After the launch of the Bitcoin spot ETF, the RWA track has entered a new stage of capital competition, and Wall Street financial giants are accelerating the on-chain of securities to compete for the dominance of the global financial system. Projects like Ondo Finance are trying to promote the tokenization of RWA within the compliance framework, while the deep involvement of traditional institutions like BlackRock has made the game between decentralized finance and centralized capital more intense.
Author, Source: YBB Capital Researcher Ac-Core
I. Preface: Can RWA become the next watershed for the market
With the launch of the Bitcoin spot ETF, the crypto field is ushering in a new development turning point. The policy trends of the Trump administration laid the foundation for this field, and now the entry of traditional financial giants like BlackRock has further promoted the development of the RWA (Real World Assets) track. More and more financial institutions are exploring how to achieve on-chain trading and management of traditional assets such as stocks and bonds through blockchain technology, a trend that is reshaping the landscape of the financial market.
The recent initiatives of Ondo Finance, such as the launch of Ondo Global Markets and Ondo Chain, mark the gradual mainstream of the RWA track. This transformation has also triggered a new round of game on Wall Street, quietly changing the rules of the crypto market and traditional finance.
II. Differentiation and Commonalities of RWA Track Projects
2.1 Ondo Finance, a representative project relying on BlackRock
Ondo Finance has been active recently. On February 5, they launched the Ondo Global Markets platform, which mainly provides blockchain access services for stocks, bonds and ETFs. Immediately after, Ondo Finance announced their new Layer 1 public chain Ondo Chain, aiming to build a more powerful financial infrastructure to promote the tokenization of RWA.
Ondo Chain is the infrastructure of Ondo Global Markets (Ondo GM), focusing on realizing the tokenization and integration of RWA with blockchain. Ondo Chain supports global investors to access US-listed securities (such as stocks, bonds, ETFs) through the blockchain platform, breaking geographical restrictions and providing 24/7 uninterrupted trading services.
Ondo Chain has introduced a solution to embed institutional-level compliance into the public chain architecture, using innovative means such as the permissioned validator node mechanism and native cross-chain protocols, trying to overcome the pain points of existing RWA on-chain in terms of technology and system. Ondo Chain uses traditional financial assets as collateral to ensure network security, and achieves interoperability with traditional clearing systems, further connecting on-chain and off-chain liquidity.
2.2 Ondo Finance's Competitiveness and Limitations in the Same Track
This is related to its unique architectural design and strong institutional resources, and also reflects the power and interest game between blockchain and traditional finance.
Competitiveness
By collaborating with top-tier financial institutions like BlackRock, it has built a blockchain-based financial infrastructure that can support large-scale tokenization of real-world assets, ensuring a balance between compliance and decentralization.
1. Tokenization and free transfer of RWA: By pairing stocks, bonds, ETFs and other assets with tokens 1:1, investors can freely transfer these tokenized assets outside the US and integrate with DeFi, participating in lending, yield and other financial activities.
2. Combination of openness and compliance: Ondo Chain combines the openness of public blockchain and the compliance of permissioned chain. The validators have undergone permissioned review to ensure compliance, while any developers and users can issue Tokens and develop applications on this chain, ensuring innovative vitality.
3. Institutional participation and ecosystem building: Ondo Chain's advisory team includes financial institutions such as Franklin Templeton, Wellington Management, and WisdomTree, promoting its institutional-level applications in TradFi and DeFi.
4. Oracle mechanism and data security: The built-in oracle system can ensure the accuracy and timeliness of on-chain data, reducing the risk of data manipulation. This design enhances the credibility of key data such as asset prices, interest rates, and market indices.
5. Cross-chain functionality and security assurance: Through the Ondo Bridge, it realizes cross-chain asset transfer, provides security assurance for the decentralized verification network (DVN), and supports the management of institutional assets and liquidity, adapting to large-scale transactions.
Limitations
Highly dependent on institutions, limiting the participation of ordinary users and decentralized communities, and the degree of centralization is relatively high, with the main power still in the hands of a few institutions.
1. Highly dependent on institutions, lack of community driving force
Ondo Finance's architecture is strongly dependent on the participation of traditional financial institutions, and the credibility and liquidity of its tokenized assets mainly come from the endorsement of these institutions. Although this model ensures the quality and compliance of tokenized assets, it also brings a core issue: its ecosystem is mainly designed for institutions, with relatively low participation from ordinary users. Compared to fully decentralized RWA projects, Ondo is more like an extension of the traditional financial world, and the circulation and trading of its tokenized assets are more among institutions, with the influence of ordinary investors and decentralized communities being weakened.
2. Power distribution problem under centralized control
Although Ondo Chain retains some openness, its validators are permissioned, which means that the core power is concentrated in the hands of a few institutions. This is in stark contrast to some fully decentralized RWA projects, which emphasize that any participant can become a key node of the network. Ondo's design to some extent reflects the power structure of traditional finance, where most of the control rights are still in the hands of a few large financial institutions. This power concentration may lead to conflicts in future governance and resource allocation, especially when the interests of token holders and institutions are in conflict.
3. Innovation speed may be limited by compliance and traditional institutions
Since the core pillars of Ondo Finance are compliance and institutional participation, this may also limit its innovation speed. Compared to fully decentralized projects, Ondo may need to go through complex compliance procedures and institutional approvals when introducing new financial products or technologies. This makes it face the risk of slow response in the rapidly changing crypto field, especially when competing with more flexible DeFi projects, its compliance and institution-oriented architecture may become a burden.
III. Real Obstacles Faced by RWA Projects
Although blockchain technology provides a technical foundation for the on-chain of RWA, the current public chains still find it difficult to meet the demands of traditional finance in terms of high-frequency trading and real-time settlement. At the same time, the fragmentation and security issues of the cross-chain ecosystem have further exacerbated the difficulty for institutions to deploy RWA. The application of RWA in decentralized finance (DeFi) faces multiple real obstacles:
First, the issue of trust and consistency between assets and on-chain data has become the core challenge for RWA on-chain. The key to RWA on-chain is to ensure the consistency between the real-world assets and the on-chain data records. For example, after the tokenization of real estate, the on-chain records of ownership, value, etc. must fully match the legal documents and asset status in reality. However, this involves two key issues: one is the authenticity of on-chain data, i.e. how to ensure that the source of on-chain data is credible and tamper-proof; the other is data synchronization and updating, i.e. how to ensure that on-chain information can timely reflect the changes in the status of real-world assets. Solving these problems usually requires the introduction of trusted third parties or authorities (such as governments or certification agencies), but this conflicts with the decentralized nature of blockchain, and the trust issue is still an unavoidable core challenge for RWA on-chain.
Insufficient network security is also an important issue. The security of blockchain networks usually depends on the economic incentive mechanism of local tokens, but the volatility of RWA is generally lower than that of cryptocurrencies, especially in times of market downturn, which may lead to a decline in network security. In addition, the complexity of RWA requires higher security standards, which the existing blockchain systems may not be able to fully meet.
The compatibility issues between RWA and DeFi architecture have not yet been resolved, as the original design of DeFi is to serve crypto-native assets rather than traditional securities. The on-chain integration of RWA involves complex financial activities (such as stock splits and dividend distributions), which are difficult to effectively manage through the existing DeFi systems. More importantly, the oracle system also has obvious shortcomings in terms of real-time performance and security when processing large-scale traditional financial data.
The challenges of cross-chain liquidity dispersion and security issues have further increased the difficulty of on-chaining RWA. The cross-chain issuance of RWA leads to liquidity dispersion, increasing the complexity of asset management. Although the cross-chain bridge mechanism provides a solution, it also introduces new security risks, such as double spend attacks and protocol vulnerabilities.
Institutional regulation and compliance issues are the biggest non-technical obstacles to on-chaining RWA, as many regulated financial institutions are unable to trade on public blockchains, mainly due to anonymity, lack of compliance frameworks, and differences in global regulatory standards. Compliance requirements such as KYC and anti-money laundering further increase the complexity of on-chaining RWA, which to some extent limits the inflow of capital.
The limitations of market liquidity and institutional participation also constrain the development of RWA. Currently, the overall market capitalization of RWA is mainly concentrated in low-risk assets (such as government bonds and funds), while the on-chaining progress of major asset classes such as stocks and real estate is slow. The liquidity of RWA still depends on crypto-native protocols, and the overall market is still in the early stage of development.
Finally, the conflict between the trust mechanisms of DeFi and traditional finance is also a problem that RWA on-chaining must solve. DeFi relies on code and cryptography to build trust, while traditional finance relies on legal contracts and centralized institutions. This difference in trust mechanisms makes traditional financial institutions cautious about blockchain technology, especially in key aspects such as custody and risk control.
Although blockchain technology provides the possibility for on-chaining RWA, there are still many challenges in practical application. From data consistency, network security, compatibility, liquidity, compliance, to the matching of technology and economic models, as well as the conflict of trust mechanisms, these issues need to be gradually solved in the development process to promote the widespread application of RWA in DeFi.
If RWA is successful, Ondo Chain may become the redistribution of power between the old and new financial systems of the "Wall Street game"
When analyzing the core Wall Street interests involved in Ondo Chain, it is necessary to go beyond the blockchain and the tokenization of real assets, and examine the driving factors behind the financial operation logic and interest competition. As mentioned in the previous text, the core difficulty of RWA is not at the technical level, but how to achieve compliance, which requires the recognition of powerful centralized power organizations.
BlackRock, the world's largest asset management company, has participated in the investment and construction of RWA after promoting the Bitcoin ETF. This is essentially an attempt to be the first to compete for the redistribution of power between the traditional financial system and the emerging decentralized technology based on blockchain. This struggle is not just a competition of technological change or financial innovation, but a fight for the right to formulate global financial rules, control capital, and the future wealth distribution mechanism.
Although blockchain technology has brought the hope of decentralization, in the face of the high concentration of capital and power, Wall Street is trying to bring this technological revolution under its own control, through new forms of market manipulation and asset securitization, to maintain its dominant position in the global financial system.
4.1 Rebalancing the power of the global financial system
Wall Street has always occupied a dominant position in the global financial system, controlling the key nodes of capital flow, asset management and financial services. Traditional financial institutions have achieved control over global capital through the monopoly of financial infrastructure (banks, stock exchanges, clearing systems, etc.). However, the rise of blockchain technology has broken this situation:
Decentralized Finance (DeFi) has weakened the traditional financial infrastructure long controlled by Wall Street through disintermediation. DeFi allows key functions such as capital flow and asset management to operate on decentralized platforms, where users can perform asset management, lending, trading and other operations directly on the blockchain without intermediaries such as banks and investment banks. But this poses a huge threat to Wall Street, as this shift in power means that Wall Street may lose its dominance over the global financial system.
4.2 Asset tokenization: Who can control the new financial infrastructure
The tokenization of RWA promoted by platforms like Ondo Chain, although aimed at enhancing the liquidity of assets, hides the struggle for control over the new financial infrastructure. Blockchain networks are candidates for the next generation of global financial infrastructure, and whoever can dominate this infrastructure will be able to occupy a dominant position in the future blockchain-linked real-world asset market.
Wall Street's interests are reflected in their intention to control these decentralized networks. They may not directly deny blockchain, but through investment, acquisition or cooperation, control these emerging blockchain platforms, allowing the re-emergence of capital centralization. Although blockchain aims to be decentralized, a large amount of capital and liquidity are still likely to be concentrated in the hands of a few large financial institutions or hedge funds. Ultimately, the key resources (liquidity, protocol governance, etc.) on the blockchain platform may still return to the hands of a few players, causing the decentralized asset market to completely require the drive of a centralized powerful force.
4.3 Regulatory arbitrage and extraterritorial power
According to a report by Cointelegraph on February 6, JPMorgan's latest institutional trader electronic trading survey shows that 29% of institutional traders will or are already engaging in cryptocurrency trading this year, up 7 percentage points from last year.
Arbitrage has always been a trading strategy that Wall Street elites are good at exploiting. Faced with the uncertain regulatory environment of blockchain decentralization, Wall Street institutions may in the future take advantage of the regulatory differences between different countries and regions, by setting up operating entities in jurisdictions with more lax regulations, thereby avoiding stricter regulations. For example:
In projects like Ondo Chain, the tokenization of certain RWAs may bypass traditional securities laws or financial market regulations. By manipulating asset flows and capital structures in different regulatory environments, further strengthen control over emerging markets. This "gray area" of operation may be one of the means by which Wall Street seeks to obtain higher returns through blockchain.
4.4 Market liquidity and price manipulation: The hidden struggle for dominance
Liquidity is the core of market manipulation, and implicit price manipulation can be achieved in the seemingly "decentralized" market. Ondo Chain provides new investment opportunities for global investors through the tokenization of RWA, but its liquidity and trading depth still highly depend on the injection of large capital, and liquidity control will continue to be a core weapon for Wall Street players. Even in the decentralized environment of blockchain, institutions with more capital, trading technology and market insights can still dominate market trends.
4.5 RWA hedge funds: Reconstructing the asset securitization game
Wall Street has historically achieved huge profits through asset securitization (such as subprime mortgage securitization). The tokenization of RWA on the blockchain provides an opportunity for a new generation of asset securitization. For example, Wall Street can issue new financial products by tokenizing asset portfolios to attract global investors. These products can be based on RWA, such as real estate investment trust tokens and corporate bond tokens, providing more choices for the market.
The advanced path of the crypto world, the industry's development has been forced to accelerate
We take the ETF trading of cryptocurrencies led by Bitcoin, the events related to Trump, and the future RWA as examples to analyze. They are all accelerating the development process of the industry to varying degrees, and the direct impact is to increase the difficulty of industry profitability. These factors affect the crypto industry through complex market dynamics, regulatory pressure, and the gradual penetration of the traditional financial ecosystem.
5.1 The Maturation of the Market Brought by the Introduction of ETFs
The launch of ETFs marks the gradual acceptance of the crypto industry by mainstream financial institutions and investors, but this does not necessarily benefit the overall growth of the crypto industry, just as the introduction of ETFs for gold has led to a prolonged price increase:
Decline in Market Liquidity and Volatility
The introduction of ETFs means that crypto assets have entered the traditional financial market, and the investment style of the institutions attracted is more conservative, and the increase in more financial derivatives has also led to a decrease in the volatility of crypto assets. This means fewer arbitrage and high-frequency trading opportunities for traders (such as retail investors and crypto hedge funds), thereby reducing their profit margins.
Concentration of Capital Flows
ETFs have led to a more concentrated flow of funds in the crypto market, mainly concentrated in a few large assets such as Bitcoin. This may expose small and medium-sized crypto assets to the risk of liquidity depletion and price declines, affecting the development opportunities of more small projects. The result is a reduction in the profit opportunities of emerging projects, and an overall increase in the difficulty of profitability in the industry.
Competitive Pressure from Traditional Finance
The launch of ETFs means that crypto assets have been financialized by traditional financial products, bringing higher market transparency and competition. This also means that the crypto industry has to compete more fiercely with traditional financial instruments such as stocks, bonds and commodities, diverting funds and investors' attention.
5.2 Market Uncertainty Brought by the Trump Effect
The actions of political figures like Trump may affect the crypto market through their policies, regulatory attitudes and international relations, increasing the uncertainty and complexity of the industry:
Increased Policy Uncertainty
Trump's policy positions and governing style are often full of uncertainty, especially when it comes to economic and financial regulation. During his tenure, the regulatory policies he and his administration may implement (such as cracking down on or relaxing regulation of digital currencies) will directly affect market sentiment and increase the instability of the crypto market. This uncertainty will expose the crypto industry to greater policy risks, affecting the stability of long-term profitability.
Strengthening of Anti-Money Laundering and KYC Requirements
Due to the possibility of politicians like Trump implementing stricter anti-money laundering and KYC regulations in the future, exchanges and crypto projects will face higher compliance costs. This will significantly increase operating costs and squeeze profit margins, especially for crypto companies lacking compliance experience.
The "Trump Coin" Causing a "Suction Effect" in the Market
High volatility attracts more speculative capital, and the "TRUMP" coin has a natural marketing effect that can attract a large amount of funds to concentrate on this single asset. The limited liquidity and capital in the market can be easily "sucked in" by meme coins in the short term, forming a "capital concentration effect", but as the price falls later, the liquidity is also difficult to disperse back to the original place.
5.3 The Development of RWA Will Bring Traditional Financial Penetration
The development of RWA in the crypto field represents the trend of the crypto market gradually integrating with traditional financial assets, but this integration also brings increased difficulty in profitability:
Introduction of Traditional Finance's Cost Structure and Competition
When RWA projects are deployed on a large scale, traditional financial assets such as bonds, stocks, and real estate will compete with crypto assets in the same ecosystem. The maturity, cost efficiency and low-risk characteristics of traditional financial products will attract a large number of institutional investors, which means that crypto assets need to compete with these mature financial products.
Contradictions Between Decentralization and Compliance
The deployment of RWA involves complex regulatory requirements, especially in terms of compliance and legal liability. Compared to the current decentralized crypto assets, the introduction of RWA may force more crypto projects to move towards compliance, leading to more projects exiting the market due to their inability to meet regulatory requirements, thereby reducing profit opportunities.
Capital Easily Flows to Low-Risk Assets
The on-chain deployment of real-world assets such as government bonds and corporate bonds will attract a large number of conservative investors into the on-chain market. As more capital flows into the low-risk RWA, high-risk, high-return projects (such as DeFi protocols or emerging Tokens) in the crypto market may lose some capital support. This phenomenon of capital shifting to low-risk assets will further compress the profit margins of the crypto market.
At the same time, the derivatives market may also be expanded through blockchain technology. Wall Street can design complex financial derivatives (such as options, futures, and swaps) and resell the packaged risks to global investors. The game of risk transfer and profit-making will continue to play out in the era of RWA tokenization.
Six. Conclusion: Is RWA a Narrative Bubble or a Market Shift?
In summary, in my personal opinion, the introduction of ETFs, the Trump effect, and the future rise of RWA will increase the difficulty of profitability in the crypto industry through different paths and intensities. The maturation and institutionalization brought by ETFs have reduced market volatility and high-profit opportunities; Trump's policies may increase market uncertainty and bring policy risks to the industry; and the introduction of RWA means that the crypto market will compete with the traditional financial market. In this constantly evolving process, as crypto assets become more "mainstream", the market will become more "bottlenecked", and the crypto market will face more severe new challenges in the future.
So whether RWA is a "narrative bubble" or a "market shift" depends on the maturity of its technical foundation, market demand, and implementation path. If we only look at the early stage progress and challenges, RWA has certain "narrative bubble" elements, but with the deep participation of well-known institutions, RWA is expected to become a new catalyst for the crypto market shift.
