Written by: Shao Jiadine, Liu Honglin; Mankun
In the Web3 circle of 2025, the most abundant thing is the "trend". After DeFi, Non-Fungible Token, metaverse, and meme, RWA suddenly became the top trend - screens are filled with slogans like "asset on-chain reconstruction of financial system" and "trillion-dollar market new blue ocean", various RWA industry associations, summits, alliances, and forums are proliferating like cancer cells, far more numerous than actually implemented RWA projects. Even the uncle selling pancakes at the village entrance has heard that "houses can be sold globally when put on-chain", but sorry, today we must pour cold water: when you follow the crowd shouting "RWA asset on-chain", you might not even understand what you're talking about.
[The rest of the translation follows the same professional and accurate approach, maintaining the original tone and technical nuance while translating into clear English.]Beware of the "RWA Bubble": 99% of Discussions Are Mere Hype, with Challenges in the "Last Mile" of Implementation
The current RWA circle is reminiscent of the ICO fever in 2017: white papers are flying everywhere, intermediaries outnumber actual use cases, and industry associations outnumber project teams. Truly compliant and operational RWA cases are rare. Why? Because RWA implementation requires crossing three "gates of hell":
First Gate: Legal Compliance
This is the most challenging gate. Taking the United States as an example, the SEC views most RWAs as "securities" that must comply with the Securities Act, complete registration, or obtain an exemption, otherwise it's illegal. This means project teams need to hire top-tier legal teams, spend millions of dollars on legal documents, and pass regulatory scrutiny. In China, it's even stricter - any actions involving "asset securitization" or "financial product issuance" must be approved by financial regulators, and unauthorized issuance may be suspected of illegally absorbing public deposits.
Second Gate: Asset Penetration
For RWAs to gain investor trust, they must address the "asset authenticity" issue. For instance, with a real estate RWA, does the Token on the chain truly correspond to a real-world property? Is the property rights clear? Are there any mortgages? This requires professional asset evaluation, due diligence, and legal confirmation, not just "smart contract automatic execution" in a white paper. Many projects claim "on-chain confirmation," but in reality, property rights confirmation requires extensive legwork, and blockchain merely records the result, unable to replace offline legal processes.
Third Gate: Investor Protection
Traditional finance has a mature investor protection mechanism, such as securities regulatory oversight, bank custody, and risk warnings. But what about RWAs? Under a decentralized architecture, who regulates the project team? Who ensures investors' right to information and redemption? If the Token price crashes, can investors redeem like with mutual funds? If the underlying assets are fraudulent, do investors have legal recourse? Without solving these issues, RWA will remain a "castle in the air".
More ironically, many RWA projects are now finding creative ways to evade regulation: placing the issuing entity in the Cayman Islands, using a "Decentralized Autonomous Organization (DAO)" to avoid legal responsibility, claiming to be "unregulated by any country". But the reality is, if you target investors in a specific country, you must comply with local laws - DAO is not beyond the law, and Tokens are not "get-out-of-jail-free cards".
