On August 28, the Hong Kong Monetary Authority (HKMA) held a press conference to announce the progress of the first phase of the Ensemble project (Sandbox) and detailed four major tokenization theme use cases.
At the press conference, the first domestic transaction based on new energy physical assets completed in Hong Kong by Longxin Group (300682, SZ) in cooperation with Ant Digital Technology was officially announced. This is one of the four tokenization theme cases in the progress of the HKMA's sandbox project and has attracted the most attention. Specifically, the project was issued on Ethereum and Longxin obtained 100 million yuan in financing.
This is the first new energy physical asset RWA in China, which means that a new capital channel is opening up.
01
“Charging pile digital assets”
RWA (Real World Assets-tokenization) refers to the conversion of the relevant rights of traditional financial assets and physical assets into digital tokens on the blockchain. These digital tokens represent the ownership or shares of traditional financial assets and physical assets. It provides a unique and promising financing channel for companies with physical assets, and builds a bridge between real assets and the crypto market for asset and funding parties. RWA is considered one of the most promising applications of blockchain technology.
According to reports, in the first RWA trial, New Electric, a subsidiary of Longxin, as the operator and service provider of the new energy digital platform, used some charging piles operated on the platform as RWA anchor assets, and issued "charging pile" digital assets on the blockchain based on trusted data. Each digital asset represents part of the income rights of the corresponding charging pile. Ant Chain, a subsidiary of Ant Digital Technology, provides technical support to ensure the security, transparency and non-tamperability of data on the asset chain.
Public data shows that currently 85% of public charging services are provided by private enterprises, more than 82% of operators have less than 10 charging stations, and more than 50% of operators have an overall investment of less than 1 million. These operators are more focused on localized operation services, and are more likely to obtain local resources and establish stable service cooperation relationships with surrounding resources. However, they also have the pain point of mismatch between financing needs and financing solutions.
The implementation of the first new energy physical asset RWA project means that Ant Digital has achieved the use of digital technology to facilitate the trusted data flow of physical assets. By digitizing physical assets and opening up new financing channels, industrial Web3 represented by RWA is entering a turning point to truly empower physical enterprises.
Prior to this, traditional financial institutions and Internet giants had significantly increased their layout activities around RWA, and the speed of application had significantly accelerated.
02
Giants are making plans
Based on RWA's advantages over traditional finance, such as high efficiency, low threshold, and risk diversification, RWA has become a new favorite of capital, and major financial institutions and Internet giants have begun to make plans.
Before Ant Digits and Longxin Group launched the first new energy physical asset RWA project, Goldman Sachs launched a digital asset platform in 2023 to help the European Investment Bank issue a 100 million euro digital bond; subsequently, electrical giant Siemens issued 60 million euros of digital bonds on the blockchain for the first time; other financial giants such as HSBC, JPMorgan Chase and Citigroup are also exploring tokenized government bonds.
In March 2024, BlackRock launched the first tokenized fund issued on a public blockchain; other financial giants such as HSBC, JPMorgan Chase and Citigroup are also exploring tokenized government bonds.
A Boston Consulting Group (BCG) report predicts that by 2030, the value of global tokenized assets will reach $16 trillion, accounting for 10% of global GDP.
RWA is an important component of global tokenized assets.
Wang Yang, vice-president of the Hong Kong University of Science and Technology and chief scientist of the Hong Kong Web3.0 Association, believes that the introduction of blockchain technology has revolutionized RWA compared to traditional securitization.
Wang Yang believes that RWA is transparent and secure, and expands liquidity by realizing partial ownership. This approach not only solves the problem of inefficiency in the traditional financial system, but also breaks the limitations of the traditional financial system, making assets digital and unique, shortening the distance between traditional finance and new finance, meeting the personalized financial needs of users, and lowering the investment threshold. This will stimulate more small and medium-sized investors to enter and participate in financial activities, thereby creating huge value and benefits. At the same time, RWA injects liquidity and diversity into the real economy, and increases the scale of funds by expanding the types of assets.
Bai Haifeng, co-head and managing director of CMB International Asset Management, wrote that the core value of RWA lies in the bridge connecting the world of digital assets, which is specifically reflected in four aspects: 1. Close integration with decentralized finance, huge potential; 2. Optimization of traditional financial asset trading models; 3. Increased liquidity of physical assets;
4. It has fragmented characteristics, which lowers the investment threshold and brings additional liquidity.
Bai Haifeng believes that the most exciting feature of RWA is the trading of fund tokens in the secondary market. "As the RWA market matures, the price of fund tokens fully traded in the secondary market can more accurately reflect the value of the fund."
Wang Yang and others recently wrote that the next stage of development of Web3.0 in Hong Kong and even the world is to break the barriers between the virtual world and the real world, so that assets and funds can flow freely between the two systems. RWA is an important innovation that breaks down technical barriers and accelerates the integration of virtual and real world. RWA can not only improve transparency and security with the help of blockchain technology, solve some problems in the traditional financial system, but also fundamentally activate more physical assets, thereby injecting more liquidity into the development of the real industry and the digital economy.
03
Hong Kong New Blue Ocean
The rapid development of RWA is inseparable from regulatory support.
In its reply to Proposal No. 02969 of the First Session of the 14th National Committee of the Chinese People's Political Consultative Conference, the Ministry of Industry and Information Technology stated that it will strengthen research on Web3, formulate a Web3 development strategy document that conforms to my country's national conditions, clarify the development path, technical focus, and application model of Web3, and handle the relationship between inheritance and innovation, development and security, government and market, and supply and demand.
Compared with the mainland, Hong Kong has gradually introduced relatively mature Web3 ecological policies and new regulations in recent years. From the release of the "Policy Declaration on the Development of Virtual Assets in Hong Kong" by the Hong Kong Financial Secretary, to the release of the "Circular on Intermediaries Engaged in Tokenized Securities-Related Activities" and its appendix and the "Circular on Tokenized SFC-Approved Investment Products", the Hong Kong SFC's considerations and regulatory measures on tokenized securities have been clarified, including the clarification and relaxation of some of the original policies.
The Policy Statement on the Development of Virtual Assets in Hong Kong states: If we look beyond this to other uses of virtual assets, such as the trade of artworks and collectibles, the tokenization of antique objects, or from the perspective of financial innovation, the tokenization of different types of products (such as debt securities), we will surely be able to usher in greater opportunities.
The Declaration also states that "virtual assets have far-reaching reach."
On February 20, 2024, the Hong Kong Monetary Authority issued a circular on "Sale and Distribution of Tokenized Products", which sets out the expected regulatory standards that the HKMA must comply with when authorized institutions sell and distribute tokenized products to customers, that is, real-world assets (RWA) expressed in digital form using distributed ledgers or similar technologies.
Wang Yang believes that regulatory laws and regulations form the basis of RWA, which determines which assets can be tokenized and the regulations that need to be followed during the tokenization process.
RWA requires tokenized financial assets, such as stocks, bonds, funds, etc., which have clear legal definitions in the Hong Kong market. Hong Kong regulators have formed clear regulatory guidelines and a multi-level regulatory system, attracting a large number of companies to consolidate Hong Kong's position as an international trade port and global financial center.
Hong Kong has always been renowned worldwide for its adaptable and well-defined financial regulatory environment. More importantly, the Greater Bay Area adjacent to Hong Kong and even the entire mainland are the main sources of real assets for Hong Kong's virtual asset market. The introduction of RWA will bring great benefits to Hong Kong's virtual asset market.
In the past two years, Hong Kong has been active in the areas of virtual asset trading platform (VATP) compliance, tokenization and exchange-traded funds (ETFs). Many experts have suggested using stablecoins to accelerate the promotion of current RWA and tokenization practices in a compliant environment.
On the other hand, the development of Hong Kong's stablecoin has also made breakthroughs recently, which will promote the development of RWA.
In December 2023, the Hong Kong Treasury and the HKMA jointly issued a consultation document on the proposed regulatory regime for stablecoin issuers. In March 2024, the HKMA announced the "Stablecoin Issuer Sandbox" policy, allowing the testing of stablecoin issuance within the regulatory sandbox. In July 2024, the Hong Kong Treasury and the HKMA issued a consultation summary, summarizing public opinions and feedback, and put forward legislative recommendations on the implementation of a regulatory regime for stablecoin issuers in Hong Kong.
In July 2024, the Hong Kong Monetary Authority released the first list of participants in the stablecoin regulatory sandbox, including Standard Chartered Bank (Hong Kong) Limited, Anmi Group Limited, Hong Kong Telecom Limited (HKT), and JD Coin Chain, a subsidiary of JD Technology; Xiaomi's Airstar Bank also cooperated with JD Coin Chain Technology in the Hong Kong regulatory sandbox.
The promotion of stablecoins is conducive to the rapid development of RWA. "Building an RWA ecosystem requires not only multi-dimensional support from capital, technology and regulation, but also a new digital infrastructure to undertake the asset liquidity released through digitization and tokenization. The Hong Kong dollar stablecoin is such an infrastructure." Wang Yang and others pointed out in the article, "In the foreseeable future, the vast majority of RWA transactions in Hong Kong will be completed with compliant Hong Kong dollar stablecoins as the carrier, and the connection and interoperability between stablecoins and traditional finance will be completed. ... The introduction of a stablecoin regulatory framework may lay the foundation for the innovative development of Hong Kong's RWA ecosystem, and with the prosperity of the RWA ecosystem, the role and value of the Hong Kong dollar stablecoin as a bridge for Hong Kong's Web3.0 to connect to the outside world will become more prominent."
Another notable feature of RWA is that the value of different types of tangible and intangible assets can be tokenized, which means that RWA breaks through the shackles of the traditional financial primary market, obtains more diverse transaction content in the digital economy, and thus opens up more flexible and convenient financing channels.
For corporate financing, RWA represents a qualitative breakthrough - assets accumulated by enterprises through actual business but whose value cannot be measured in the traditional financial system can also obtain reasonable quotations through digitalization and become digital assets, allowing the funding party to see them clearly and understand them.
