately after issuing RWA products. You need to think seriously: where is the money?
4 and 5 can be discussed in no particular order. It is OK to discuss distribution/"stolen goods" under the table and tokenize funds technically.
6) After the tokenization and underwriting of the fund are agreed upon, it can be listed on a licensed exchange. In fact, the licensed exchange is only responsible for reviewing the coin list. Of course, the exchange often has its own institutions or cooperative institutions such as No. 1 license, No. 9 license and trust custody license to provide related services, including the distribution of the series of transactions of the underwriting institution and the custody of the digital assets of the RWA token, the subsequent subscription and redemption, the exchange's RWA product investment transactions (currently limited to PI customer investment) and possible OTC transactions, block transactions, etc.
7) According to regulatory guidelines, PI investment transactions are temporarily allowed at present. When the retail market requirements are met, it can be opened to the retail market (retail investment). However, it is not clear what requirements must be met. If compared with the stock market or from the perspective of protecting retail investors, it may be similar to the RWA product. After the number of holding addresses, liquidity, market price and net value fluctuations are relatively stable and mature, the SFC will approve retail transactions in the retail market;
8) The last step is for the exchange to open the retail secondary market for the RWA product and start investment and trading for retail investors. A compliant RWA product will be truly successful only when it reaches this point, but how far is it to get to this point?
The native model of retail tokens to the left
Different from the licensed and compliant virtual asset exchanges and securities product tokenization model, there is also a relatively radical or innovative token-native model, which is based on the common law alternative investment regulation, avoiding the equity-based design of securities regulation, and directly tokenizing physical assets, or physical asset digital warrants. Because they are non-securities tokens and physical asset tokens, they are not air coins or memecoins without physical asset support. They go through offshore RWA exchanges or alternative investment OTC and Swap exchanges. The issuance model draws on the token economic model, and the issuance scale can be large or small. Because it is based on the native token model and related community traffic, it is directly facing the retail investment market and naturally has a certain liquidity, combined with the cash flow supported by physical assets or market activities to promote market value management.
The model of unlicensed exchanges involves relatively complex content such as RWA asset issuance, trading, leverage and derivatives, liquidity, etc. We will discuss this in another separate article. Many friends have asked how to design RWA products. Here we will briefly discuss the design of non-securities RWA token products.
[Principle 2] The RWA product design does not correspond to physical assets, but focuses on the platform of the physical world. What is tokenized is the governance token or points token of the RW platform.
1) The core of non-securities RWA product design is not to correspond to physical assets or map the rights and interests of physical assets. The supporting assets can be physical assets or rights and interests, but what is tokenized is not the rights and interests, but the platform or the utility of the quasi-equity. This is a bit difficult to understand, especially for those who have no experience in traditional asset securitization, especially issuing bonds or ABS. I will have the opportunity to refine it through Space or live broadcast of specific case consultation and disassembly in the future.
2) The core of the native model of retail tokens to the left is the combination of non-securities RWA tokens and alternative investment exchanges, combined with Crypto Fund (early Capital and later Maker). For example, for the licensed exchange HashKey, its compliant STO/RWA products have not yet been scaled up, but its retail token model RWA market can go the way of: offshore international station list + Tokenization department + Capital + Fund (Maker) RWA tokenization combination.
3) Participation of retail investors and institutions, using the DAO, community or node model, encourages more retail investors and related physical asset world industry chain ecological institutions to participate, which can be understood as a process of digitization and chain-up, or as a hedging behavior with the physical world. The 2C model does not start after the coin is listed, but from the initial community construction, product discussion and node consensus, etc., it participates early and becomes a part of the consensus.
4) The stock-to-coin linkage model has been introduced in the previous article, that is, the RWA model of linkage between stocks (traditional financial stocks) and coins (virtual assets), the linkage between traditional financial stocks and virtual assets, and the linkage between the stocks of listed companies and virtual assets such as Bitcoin physical assets or Bitcoin spot ETF investment allocation and Web3 layout. While the price or value of virtual assets mainly Bitcoin continues to rise, the value of stocks of listed companies in the physical world has also doubled. If the Web3 layout and Crypto investment are related to the main business of listed companies, they can move in the same direction and pull synchronously.
5) Combination of native token models: RWA NFT + FT + memecoin, using NFT to carry the identity (or membership) and digital equity certificates of retail investors, and can become the anchor for a series of liquidity token airdrops; changing the ST of equity or dividends to FT for liquidity or some kind of governance utility, and becoming a functional token for RWA application scenarios, as well as a functional token for incentive or mining models; combining the RWA narrative of the physical world, upgrading the brand or IP franchise combined with token media traffic to a memecoin with an RWA combined narrative, as the brand leading banner of the former's NFT and FT, and the three are linked.
6) The tokenization of RWA cash flow does not follow the profit and dividend model, but instead structures the cash flow into the structured liquidity of the liquidity pool through an SPV or smart contract, becoming a special Maker Fund or Liquidity swap pool, which shows the expected continuous liquidity management.
7) Stock-to-coin product linkage, an upgraded version of the stock-to-coin linkage model of 4, that is, a listed company issues compliant RWA asset tokens based on its main business or underlying asset package, and uses the listed company's CB to purchase RWA tokens, while RWA tokens can also be airdropped (given) stocks (physical financial assets). This combines the listed company's stocks, virtual asset investments, and RWA token issuance, and uses convertible bonds to achieve partial underwriting of RWA products. The listed company's operating cash flow agrees on a certain part of the liquidity pool of RWA tokens according to corporate governance requirements, and airdrops/allots listed company stocks or options to RWA token holders, which can mutually pull value and increase users. If there are many people interested in this model, you can find an opportunity to talk about it in Space or live broadcast.
[Principle 3] Limited and unlimited space for RWA tokenization
The principle of RWA tokens: “It’s better to be useless, but it sounds useful, but it’s usually not used.”
8) Thoughts on related RWA assets
From the perspective of usefulness and uselessness and finiteness and infinity, which are the higher-quality and more suitable RWA assets?
First of all, it is clear that real estate is not a good RWA asset class at present. For now, considering the unlimited imagination space of assets and their own flow and ability to generate operating cash flow, we are more concerned about the following asset classes:
Digital warrants for commodities with financial attributes, such as durian, agarwood, etc.;
AI computing power, especially distributed computing power and edge computing combined with #DePIN;
Green energy, renewable energy solar-storage-charging ecosystem combined with #DePIN and carbon credits;
The fan ecosystem of music and sports, from the perspective of streaming payment and idol economy;
New content platform models, mainly IP franchising and content distribution of cultural films and TV series, Watch2Earn, etc.
03
Conclusion
In summary, the future of RWA is very bright, and it may not be limited to the several models discussed above. Due to the length of the article, it cannot be expanded in detail. There will be opportunities to discuss it in detail through Space or live broadcast in the future. However, whether it is the RWA products of licensed and compliant exchanges, or the RWA tokens of alternative investment exchanges, or the combination punches linked with listed companies, the most essential thing is to follow the most energetic assets, funds and people. Compare the data and development of Bitcoin spot ETFs, and think about it, maybe you will understand why RWA will be the next hot track with more sustainability and long cycles? !
What are the future trends of RWA, the specific procedures for licensed and compliant RWA in Hong Kong, and how to design unlicensed alternative investment RWA?
01
A multipolar context?
It has been quite lively recently, whether it is the hot spots in the crypto, such as the rise and adjustment of BTC, the charge of runes, stones and memecoin, and the topics and traffic brought by Bitcoin ETF, etc.; there are also hot spots in the international situation, such as the older Russia-Ukraine and Israel-Palestine conflicts, as well as the assassinations in Saudi Arabia and Slovakia in the past two days, the crash of the Iranian presidential helicopter, etc. Entering the year 2024 of Lihuo Jiuyun, there is chaos.
The decoupling of China and the United States is a fact, and international conflicts highlight the trend of multipolarization, which will inevitably bring about the decoupling and reconstruction of the international monetary system. Since internationalization has retreated to a regionalized multipolar strategy, digital currency will become a key link, which in turn must be linked and anchored to the physical world.
At the same time, more and more traditional institutions, mainly Wall Street in the United States, have begun to talk about the future trend of tokenization. The future trend of the physical world will be tokenization. However, this future requires a cycle, and the popularization of tokenization, promotion of education, and conversion and migration of inclusive people require the emergence of real RWA. The RWA track is not only centralized traditional financial tokenization, but also decentralized native tokenization, and perhaps even more novel and radical gameplay.
In fact, the development momentum of Bitcoin ETF has proved the direction of the RWA track, because only by connecting with financial institutions and industrial capital in the physical world can it bring about a sudden change in scale and new incremental users. At the same time, after runes and memecoin, more and more voices and opinions are beginning to point to the next more sustainable hot spot, which will be the RWA track.
Judging from ROOTDATA's RWA track project list, most of the current RWA track projects are still more focused on the Defi product model of traditional financial products as interest-bearing mortgage assets, and there are no real RWA tokenized products in the strict sense.
02
Future Trends of RWA in Hong Kong
Since the 2023 Hong Kong Web3 Conference and the promulgation of a series of new virtual asset regulations, especially the development of No. 7 virtual asset exchanges and the promulgation of security token regulations, many people believe that Hong Kong will become the core base of RWA.
As a transformation of mainland funds, there are a large number of high-quality corporate asset resources as well as securities, funds, insurance funds and other resources. Naturally, they are very optimistic about this direction, so they have been paying attention and communicating closely from the first time. Since last year, they have been communicating closely and discussing projects with licensed securities firms, asset management companies, exchanges and even offshore exchanges in Hong Kong. In the end, they found that this was not the case. They can only say that "ideals are full and reality is skinny."
We have summarized a future strategy for Hong Kong RWA: "Licensing and compliance to the right, retail tokens to the left, and stock-to-coin products to the linkage."
Licensed and compliant RWAs rely on licensed exchanges, tokenize financial products, and focus on debt or equity designs. They are relatively conservative and tend to be traditional financial institutions and regulatory models. They are mainly based on the institutional market (2B), with a moderate issuance scale but weak liquidity, representing the attributes of corporate financing.
RWA that takes the unlicensed compliance route relies on offshore RWA exchanges or alternative investment OTC and Swap exchanges to tokenize physical assets. It will not focus on equity-based design, integrate native token models, avoid traditional securities supervision, and focus on the retail market (2C retail investors). It has a flexible issuance scale, draws on the token economic model, pursues liquidity, and represents the attributes of retail investment (cryptocurrency speculation).
The key to the success of Hong Kong RWA lies in: how to realize the transition from 2B market to 2C market?
This is not a question of whether it can be transformed, but whether traditional financial institutions and interest groups are willing to share power and profits or be overthrown?
Although Hong Kong's Web3 ecosystem is currently very loud, in reality it is still the regulators and various traditional financial interest groups that are fighting for power. Take the current Hong Kong Bitcoin spot ETF, a good RWA product that is a bellwether, for example, but it has become such a mess that it is not given to a licensed virtual asset exchange but is still on the traditional Hong Kong Stock Exchange. A group of old financial institutions are dividing the pie, there is no trading volume, and the ecosystem has not been driven.
If there is no revolution and innovation, Hong Kong's licensed and compliant RWA products will sooner or later become like this. Licensed virtual asset exchanges are only OTC for RWA product transactions and redemptions. The core is still in the interest groups of securities companies, asset management companies and various institutional markets.
[Principle 1] RWA product design can be more innovative. Although it is currently packaged into securities products and then tokenized in traditional financial ways, innovative designs can be made in OTC or ATS outside the body, just like GameFi, where the game is played in Game but the incentives are in Fi. Tokenized securities products may lack liquidity, so liquidity incentives can be made outside the body.
Licensing and compliance: conservative route to the right
You may not be able to imagine how conservative the licensing and compliance of RWA (or STO) under Hong Kong regulation is. Basically, everyone thinks that once the exchange license has been issued and the regulations have been promulgated, they can start working quickly, right?
In fact, this is not the case. For the issuance of securities tokens in Hong Kong, which is currently under the premise of being licensed and compliant, the asset package needs to issue a fund first, which requires a Type 9 asset management license; then the issuance and underwriting of RWA products requires a Type 1 brokerage license (usually a securities firm), and the securities firm needs to find a Hong Kong financial institution to share the quota; RWA products are generally equity-based and must be traded on a Type 7 license exchange. Unlicensed exchanges will gradually be unable to conduct business in Hong Kong, especially they cannot list securities tokens.
Many people are interested in the issuance process of RWA/STO in Hong Kong, so we will explain it in detail here for your reference.
1) As a project party, if you are the asset party or a third-party entity serving the asset party, the first step is to find an experienced brokerage firm with a No. 1 brokerage license (the key is to have financing channels and PI resources), and discuss with the asset-owning enterprise and the underlying asset package whether to design it in a simple or complex manner. According to the regulatory guidelines of the Hong Kong Securities and Futures Commission, the simple type is the debt type, and the complex design is similar to complex models such as ABS or REITs. The latter has not yet issued specific guidance on supervision;
2) A third-party institution is required. You need to find a law firm with Crypto business or license to issue legal opinions on product structure or SPV, Fund structure, etc. You need an asset appraisal report of the asset package from an accounting firm. If it is a corporate credit bond model, you also need a credit rating report from an internationally recognized rating agency;
3) According to regulatory requirements, the basic product of RWA needs to issue a Fund, that is, your asset package or credit bond needs to use the No. 9 asset management license to issue a fund product for filing (or review). It can be a closed-end fund (filing) or an open-end fund (the difference is that the open-end fund can be publicly raised but has more regulatory requirements). If there is a series of issuance plans, you can first lay out the umbrella structure of the fund at the time of issuance; the license can be self-held. In theory, because it is a fund of RWA physical assets (not 100% digital assets), it can be a non-uplift No. 9 license. If not, you need to find a No. 9 license asset management institution to be the investment manager. Of course, the uplift No. 9 license is best, which means that having Crypto experience may be conducive to regulatory approval;
4) The process of RWA tokenization is actually the tokenization of fund products, that is, the core of securities tokens is actually the tokenization of financial products. It is necessary to select a public chain platform (currently generally the Ethereum chain) and a designated digital wallet, and put the fund products on the chain and tokenize them according to the issuance scale, minimum share, minimum transaction amount, etc. of the fund products, and prepare guidance manuals and customer service websites, etc. This technical work may be the easiest;
5) The most difficult part is institutional market distribution, which tests the brokerage business capabilities of your securities firm. Do you have a mature distribution channel or a PI customer base for a series of investment products? Do you have Hong Kong financial institutions that often conduct roadshows and cooperation to carry out underwriting or distribution? Do you have some specific fund institutions to conduct OTC market and block transactions? Remember, as I said in my previous article, the essence of RWA products is corporate financing, and the essence of corporate financing is the institutional market. Underwriting and distribution need to be negotiated in advance. It is not that you will get money immediately after issuing RWA products. You need to think seriously: where is the money?
4 and 5 can be discussed in no particular order. It is OK to discuss distribution/"stolen goods" under the table and tokenize funds technically.
6) After the tokenization and underwriting of the fund are agreed upon, it can be listed on a licensed exchange. In fact, the licensed exchange is only responsible for reviewing the coin list. Of course, the exchange often has its own institutions or cooperative institutions such as No. 1 license, No. 9 license and trust custody license to provide related services, including the distribution of the series of transactions of the underwriting institution and the custody of the digital assets of the RWA token, the subsequent subscription and redemption, the exchange's RWA product investment transactions (currently limited to PI customer investment) and possible OTC transactions, block transactions, etc.
7) According to regulatory guidelines, PI investment transactions are temporarily allowed at present. When the retail market requirements are met, it can be opened to the retail market (retail investment). However, it is not clear what requirements must be met. If compared with the stock market or from the perspective of protecting retail investors, it may be similar to the RWA product. After the number of holding addresses, liquidity, market price and net value fluctuations are relatively stable and mature, the SFC will approve retail transactions in the retail market;
8) The last step is for the exchange to open the retail secondary market for the RWA product and start investment and trading for retail investors. A compliant RWA product will be truly successful only when it reaches this point, but how far is it to get to this point?
The native model of retail tokens to the left
Different from the licensed and compliant virtual asset exchanges and securities product tokenization model, there is also a relatively radical or innovative token-native model, which is based on the common law alternative investment regulation, avoiding the equity-based design of securities regulation, and directly tokenizing physical assets, or physical asset digital warrants. Because they are non-securities tokens and physical asset tokens, they are not air coins or memecoins without physical asset support. They go through offshore RWA exchanges or alternative investment OTC and Swap exchanges. The issuance model draws on the token economic model, and the issuance scale can be large or small. Because it is based on the native token model and related community traffic, it is directly facing the retail investment market and naturally has a certain liquidity, combined with the cash flow supported by physical assets or market activities to promote market value management.
The model of unlicensed exchanges involves relatively complex content such as RWA asset issuance, trading, leverage and derivatives, liquidity, etc. We will discuss this in another separate article. Many friends have asked how to design RWA products. Here we will briefly discuss the design of non-securities RWA token products.
[Principle 2] The RWA product design does not correspond to physical assets, but focuses on the platform of the physical world. What is tokenized is the governance token or points token of the RW platform.
1) The core of non-securities RWA product design is not to correspond to physical assets or map the rights and interests of physical assets. The supporting assets can be physical assets or rights and interests, but what is tokenized is not the rights and interests, but the platform or the utility of the quasi-equity. This is a bit difficult to understand, especially for those who have no experience in traditional asset securitization, especially issuing bonds or ABS. I will have the opportunity to refine it through Space or live broadcast of specific case consultation and disassembly in the future.
2) The core of the native model of retail tokens to the left is the combination of non-securities RWA tokens and alternative investment exchanges, combined with Crypto Fund (early Capital and later Maker). For example, for the licensed exchange HashKey, its compliant STO/RWA products have not yet been scaled up, but its retail token model RWA market can go the way of: offshore international station list + Tokenization department + Capital + Fund (Maker) RWA tokenization combination.
3) Participation of retail investors and institutions, using the DAO, community or node model, encourages more retail investors and related physical asset world industry chain ecological institutions to participate, which can be understood as a process of digitization and chain-up, or as a hedging behavior with the physical world. The 2C model does not start after the coin is listed, but from the initial community construction, product discussion and node consensus, etc., it participates early and becomes a part of the consensus.
4) The stock-to-coin linkage model has been introduced in the previous article, that is, the RWA model of linkage between stocks (traditional financial stocks) and coins (virtual assets), the linkage between traditional financial stocks and virtual assets, and the linkage between the stocks of listed companies and virtual assets such as Bitcoin physical assets or Bitcoin spot ETF investment allocation and Web3 layout. While the price or value of virtual assets mainly Bitcoin continues to rise, the value of stocks of listed companies in the physical world has also doubled. If the Web3 layout and Crypto investment are related to the main business of listed companies, they can move in the same direction and pull synchronously.
5) Combination of native token models: RWA NFT + FT + memecoin, using NFT to carry the identity (or membership) and digital equity certificates of retail investors, and can become the anchor for a series of liquidity token airdrops; changing the ST of equity or dividends to FT for liquidity or some kind of governance utility, and becoming a functional token for RWA application scenarios, as well as a functional token for incentive or mining models; combining the RWA narrative of the physical world, upgrading the brand or IP franchise combined with token media traffic to a memecoin with an RWA combined narrative, as the brand leading banner of the former's NFT and FT, and the three are linked.
6) The tokenization of RWA cash flow does not follow the profit and dividend model, but instead structures the cash flow into the structured liquidity of the liquidity pool through an SPV or smart contract, becoming a special Maker Fund or Liquidity swap pool, which shows the expected continuous liquidity management.
7) Stock-to-coin product linkage, an upgraded version of the stock-to-coin linkage model of 4, that is, a listed company issues compliant RWA asset tokens based on its main business or underlying asset package, and uses the listed company's CB to purchase RWA tokens, while RWA tokens can also be airdropped (given) stocks (physical financial assets). This combines the listed company's stocks, virtual asset investments, and RWA token issuance, and uses convertible bonds to achieve partial underwriting of RWA products. The listed company's operating cash flow agrees on a certain part of the liquidity pool of RWA tokens according to corporate governance requirements, and airdrops/allots listed company stocks or options to RWA token holders, which can mutually pull value and increase users. If there are many people interested in this model, you can find an opportunity to talk about it in Space or live broadcast.
[Principle 3] Limited and unlimited space for RWA tokenization
The principle of RWA tokens: “It’s better to be useless, but it sounds useful, but it’s usually not used.”
8) Thoughts on related RWA assets
From the perspective of usefulness and uselessness and finiteness and infinity, which are the higher-quality and more suitable RWA assets?
First of all, it is clear that real estate is not a good RWA asset class at present. For now, considering the unlimited imagination space of assets and their own flow and ability to generate operating cash flow, we are more concerned about the following asset classes:
Digital warrants for commodities with financial attributes, such as durian, agarwood, etc.;
AI computing power, especially distributed computing power and edge computing combined with #DePIN;
Green energy, renewable energy solar-storage-charging ecosystem combined with #DePIN and carbon credits;
The fan ecosystem of music and sports, from the perspective of streaming payment and idol economy;
New content platform models, mainly IP franchising and content distribution of cultural films and TV series, Watch2Earn, etc.
03
Conclusion
In summary, the future of RWA is very bright, and it may not be limited to the several models discussed above. Due to the length of the article, it cannot be expanded in detail. There will be opportunities to discuss it in detail through Space or live broadcast in the future. However, whether it is the RWA products of licensed and compliant exchanges, or the RWA tokens of alternative investment exchanges, or the combination punches linked with listed companies, the most essential thing is to follow the most energetic assets, funds and people. Compare the data and development of Bitcoin spot ETFs, and think about it, maybe you will understand why RWA will be the next hot track with more sustainability and long cycles? !
