Analysis of RWA Concepts and Regulations

Recently, RWA projects have sparked widespread discussion in the Web3 community. Some believe that RWA will reshape the financial ecosystem in Hong Kong and achieve breakthrough development within the existing regulatory framework. However, there is controversy in the industry regarding the "compliance" issue, and the understanding of "what constitutes compliance" varies. This divergence stems from different interpretations of the RWA concept.

Definition of RWA Concept

RWA is a broad concept, and any process that achieves asset tokenization through blockchain technology can be referred to as RWA. A true RWA project must possess the following characteristics:

1. Based on real assets
2. Asset Tokenization on Chain
3. Digital assets have ownership value
4. The issuance and circulation of tokens comply with legal regulations and are subject to administrative supervision.

RWA projects can be divided into two categories:

1. Narrow RWA: Physical assets on the chain
2. STO: Financial Assets on Chain

STOs are subject to securities regulations and must comply with local securities laws regarding the definition of "securities." Different countries have varying definitions and regulatory focuses on securities.

RWA Project "Compliance" Layering

The compliance of RWA is a layered system:

1. Sandbox Compliance: Hong Kong Monetary Authority Ensemble Sandbox Project
2. Hong Kong Administrative Regulatory Compliance: Incorporate into the STO Framework Management
3. Clear regulatory framework for crypto-friendly regions
4. "Pan-compliance": There is currently no clear violation determination in specific offshore areas.

Most projects find it difficult to comply with the first two types and often try the third path.

Legal Advice on RWA Projects

1. Choose a policy-friendly jurisdiction
2. Ensure that the underlying assets are real and redeemable.
3. Obtain investor recognition
4. Ensure that institutional operations in the chain are compliant.
5. Preventing Post-Compliance Risks
6. Emphasize Brand Reputation Management

RWA projects need to promote innovation while respecting existing regulatory frameworks, and at the same time be vigilant about compliance risks. Forming industry standards through practice and promoting the improvement of systems is a positive path for institutional evolution.