Deconstructing the fragile balance of Ant Financial and Guotai Junan's RWA experiment

Written by Zhao Qirui

On August 26, 2025, Guotai Junan International announced that it had successfully issued the first batch of structured product tokens and achieved cross-chain transfer to Ethereum through Ant Chain technology .

Public narratives portrayed this incident as the next wave of financial innovation in Hong Kong's Web3 wave, aimed at improving efficiency and reducing costs. However, when viewed within the broader context of increasingly fierce geopolitical financial competition, and particularly the collaboration between the first Hong Kong-based Chinese brokerage firm to offer "full- service virtual asset trading" and a technology company involved in the first cross-border RWA transaction for a mainland enterprise , the essence of this transaction becomes more clearly evident: a high-risk strategic experiment jointly initiated by two leading forces in China's financial and tech sectors.

Guotai Junan International, a state-owned Chinese brokerage firm with a strong culture of robust compliance, provided an ideal and highly reputable platform for this sensitive test in a cutting-edge field. Ant Financial, the technology driver, provided a core pipeline connecting mainland Chinese assets with global trading markets through its "Two Chains, One Bridge" platform.

Similarly, it is no coincidence that the first batch of tokenized assets chose structured products: the financial structure is complex enough to effectively test the feasibility of the technology; the scale is controllable enough to operate within Hong Kong's relatively open but clearly defined "regulatory sandbox", thus avoiding the systemic risks of direct exposure to retail cryptocurrency transactions.

In an era where data has been defined as a key factor of production, the question arises: through what channels and under what framework can assets or data originating from mainland China achieve legal and controllable cross-border circulation after tokenization? When mainland China's data sovereignty and capital control requirements collide with Hong Kong's openness as an international financial center, the balancing act attempted by this technical architecture directly challenges the current ambiguity in cross-border data and capital flow regulation. We believe this will inevitably force further clarification of the rules .

This seemingly singular collaboration is, in fact, a simultaneous test of the limits of technology, market, and regulation. It showcases China's ability to export financial technology to the global market, and may also influence the future direction of RMB internationalization and the global digital asset regulatory competition.

The collaboration between Guotai Junan International and Ant Digit in the RWA sector can be considered a carefully crafted asymmetric interdependence . The core of this strategic exchange is Guotai Junan's irreplaceable "compliance stock" within the Chinese financial system—legal financial licenses, deep regulatory trust, and a mature risk control system—in exchange for the "technological incrementality" represented by Ant Digit—a cutting-edge technological path to the future of digital finance.

Guotai Junan's dominance stems from its accrued legitimacy in the traditional financial world. As a state-owned brokerage firm holding a full license in Hong Kong, it not only secures market access but, more importantly, its rigorous log management and data security practices make it an indispensable and highly trusted vehicle for mainland digital assets seeking compliant international expansion. Ant Financial's dominance, in contrast, is rooted in its technological capabilities for building the future. Its "Two Chains, One Bridge" platform, leading privacy-focused computing technology, and high-concurrency processing capabilities provide the underlying infrastructure for this experiment and are the engine driving the expansion of the digital asset market.

Therefore, this isn't simply a resource integration. More precisely, Guotai Junan is leveraging its regulatory trust to find a compliant "testing ground" for Ant Digit's innovative technology, while Ant Digit is empowering Guotai Junan with its technology, helping it explore new business frontiers. However, this asymmetry also foreshadows the core contradiction of this chapter: when regulatory boundaries clash with technological ambitions, how will this alliance navigate this conflict?

To tell the capital market a new story about a quadratic growth curve, Guotai Junan has seized on RWAs, a bridge connecting real assets with the digital world. As a licensed institution with state-owned capital, Guotai Junan enjoys a significant first-mover advantage in Hong Kong's policy environment, which is actively promoting digital finance. By participating in the regulatory sandbox mechanism and testing new products in a controlled environment, Guotai Junan not only reduces its own trial-and-error costs but also consolidates its leading position in the industry.

Under this strategy, the short-term profits of the RWA product itself may even be secondary. Its core value lies in attracting and targeting a new generation of customers interested in digital assets by fragmenting high-threshold assets. Furthermore, through its collaboration with Ant Financial, Guotai Junan will accumulate experience in digital asset operations throughout the entire process, from asset title confirmation and blockchain integration to risk control, laying the foundation for building a future one-stop digital asset service platform. More importantly, as a pioneer, Guotai Junan has the opportunity to deeply participate in the development of industry standards. By building a moat encompassing technology, compliance, and ecosystem partnerships, Guotai Junan can prevent its own business from being "disintermediated" in the future. The ultimate goal of this game is far more than just commercial profit; it is about reshaping its own value positioning in the future digital economy.

Ant Digit's strategic plan is truly a two-year effort. Its breadth and depth make it hard to argue that its ultimate goal isn't to recreate the dominant position of Ant Group in the early days of the internet era, establishing its technology stack as the de facto standard for connecting Chinese assets with global liquidity. Its collaboration with Guotai Junan Securities is an excellent example of a "model project" and a key "beachhead" to showcase the superiority of its protocol in security, compliance, and efficiency. In the future internet of value, Ant Digit will play a similar underlying infrastructure role to that of "SWIFT + DTCC" in the payments sector, capturing and controlling the flow of global value.

To this end, Ant Digital has built a technical solution designed to achieve strong network effects and ecosystem lock-in. Its "blockchain + IoT" AntChain Inside architecture aims to unify data standards for physical assets from the source, creating a technological reliance. Jovay, a Layer 2 solution designed specifically for institutional scenarios, offers high performance and strong compliance, attracting financial institutions to deeply integrate their transaction logic. All of this is ultimately integrated into the "Two Chains, One Bridge" platform, which provides not only technology but also a complete cross-border value transfer and settlement protocol embedded with compliance logic. We speculate that, while full information about this transaction has not yet been disclosed, this protocol is the key to achieving cross-chain transactions .

By providing a one-stop tokenization solution and leading the development of industry technical specifications, Ant Financial is systematically building an infrastructure ecosystem centered around itself. However, replicating its experience in physical assets like new energy to the highly complex financial sector presents new challenges. Financial assets far surpass physical assets in valuation dynamics, data complexity, and regulatory stringency, placing higher demands on the adaptability of Ant's technical solutions. Furthermore, its reliance on oracles, off-chain custody, and the security of cross-chain bridges present potential vulnerabilities in its technical architecture.

In this ecosystem's dominant structure, Guotai Junan, due to its unique leading position, is more like an empowered super-user than an equal partner. While financial institutions own clients and assets, Ant Financial, as the underlying infrastructure provider, undoubtedly holds greater dominance in determining core protocol rules such as technological evolution and data standards.

In the short term, the collaboration between Guotai Junan and Ant Digital demonstrates significant synergy between complementary financial and technological resources: Guotai Junan acquires much-needed digital capabilities, enabling it to revitalize assets, reduce costs, and optimize its balance sheet; while Ant Digital secures key application scenarios and regulatory compliance for its technology. However, a deeper examination of the asymmetric structure of this partnership reveals three profound structural fault lines within it, which could trigger a deep-seated struggle over dominance, data, and profits in the long term.

The first is a cultural fault line . Financial institutions are rooted in a prudent culture of risk aversion and compliance, while technology companies believe in rapid innovation and agile iteration. When faced with a crisis such as a technical security breach, cultural differences in the speed, force, and transparency of emergency response can quickly erode mutual trust.

The second is the fault line of interests . The core of this game revolves around data ownership and value distribution. Guotai Junan, as the asset provider, profits from value discovery and increased liquidity; Ant Financial, as the technology provider, generates revenue from platform services. However, both parties may seek to leverage the massive amounts of data generated through their collaboration for secondary development. Without clear demarcation of control and revenue rights over this data, the distribution of future profits will inevitably become a major point of conflict.

The third is a strategic fault line . Ant Digital's ultimate goal is to build an open protocol that is broadly interoperable with the global multi-chain ecosystem. Guotai Junan's every move must strictly adhere to the complex regulatory red lines in Hong Kong and even mainland China. As the eldest son of state-owned capital, the industry's leading state-owned enterprise, this unwavering adherence to compliance creates a fundamental tension with Ant's vision of a global, open protocol. If regulatory policies tighten, Guotai Junan's compliance requirements will directly limit the application boundaries of Ant's technology platform, threatening the depth and breadth of cooperation.

In the long run, the outcome of this partnership will swing between two paths: Ant Digital will "pipeline" Guotai Junan's technology, or Guotai Junan will successfully leverage Ant's technology to incubate and internalize its own digital capabilities. Initially, given the complexity of the technology, a certain degree of "pipelining" is inevitable. However, as a major financial institution, Guotai Junan's strategic goals extend beyond simply procuring technology. Ultimately, the two parties are most likely to develop an embedded, symbiotic relationship: deep integration of technology and business, but Guotai Junan will ensure sufficient strategic control by firmly controlling data sovereignty and adhering to compliance guidelines to avoid complete pipelining.

Many details of the "Two Chains, One Bridge" architecture jointly developed by Guotai Junan Securities and Ant Financial remain under wraps. However, existing real-world cases demonstrate that this is more than a simple technical solution; it should be understood as a carefully constructed "compliance sandwich" balancing regulatory realities with market demands. This is truly a product rife with compromises and trade-offs, with its core design centered on striking a delicate yet fragile balance between the conflicting objectives of compliance, liquidity, and decentralization.

To win the trust of traditional financial institutions, absorb their vast assets, and ultimately secure regulatory approval, this architecture, from its inception, represented a significant strategic concession to blockchain's inherent decentralization ideals, inevitably sacrificing certain inherent characteristics at multiple levels. The underlying logic is clear: Ant Chain, a consortium blockchain, serves as a solid first layer, providing a controllable and traceable technical framework for asset compliance. At the top layer, access to global liquidity on the trading side is achieved through integration with Ethereum, the world's largest public blockchain.

However, what connects these two philosophically diametrically opposed worlds is the most crucial yet fragile layer of this "sandwich" structure: the cross-chain bridge . This layer is fraught with technical compromises and potential trust risks. It attempts to bridge a siloed island of compliance defined by permission and control with a vast ocean of liquidity defined by openness and anonymity. While this design theoretically satisfies mainland China's strict controls on capital and data flows and Hong Kong's cautious openness to financial innovation, it inevitably introduces more centralized control points and censorship mechanisms, shifting some of the burden of trust back to trusted intermediaries.

Is this meticulously designed bridge a steel structure capable of withstanding market fluctuations and regulatory shocks, or a fragile cable, prone to breaking at every point? Is the delicate balance between compliance and efficiency precisely its most fatal weakness in long-term development? A deeper analysis of each layer of this "compliance sandwich" will reveal the alliance's true resilience and potential challenges.

The "Two Chains, One Bridge" architecture, if viewed solely on a technical level, is a promising blueprint for addressing interoperability. In the financial sector, it is a meticulously crafted "multi-layered narrative value system," designed to simultaneously tell a compelling story to three key audiences who ultimately determine its success or failure.

First, it tells regulators a compliance story of "controllable risks and traceable processes."

The core of this narrative lies in firmly anchoring key processes—asset generation, ownership confirmation, and compliance management—on Ant Chain, a consortium blockchain. The permissioned nature of consortium chains is a technical affirmation of regulatory authority. It fundamentally eliminates the anonymity and disorder inherent in public chains, ensuring that every participating node and on-chain identity is known, controllable, and accountable. This "Chinese-style" approach to independent control aligns perfectly with mainland China's strict restrictions on virtual currency transactions and its strong emphasis on financial stability.

On this basis, the use of smart contracts further strengthens this compliance narrative. By codifying regulatory rules, asset issuance, transfer, and revenue distribution processes can be automated and independently audited, providing regulators with an unprecedented set of near-real-time, penetrating oversight tools. Ant Digital's proud privacy-focused computing technologies, such as the zero-knowledge proofs ( ZKPs ) and trusted execution environments (TEEs) integrated into its "MOS" platform, add a crucial element to this story. They aim to address the most thorny tension in cross-border data flows: how to meet regulatory requirements for data security and sovereignty (i.e., data remains within the domain) while enabling necessary commercial data exchange. By making data available but invisible, Ant Chain demonstrates to regulators a technological path that can both protect national data security and participate in the global digital economy. This approach is undoubtedly highly attractive to a government that prioritizes data security. This separation of assets and transactions on different chains is a deliberate effort to isolate risks and meet the regulatory requirements of different jurisdictions, and is the cornerstone of the entire compliance narrative.

Secondly, it tells traditional financial institutions a transformation story of "embracing innovation and connecting to the future."

For traditional financial institutions like Guotai Junan, the appeal of RWA lies in its clear path to a "secondary growth curve," addressing the growing anxiety of pipeline closures. This framework leverages tokenization technology to transform previously illiquid and difficult-to-divide assets like real estate and private equity into digital tokens that can be efficiently transferred globally. This not only increases the fair value of assets by eliminating illiquidity discounts, but also overcomes the geographical and investor constraints of traditional financing, providing lower-cost global capital.

The deeper value lies in the fact that RWA provides traditional financial institutions with a powerful tool for optimizing their balance sheets and achieving asset-light operations, potentially boosting their return on capital and overall market valuation. The combination of Ant Chain and Ethereum perfectly addresses the dual needs of financial institutions for innovation and security: Ant Chain, as a consortium blockchain, ensures the robust operation of asset-side businesses with its high performance and strong stability, meeting the stringent risk control requirements of financial services; while Ethereum, as a public blockchain, provides access to a vast new market. Guotai Junan International's submission and confirmation of its tokenized securities business plan by the Hong Kong Securities and Futures Commission (SFC) is a powerful footnote to this transformation story. It demonstrates to the industry that traditional financial institutions can embrace and benefit from distributed ledger technology without disrupting their compliance foundations.

Finally, it tells global investors a story of opportunity to "invest conveniently and safely in high-quality Chinese assets."

The success of this narrative hinges directly on effectively connecting mainland China's abundant, high-quality assets with the abundant liquidity of global markets. Choosing Ethereum as the transaction chain is the most pragmatic and crucial step in this narrative. Ethereum is not only a technological node, but also the seat of the most powerful liquidity consensus in the global digital asset sector. Its vast user base and mature DeFi ecosystem are unmatched by any other platform.

Through a regulated cross-chain bridge, Chinese assets, compliantly processed on Ant Chain, can be securely "deployed" in tokenized form onto the high seas of global liquidity on Ethereum, providing international investors with an unprecedented, regulated investment channel. As an international financial center, Hong Kong's progressively improving virtual asset regulatory framework provides critical institutional support for the legitimacy and security of this bridge. From "penetrating scrutiny" to the "equal application" of securities laws to security tokens, Hong Kong's regulatory system provides clear investor expectations and protections. Therefore, the "Ant Chain + Ethereum" combination is both a stopgap measure to address mainland China's regulatory realities and a best practice for maximizing value by leveraging the strengths of their respective ecosystems. It seeks to establish a closed loop of trust: investors trust Hong Kong's legal framework, which recognizes Guotai Junan's compliant operations, while Guotai Junan relies on Ant Chain's technology to ensure the authenticity and trustworthiness of the underlying assets. The ultimate goal of this story is to enable global capital to share in the growth dividends of China's digital economy in a compliant and transparent environment.

However, when this narrative value system, carefully constructed to cater to the interests of multiple parties, is put to the test under the cold laws of physics of distributed systems and the brutal realities of financial markets, every connection point of this ideal blueprint begins to reveal profound fragility. Behind this architecture's pursuit of efficiency and compliance advantages, it hides a series of technical debt and potential attack vectors that deserve our attention. Every trade-off between the "Blockchain Trilemma" constitutes a potential breaking point.

As a critical hub connecting isolated compliance islands with the vast sea of ​​liquidity, we believe Ant Chain's trusted cross-chain bridge is the weakest and most controversial link in the entire "compliance sandwich." From a security audit perspective, despite claiming to be based on highly secure heterogeneous protocols, its operational mechanisms still harbor the elusive specter of centralization. As the most vulnerable link in the entire blockchain ecosystem, the security of the cross-chain bridge directly determines the survival of the system.

This centralization risk first manifests itself in its verification mechanism. While committee-based Byzantine Fault Tolerance (PTC) provides a seemingly decentralized verification and endorsement, the security of this mechanism depends entirely on the decentralization of the committee itself. If the committee's membership is limited, its composition is homogeneous, or its identities are easily identifiable, it will degenerate from a distributed and secure network into a centralized bottleneck vulnerable to nation-state attacks or internal collusion. Secondly, the locking and minting of cross-chain assets inherently rely on some form of private key management. If the underlying layer still uses traditional multi-signature (multi-sig) schemes rather than more advanced distributed key technology, the consequences of compromising or coercing a small number of key entities holding private keys would be catastrophic. In the absence of full transparency regarding the committee's membership, election mechanism, and censorship-resistant design, the trust foundation of this bridge remains based on the "trust assumption" of a small number of participants rather than cryptographically guaranteed "trustlessness."

Furthermore, reliance on external oracles and relayers introduces new attack vectors. These components are responsible for transmitting state and verifying transactions between chains. If they are not fully decentralized or their data sources have a single point of failure, attackers can compromise the integrity of cross-chain transactions by manipulating data or disrupting services. Especially during periods of extreme market volatility, oracle delays or distortions can directly lead to a decoupling of on-chain tokens from the value of the underlying off-chain assets, thereby undermining the value foundation of RWA.

The second vulnerability of this architecture lies in the data itself. Ant Chain's AntChain Inside solution, through the integration of blockchain and IoT, attempts to address the issue of data authenticity on-chain from the physical source. This effectively ensures the trustworthy on-chain storage of operational data (such as power generation) for assets like new energy charging piles. However, this solution also has inherent limitations and risk blind spots.

Its core flaw lies in the fact that while it ensures the authenticity of operational data , it cannot guarantee the stability of the underlying asset value . The value of the RWA token ultimately derives from the off-chain assets it represents, not simply its operational data. For example, even if the power generation data of a photovoltaic power plant is 100% authentic, it cannot prevent the asset value of the plant from plummeting due to policy changes or technological iterations.

Existing solutions do not appear to fully demonstrate how on-chain tokens can effectively and promptly transmit and reflect significant risk events such as default, damage, or bankruptcy of the underlying assets. This exposes a legal gap between on-chain technical solutions and off-chain legal enforcement—smart contracts may perfectly execute code, but they cannot enforce liquidation or disposal of assets in the real world.

At the same time, the introduction of advanced privacy-preserving computing technologies to meet regulatory compliance requirements is itself a double-edged sword. While technologies like zero-knowledge proofs (ZKPs) theoretically achieve "data availability without visibility," resolving the conflict between data sovereignty and commercial applications, this privacy comes at a price. For global investors, excessive data encapsulation can impair their ability to conduct due diligence on underlying assets, reducing transparency and impacting the final pricing and liquidity of assets. More importantly, these complex cryptographic calculations incur significant performance overhead, increasing system complexity and verification costs. Striking a balance between protecting privacy and meeting regulatory compliance, while ensuring transparency and attracting investment, will be an ongoing technical and commercial struggle.

Finally, the architecture's touted high performance and scalability also come with a hidden price. Ant Financial's Jovay, a Layer 2 blockchain specifically designed for institutional use cases, claims to achieve extremely high transaction throughput (TPS) and extremely low user response times. However, this performance boost often comes at the expense of decentralization.

As a Layer 2 for institutions, Jovay's architecture is likely a permissioned chain operated by a small number of trusted nodes, rather than a public network open to the world. While this design meets the performance and controllability needs of financial institutions, it inherently conflicts with the decentralized core philosophy of the Ethereum public blockchain to which it connects. This reduces the system's censorship resistance and transparency, forcing users to relinquish some trust to the Layer 2 operators while enjoying high performance.

Furthermore, this layered architecture introduces new complexities and potential points of failure. The data synchronization and security anchoring mechanisms between Layer 2 and the main chain themselves present potential security risks. In extreme market conditions like flash crashes or large-scale redemptions, if the Ethereum mainnet is congested, delays in Layer 2 settlement submissions to the mainnet will directly impact the finality of on-chain RWA transactions and may even expose them to redemption risks due to insufficient liquidity within the Layer 2 itself. This reliance on the underlying public chain means that the resilience of the entire system is ultimately limited by the most congested bridge.

These trade-offs, compromises, and inherent vulnerabilities in technological implementation will inevitably translate into profound real-world challenges. These challenges go beyond the purely technical realm and directly address two fundamental dilemmas of this model: commercial "economic sustainability" and ecological "system siloing."

While Ant Chain boasts strong technical support, such as its large-scale open blockchain architecture (HOU), which supports 100,000-level transaction throughput (TPS), seconds-level transaction on-chain time, and petabyte-level data ledger storage and processing capabilities, and its cross-chain data connectivity service (ODATS) leverages Ant Blockchain's leading technology and the standardized UDAG full-stack cross-chain protocol to enable trusted interoperability between homogeneous and heterogeneous chains , achieving such high performance and interoperability comes at a significant cost in terms of both technical and operational costs.

Beyond these direct technical costs lies the even heavier, intangible burden of compliance and trust . Under Hong Kong's strict regulatory framework, obtaining and maintaining licenses for virtual asset trading, establishing financial-grade anti-money laundering (AML) and customer due diligence (KYC) systems, and navigating complex cross-border data flow regulations all require significant investment in legal, audit, and human resources. Furthermore, educating and promoting RWAs as an emerging asset class within the mainstream market and building trust among investors, regulators, and partners in this complex "bridge" also requires sustained and substantial investment.

These high combined costs make the "Two Chains, One Bridge" model, at this stage, more of a "luxury" tailored for industry giants like Ant Financial and Guotai Junan Securities, rather than a universally applicable solution that can be widely replicated and scaled. Its commercial sustainability will depend heavily on whether it can handle sufficiently large-scale, high-value assets to dilute its massive fixed costs.

However, a more profound challenge than economic sustainability lies in the potential for ecological siloing that this architecture may lead to. The "two chains, one bridge" initiative is likely to struggle to bridge the "last mile" of identity and credit mutual recognition .

A compliant user who has undergone rigorous KYC screening and possesses a good credit history on Ant Chain is virtually useless in the world of decentralized finance (DeFi) on Ethereum. DeFi protocols mostly operate under pseudonyms or anonymous addresses. Even with privacy-preserving technologies like zero-knowledge proofs, achieving cross-chain identity and credit recognition while complying with KYC/AML requirements in different jurisdictions (such as mainland China, Hong Kong, and the Ethereum ecosystem) presents enormous technical and legal challenges. This means that while Ant Chain users can transfer the "value certificates" of their assets to Ethereum, they cannot leverage their accumulated "credit value" into broader DeFi application scenarios, such as participating in unsecured lending or more complex financial derivatives.

If this fundamental issue of trust transfer cannot be resolved, the bridge will fail to become a truly two-way bridge of integration and will revert to the one-way conundrum of "data and assets can flow out, but value and the ecosystem remain difficult to integrate." This will severely limit its potential to build an open and prosperous digital financial ecosystem and could ultimately lead to its transformation into a technologically advanced "data enclave" isolated from the mainstream ecosystem within the larger global digital economy.

In this RWA collaboration driven by Ant Digits and Guotai Junan International, all participants are not dealing with isolated technical or market challenges, but are instead part of a systemic risk network.

In this network, the highest-level and most decisive variable is not known technical vulnerabilities or market fluctuations, but regulatory-defined risks - that is, how the RWA product and its cross-chain circulation behavior will ultimately be classified and ruled by regulators in key jurisdictions such as mainland China, the Hong Kong Special Administrative Region, and even the United States.

This definitional question is the backbone of the entire structure, and its outcome will directly determine the model's legal basis, technical compliance path, and market access qualifications. The Hong Kong Securities and Futures Commission's "same risk, same regulation" principle of penetrating scrutiny, mainland China's strict prohibition on virtual currency trading and its unwavering commitment to data sovereignty, as well as the ongoing jurisdictional jockeying between the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), create a complex and uncertain landscape.

The outcome of this multi-party "definition battle" will directly determine the ultimate fate of the model - whether it will open up a compliant highway connecting Chinese assets with global liquidity, or a one-way street leading to a regulatory dead end.

Every step of this collaborative model is conducted within the existing complex and often conflicting legal and regulatory framework, exposing three inherent structural issues: the compliance of cross-border capital flows, the contagion risk of securities classification, and the "trilemma" of data governance . These obstacles are not simply circumvented by technological solutions, but are rooted in deep-seated conflicts between different jurisdictions.

The core of this model's design is to create a seemingly efficient and compliant closed-loop cross-border capital flow through a "two chains, one bridge" architecture within the framework of licensed Hong Kong institutions. However, at the end of this capital cycle, there is a fragile link: how to legally and compliantly flow foreign funds into mainland entity accounts.

Its vulnerability lies in its direct confrontation with mainland China's stringent foreign exchange control system, particularly the State Administration of Foreign Exchange's penetrating scrutiny principle of "substance over form." While Guotai Junan International is able to implement strict anti-money laundering (AML) and counter-terrorist financing (CTF) procedures in Hong Kong, mainland regulators retain the final say over the ultimate source of funds—particularly when tracing them back to global cryptocurrency investors—and the commercial substance of the incoming funds.

Any attempt to disguise virtual asset investment or cross-border financing through the guise of trade settlements is extremely vulnerable to penetrating scrutiny. If the State Administration of Foreign Exchange determines that the funds flow is essentially an attempt to circumvent existing foreign exchange controls rather than legitimate settlement based on genuine trade, the entire carefully designed technical and legal framework will be immediately rendered ineffective. This potential qualitative risk means that the key to closing the capital loop lies not in the hands of technology providers or financial intermediaries, but entirely in the final policy decisions of mainland regulators regarding this emerging phenomenon.

The second structural issue stems from the determination of the “security” nature of this RWA product. This is a common issue for nearly all RWA products: in Hong Kong, under the principle of “same risk, same regulation,” the structured product tokens issued by Guotai Junan International will almost certainly be classified as security tokens and fall under the regulatory framework of securities law.

However, due to the cross-border nature of this product, the real risk comes not only from Hong Kong's clear regulatory expectations, but also from the possible "cross-border penetration" determination of this behavior by mainland regulators.

If mainland regulators apply the "look-through principle" and deem this Hong Kong offering an unauthorized, illegal securities offering targeting the mainland Chinese market, Hong Kong's role as a regulatory firewall for offshore financial centers could be breached. This risk could even be contagious, with the legal and commercial consequences extending beyond Hong Kong to the participating parties' mainland parent companies.

For Guotai Junan, this could severely impact the core business, licenses, and even market reputation of its mainland parent company. For Ant Financial, despite its strategic emphasis on technology export, if its platform is deemed to support financial activities prohibited in mainland China, regulators could reassess and impose stricter restrictions on all of its licensed financial businesses. This risk stems from the fact that as long as participants have a significant commercial presence in mainland China, they cannot completely isolate themselves from offshore innovation activities, both legally and reputationally.

The most profound structural problem with this model lies in the nearly irreconcilable "trilemma" its data governance solution faces: it must simultaneously satisfy mainland China's absolute demand for data sovereignty, Hong Kong's legal protection of personal privacy, and global investors' market expectations for asset transparency . This creates an "Blockchain Trilemma."

To meet the core red line of mainland China's Data Security Law, which stipulates that "important data" must not leave the country, this model must employ extremely prudent data localization and cross-border flow strategies. This means that it is virtually impossible for global investors to obtain original, complete, and unprocessed data on the underlying assets. Ant Chain's privacy-focused computing technology, which makes data available but invisible, is a technical compromise designed to address this dilemma. It attempts to use cryptographic tools to prove the calculation results or attributes of certain data to the outside world without transferring ownership of the original data.

However, this technical solution inherently challenges the other two objectives. For global investors, "available but invisible" largely equates to a loss of transparency . The inability to penetrate and independently verify the full details of the underlying assets significantly increases uncertainty in investment decisions and may lead investors to demand higher risk premiums, thus affecting asset pricing and liquidity. Furthermore, even if privacy protection is technically achieved, it remains unclear whether the solution can fully comply with Hong Kong's strict personal information protection regulations and whether it can provide effective judicial evidence in the event of legal disputes.

The structural issues exposed at the legal and jurisdictional levels mentioned above are not merely abstract compliance issues. They inevitably cascade downward, permeating the actual operation of this cooperative model in the form of two concrete manifestations: the systemic risks of technological reliance and the inherent contradictions of market positioning . The challenges of technology and the market are not isolated variables, but rather a direct reflection and amplification of fundamental contradictions at the legal level.

The most significant technical vulnerability of this model stems from its external reliance on Ethereum, a public blockchain. Choosing Ant Chain-Ethereum as its cross-chain architecture means that the project outsources a critical component of its value realization—access to global liquidity and ultimate transaction settlement—to a global network whose governance, protocol evolution, and even regulatory future are completely outside of Chinese jurisdiction.

This dependency exposes the project to multiple uncontrollable risks. The first is technical performance bottlenecks. The Ethereum network's congestion and high transaction fees are well known. But a deeper risk lies in the externalities of governance and regulation . Any major protocol upgrade or potential hard fork in the Ethereum community could unilaterally change the rules of the game, creating a "dimensionality reduction attack" on the RWA asset channel built on it.

Even more threatening is the concentration of Ethereum's primary nodes and developer community in the United States and Western countries, inevitably exposing it to US regulatory pressure. If US regulators (such as the SEC) were to define Ethereum's validators as licensed financial intermediaries, or restrict interaction with certain addresses or protocols for geopolitical reasons, the lifeblood of this "outbound" channel designed for Chinese assets could be instantly severed. The decision to build critical financial infrastructure on an external platform, one without sovereign influence, inherently creates the largest technical and geopolitical exposure in the entire risk matrix.

These external risks ultimately precipitated a profound "identity crisis" within the market, sparking a battle over who controls asset pricing. From its inception, this RWA product faced a fundamental positioning dilemma: who was it designed for?

For mainland high-net-worth individuals accustomed to traditional financial products, concepts like tokenization and blockchain remain unfamiliar and fraught with distrust. They seek stability and regulatory certainty, precisely the very things these cutting-edge models cannot fully provide. Meanwhile, global cryptocurrency investors embrace decentralization, permissionlessness, and censorship resistance. For them, an RWA product, led by a licensed financial institution and subject to strict KYC on a permissioned blockchain, is the very antithesis of decentralization.

This inherent contradiction in target customer groups means the product faces a potential trust crisis in both worlds, making it difficult to establish a solid market foundation. This rift in identity directly leads to a chaotic price discovery mechanism . Theoretically, the pricing of an RWA product should be anchored by the intrinsic value and stable cash flow of its underlying Chinese assets. However, once its primary source of liquidity comes from overseas crypto markets, its price is inevitably affected by that market's speculative sentiment, algorithmic trading, and macro liquidity shocks.

This will trigger a battle over China's asset pricing power. Will price determination rest with asset fundamentals, or will it shift to the crypto market, driven by external sentiment? If the latter prevails, tokenization will not only fail to achieve value discovery, but may also expose previously stable real-world assets to the volatile digital world. This will not only disrupt China's own asset valuation system but also fundamentally challenge China's strategic goal of securing global pricing dominance for its high-quality assets in the digital economy.

In summary, these technological dependency risks and market positioning difficulties together constitute the fatal shortcomings of this cooperation model. These are not tactical issues that can be solved through operational optimization or enhanced marketing, but rather stem from the inherent structural flaw of attempting "cross-border arbitrage" between two distinct sovereign, legal, and trust systems.

A deep dive into the collaboration between Ant Digits and Guotai Junan International reveals a clear picture: this isn't a simple technological application, but rather a complex machine meticulously calculated and constructed within the interests of multiple parties and under multiple constraints. Powered by a business alliance based on "asymmetric interdependence" and driven by the compromise-filled "two chains and one bridge" model, it attempts to forge an unprecedented path between the reality of sovereign regulation and the ideal of global mobility.

Yet, this ingenious design cannot mask its inherent fragility. Every key component of this machine—from the tensions of interest within the alliance, to the specter of centralization in cross-chain technology, to the irreconcilable structural contradictions of law and jurisdiction—resembles deep cracks. It has successfully launched and entered the global stage, but in doing so, it has placed itself at a precarious balancing point, shaped by technology, markets, and geopolitics.

So far, we've answered the questions of "what it is" and "can it operate reliably." The conclusion is: it's a delicate work of art, but it might be placed in an earthquake-prone area.

However, the evaluation of this experiment must go beyond the success or failure of its structure. Regardless of its ultimate fate, the very existence of a market action of this magnitude has already thrown a huge stone across the market, sending ripples cascading down. We believe that these ripples—its impact on industry paradigms, regulatory philosophies, and even geopolitical and financial structures— may be even more historically significant than the experiment itself .

We’ve dissected the inner workings of this machine, seeing how its delicate gears coexist with structural cracks. Now we must look beyond the machine itself to see how it will transform the landscape as it unleashes itself into the world , overturning old paths and marking new frontiers for those who come after.