In recent years, with the rapid development of blockchain technology, Real World Asset tokenization (RWA) has gradually become a hot topic in the global financial market. However, discussions about RWA projects domestically are often accompanied by controversy. Some have published articles stating that "any domestic imitation of overseas RWA models, involving the tokenization and public sale of assets such as real estate or artwork, will be identified as illegal financial activities." Although this view has some merit as a warning, it is an oversimplification to categorically label all domestic RWA projects as illegal activities incapable of fundraising. We should examine this issue from a more comprehensive perspective, considering the nature, legal framework, innovative value, and risks of domestic RWA projects.
I. What are Domestic RWA Projects? Simply Differentiating Between Domestic and International is Inadvisable
RWA projects refer to the conversion of real-world assets (such as real estate, artwork, debts, etc.) into digital tokens through blockchain technology, thereby achieving asset fractionalization, circulation, and trading. The core of such projects lies in leveraging the transparency, immutability, and efficiency of blockchain to reduce the costs of traditional asset transactions and improve liquidity. For example, a piece of real estate worth hundreds of millions can be divided into tens of thousands of shares through tokenization, allowing investors to participate with a lower entry barrier and benefit from asset appreciation or rental income.
Firstly, overseas RWA operations do have different characteristics. Internationally, especially in countries like the United States and Singapore, virtual currencies have been gradually incorporated into regulatory frameworks for securities or security-like assets, requiring issuance and trading to comply with strict securities laws. For instance, the U.S. Securities and Exchange Commission (SEC) treats certain token offerings as securities offerings, requiring compliance with registration and disclosure obligations. This regulatory environment provides a certain legal space for overseas RWA projects.
In contrast, domestic regulations on virtual currencies and token offerings are stricter. Since 2017, China has explicitly banned ICOs (Initial Coin Offerings) and the operation of virtual currency trading platforms, emphasizing that any form of token financing activity is suspected of illegal financial behavior. Therefore, if domestic RWA projects attempt to imitate overseas models by publicly selling tokens for fundraising to the general public, they indeed face extremely high legal risks. Regulatory authorities have repeatedly stressed that virtual currencies should not circulate as currency in the market, and tokenized assets involving public fundraising may be identified as illegal fundraising or securities fraud.
However, simply differentiating and opposing domestic and international RWA projects is inadvisable. First, not all domestic RWA projects operate outside regulatory oversight. Many projects explore possibilities within compliance frameworks, such as blockchain registration systems linked to physical assets, or small-scale pilots in cooperation with financial institutions, engaging in cross-border interactions with Hong Kong within the existing legal framework. Secondly, international RWA projects are not all smooth sailing either; they also face regulatory uncertainties and market acceptance issues. If we differentiate this way, were projects like Longxin and Xiexin from the Hong Kong RWA sandbox domestic or international? Therefore, simply dividing the feasibility of RWA projects along geographical boundaries ignores the complexity of technology and markets. Domestic projects should focus more on how to leverage the advantages of blockchain technology without crossing legal red lines.
II. Blockchain Projects Can Be Legal or Illegal; It's Unrelated to RWA Itself
As a tool, the application of blockchain technology is inherently neutral; the key lies in how it is used. The same goes for RWA projects: some operate within the legal framework, while others operate outside regulatory oversight, attempting to circumvent the law. This is unrelated to the nature of RWA but depends on the project proponents' intentions and operational methods.
RWA projects within the legal framework typically focus on asset authenticity and compliance. For example, some domestic projects collaborate with law firms and accounting firms to ensure the asset tokenization process complies with existing property law, contract law, and financial regulations. They may not involve public fundraising but instead serve specific groups through private placements or institutional investor channels. Such projects emphasize the application of technology, such as using blockchain to improve the efficiency of asset registration and trading, rather than the financing function.
Conversely, RWA projects operating outside the legal framework often use high returns as bait, publicly selling tokens to unspecified public investors and promising fixed returns. Such projects may be suspected of illegal fundraising, pyramid schemes, or fraud. For example, some so-called "real estate tokenization" projects actually have inflated or non-existent underlying assets, with token value entirely dependent on funds from subsequent investors, essentially constituting a Ponzi scheme. Regulatory authorities have cracked down on such activities multiple times, such as in 2021 when a platform was investigated for illegally raising funds under the guise of "artwork tokenization."
Therefore, we cannot completely negate the innovative value of RWA due to some illegal projects. Blockchain technology provides new ideas for asset circulation, but legal risks primarily stem from the project proponents' operational methods, not the technology itself. Just as the internet can facilitate information sharing but also be used for online scams, RWA projects need to explore development under the premise of compliance.
III. RWA Projects Are an Innovative Form of Investment and Financing; Reasonable and Legal Projects Have Fundraising Capabilities
RWA is essentially a new model of investment, financing, and project operation combining technology + finance + industry. Although domestic regulations are strict, RWA projects are inherently an innovative form of investment and financing with the potential to address pain points in traditional finance. For example, issues like financing difficulties for SMEs and low liquidity of real estate can be partially alleviated through asset tokenization. Under a reasonable and legal framework, RWA projects can fully possess fundraising capabilities; the key lies in how the structure is designed and laws are obeyed.
Firstly, reasonable and legal RWA projects focus on using technological means to enhance asset authenticity and transparency. Through blockchain technology, asset information can be publicly accessible, reducing information asymmetry. For instance, debt tokenization projects based on real supply chain accounts receivable and audited by third parties can provide new financing channels for SMEs. Such projects do not involve public sales but target qualified investors, complying with current financial regulatory requirements.
Secondly, domestic policy does not completely排斥 innovation. In recent years, China has actively promoted the application of blockchain technology, such as the digital RMB pilot and blockchain use in government affairs. Regulatory authorities have also emphasized the concept of "sandbox supervision," encouraging fintech testing within controllable risks. Therefore, if RWA projects focus on technological empowerment and avoid the financialization of tokens, they might gain policy support. For example, some regions are exploring "digital asset registration platforms" aimed at improving asset transaction efficiency without involving fundraising.
Finally, successful international cases show that compliant RWA projects can serve fundraising purposes. For instance, some real estate tokenization projects in Singapore serve institutional investors through compliant issuance, improving asset liquidity. Although the domestic environment is different, domestic projects can learn from their experience and innovate in combination with local laws. In summary, if RWA projects are reasonable and legal, they can not only raise funds but also promote financial market efficiency. We should not negate their overall value due to some illegal cases.
IV. Risk Warnings Should Target Illegal Operations, Not Simplistic Negation
In the face of risks associated with RWA projects, a simple "one-size-fits-all" negation not only hinders market development but may also stifle innovation. A more rational approach is to identify specific illegal operations and provide targeted risk warnings. The following are some common illegal behaviors and associated risks.
Public fundraising from the public without legal procedures. Globally, issuing tokens for fundraising to the unspecified public without legal procedures is basically prohibited, and China is no exception. Any RWA project claiming "anyone can participate" is highly likely to involve illegal fundraising. Participants should be wary of projects that promote to the masses and promise high returns.
Inflated assets or lack of endorsement. Some projects exaggerate asset value or have no real assets backing them. Participants need to verify the existence of assets and whether there are third-party appraisal reports. For example, an "artwork tokenization" project once listed a painting as worth tens of millions, while its actual value was only a few hundred thousand.
Promising fixed high returns. Financial principles indicate that high returns inevitably accompany high risks. If a project claims "guaranteed principal and interest" or "annualized returns exceeding 20%," it is likely a scam. Legitimate investments should emphasize a balance between risk and return.
Evading regulation and information disclosure. Compliant projects proactively disclose information and accept supervision, while illegal projects often operate opaquely. Participants should check if the project cooperates with formal institutions and has legal opinion letters.
Pyramid-style promotion. Some projects develop downlines through "recruiting" methods and offer rewards, which涉嫌 pyramid schemes. Participants need to be vigilant about multi-level marketing models.
Regarding these risks, regulatory departments, industry organizations, and the media should strengthen publicity and education to help the public identify illegal projects. Simultaneously, project proponents should exercise self-discipline, focusing on technology application rather than speculation. Simple negation will only lead to market chaos, while detailed risk warnings can promote healthy development.
V. Reminding RWA Participants to Pay Attention to Risks
For investors or practitioners interested in participating in RWA projects, risk prevention is crucial. In general, it is necessary to guard against exaggerated or even false publicity, market manipulation, or the use of projects for money laundering or other illegal activities.
The following are some specific reminders, especially needing to guard against the following types of promotional rhetoric.
Claiming high returns. No investment is "guaranteed to profit." If a project emphasizes risk-free high returns, it is likely setting a trap. Historical cases show that most fraudulent projects use this to attract investors.
Claiming rapid fundraising. Although blockchain technology can improve efficiency, asset tokenization itself takes time for compliance review and value assessment. Projects claiming to "complete fundraising within days" may overlook legal procedures, harboring risks.
Boasting many cases. Currently, there are not many RWA cases, especially domestically. Some project proponents list "successful cases" to prove their capability, but these cases may be fabricated or exaggerated. Participants should independently verify, checking relevant reports or regulatory records.
Claiming it's the market's last opportunity. Using the psychology of getting rich quick for promotion is a common marketing tactic. Truly valuable investment opportunities won't use "the last chance" as a gimmick. Participants should remain rational and avoid impulsive decisions.
Additionally, participants should learn basic financial and legal knowledge, understanding domestic regulatory policies on virtual currencies and token financing. Before participating, consult professional lawyers or financial institutions to assess project compliance. Remember, innovation does not mean overriding the law; technological development must be premised on controllable risks.
Domestic RWA projects are not incapable of fundraising; they need to explore innovation within a strict legal framework. Simply opposing domestic and foreign projects or completely negating the fundraising function of RWA does not align with the facts. Blockchain technology brings new possibilities for asset tokenization, but the key lies in how to balance innovation and compliance. We should encourage the development of reasonable and legal projects, simultaneously crack down on illegal activities, and protect participants through risk education. In the future, the regulatory environment will continue to improve, and domestic RWA projects might inject new vitality into the financial market on a larger scale. Participants need to remain rational, embracing innovation while not forgetting to guard against risks.
