What exactly are we talking about when we discuss RWA assets on the blockchain?

The story of RWA has just begun, but only by tearing off the packaging of the “myth” can we see its true value - or the bubble.

Author: Mankiw

In the Web3 circle in 2025, there is no shortage of “outlets”. Following DeFi, NFT, metaverse, and meme, RWA has suddenly become the top stream - the screen is full of slogans of “asset on-chain reconstruction of the financial system” and “new blue ocean of trillion-dollar market”, and various RWA industry associations, summits, alliances, and forums have fissioned like cancer cells, dozens of times more than the RWA projects that have actually landed. Even the uncle who sells pancakes at the entrance of the village has heard that “the house can be sold globally if you put it on the chain”, but I’m sorry, I have to pour cold water today: when you shout “RWA assets on the chain”, you may not even understand what you are talking about.

Let’s break the first myth: RWA is not a “new species”, it’s just “old money with a new ledger”.

Don’t be fooled by the “Web3 innovation” package. The funds you buy with Alipay, the A-shares in the stock software, and the bonds in the bank app are essentially “real asset tokenization” - stocks are digital certificates of equity, funds are share certificates of asset portfolios, and bonds are electronic records of creditor’s rights. The only difference is that the tokens of traditional finance are stored in the centralized databases of banks and brokerages, while the tokens of RWA are stored on the decentralized ledger of the blockchain. It’s like changing the ledger from Excel to Google Docs, the core is still bookkeeping, but the bookkeeping method has changed.

But now many people talk about this as if it were “the first time humanity discovered fire”: “Wow! Blockchain has put assets on the chain!” Come on, stocks achieved “asset tokenization” as early as the 17th century, only back then they used paper certificates, which later transformed into electronic data. RWA is essentially “Tokenization 2.0,” moving the certificates from a centralized database to the chain, adding the characteristics of immutability and decentralized verification, but the underlying logic is still “using digital certificates to represent rights.”

To give a straightforward example: if you buy Tencent shares, the brokerage APP shows that you hold 100 shares, and these 100 shares are the tokens of Tencent equity, which are stored in the brokerage’s database; If Tencent issues RWA equity, you receive 100 tokens on the blockchain, which essentially represents the 100 shares, the difference is that this token can be circulated on the chain, while traditional shares can only be transferred on the exchange. So don’t myth RWA, it’s not about “creating new assets”, it’s about “changing old assets for a cooler ledger”.

90% of people get the focus wrong: The essence of RWA is not “data on-chain”, nor is it “assets on-chain”, but rather “rights certificates on-chain”.

Now the streets are full of nonsense about “data on the chain = assets on the chain”. Someone said, “I scan the title deed into a PDF and put it on the chain, and this house becomes RWA!” Wake up, you take 100 photos of the real estate certificate and send it to the blockchain, and the house is still registered in the housing authority system, which has nothing to do with the half-dime data on the chain. Data is just information, and the core of assets is “rights” – you own a house, not because you have a photo of the title deed, but because your name is written in the register of the housing authority, which is a right granted by law.

Someone else blows: “Our Token is a 1:1 mapping of real assets, and holding a Token is equivalent to owning an asset!” What’s the difference between this and a child’s house? If you draw a “1,000,000 token” and say that it represents the convenience store downstairs, will the convenience store belong to you? “Mapping” without legal backing is a castle in the air. The core of RWA is not to move the assets themselves to the chain (the house can’t be moved, the equity can’t be moved), but to tokenize the “equity certificates that prove that you own the assets” - such as stocks, bonds, property rights certificates and other legally recognized equity certificates into on-chain tokens.

Key points: The essence of assets is “rights”, and the carrier of rights is “legally recognized certificates”. Movable property depends on contracts and invoices, immovable property depends on property rights certificates, equity depends on shareholder registers, and claims rely on debt contracts. What RWA wants to do is to repackage these “legally protected certificates” with blockchain technology to make the circulation of certificates more efficient and transparent, but the premise is that there are rights under the legal framework first, and then there are tokens on the chain. If you skip the law and talk about “assets on the chain” directly, it is pure hooliganism.

Don’t Treat “On-chain” as a Holy Grail: Without Legal Support, RWA is Just the “Emperor’s New Clothes”

The blockchain community likes to say that “code is law”, but in the RWA space, law is the father of code. If you own the private key, you own 100% of the Bitcoin, because the “rights” of the Bitcoin are completely defined by the blockchain code; However, RWA’s Token represents real assets, and the ownership of real assets is determined by the laws of various countries. For example, if you buy an RWA Token that represents a U.S. property, and the developer runs away, you can’t take the private key to a U.S. court to sue - the U.S. court first needs to see: Is the Token recognized as a legitimate certificate of interest under the local legal framework? Do you qualify as an “Accredited Investor” under the U.S. requirements? Is your purchase process compliant with U.S. securities regulations?

A more poignant example: Someone in China put a property in Beijing “on the chain,” issuing 1000 tokens, each representing 0.1% of the ownership.

However, according to Chinese law, the change of real estate ownership must be registered in the real estate registration center, and the token circulation on the chain does not count at all. If the homeowner sells the house one day, and the token holder goes to the court to defend his rights, the court will only look at the real estate certificate, not the records on the blockchain - because the law does not recognize the legitimacy of this “on-chain equity certificate”.

Therefore, the core of RWA is not a technical issue, but a legal construction issue: how to make the tokens on the chain recognized as certificates of rights and interests in the real legal system? This requires addressing three key issues:

1. Rights Anchoring: Tokens must correspond to rights protected by law in reality (such as equity, debt, or property rights), rather than being mere air.

2. Compliance Framework: The issuance process must comply with the regulatory requirements of the target market (such as SEC regulations in the United States and financial regulations in Hong Kong), otherwise, it constitutes illegal securities issuance.

3. Dispute Resolution: When disputes arise regarding the rights represented by the Token, whether the legal system can recognize on-chain records as evidence and whether it can protect the rights of the holders.

Those who talk about RWA outside the law are either clueless retail investors or deceitful scammers pretending to be ignorant—after all, the slogan “decentralized, global circulation” sounds much better than “first deal with regulatory issues in each country.”

RWA is essentially a financial product, don’t be blinded by “decentralization”.

Many people hype RWA as a “disruptive financial tool,” claiming it allows ordinary people to invest in overseas real estate, top private equity, and artworks. But the truth is: RWA is just the tokenization of financial instruments, and finance inherently carries regional characteristics and regulatory constraints.

First of all, all RWAs are “financial products”. Whether it is real estate mortgage bonds, corporate accounts receivable, or fund shares, they are essentially tools for “making money with money”, and must conform to the core logic of financial regulation: protecting investors, preventing risks, and maintaining market stability. For example, in the United States, investors who purchase RWA-type securities must be “accredited investors”, while in China, financial products must be approved and not illegally raised from the public. Projects that claim that “anyone can buy RWA” are either engaging in illegal fundraising or playing a dangerous game of “regulatory arbitrage”.

Second, the geographical nature of finance makes it difficult for RWAs to “circulate globally”. Your real estate RWA Token issued in the U.S. may be treated as “foreign securities” in China and may not be sold to Chinese investors without approval. Similarly, China’s corporate debt RWA, which U.S. investors may not be able to purchase due to regulatory restrictions. Even if the technology is global, legal recognition is still a huge obstacle – can you imagine a Chinese investor taking an on-chain token and going to a U.S. court to sue a U.S. company for default? Not to mention the cost of cross-border litigation, the question of whether U.S. courts recognize the legitimacy of your token holdings is a big question.

More realistically, financial risks do not disappear simply because they are ‘on-chain.’ Credit risk, market risk, and liquidity risk from traditional finance still exist in RWA, and may even become more concealed due to ‘decentralization.’ For example, an RWA project may issue tokens backed by fraudulent assets, and the immutable characteristics of the blockchain may actually make the scam harder to uncover—after all, the data is real, but the assets are fake.

Beware of the “RWA Bubble”: 99% of the discussions are just hot air, the challenge lies in the “last mile”.

The current RWA circle is reminiscent of the ICO boom in 2017: various white papers are flying everywhere, the number of intermediaries exceeds the number of practical cases, and industry associations outnumber project parties. However, there are very few that can present compliant and operable RWA cases. Why? Because the implementation of RWA needs to overcome three “ghost gates”:

Level One: Legal Compliance

This is the most difficult level. Taking the United States as an example, the SEC views most RWA as “securities” and must comply with the Securities Act, completing registration or obtaining an exemption; otherwise, it is illegal. This means that project parties need to hire top legal teams, spending millions of dollars to finalize legal documents, and also pass the review of regulatory agencies. The situation is even stricter domestically, as any actions involving “asset securitization” or “financial product issuance” must be approved by financial regulatory authorities, and unauthorized issuance may be suspected of illegal public fundraising.

Level 2: Asset Penetration Level

For RWA to gain investor trust, it must address the issue of “asset authenticity”. For example, for a real estate RWA, does the on-chain token really correspond to a set of real estate? Is the property right clear? Is there a mortgage? This requires professional asset evaluation, due diligence, and legal confirmation, rather than relying on the “automatic execution of smart contracts” in the white paper. Many projects claim to be “confirmed on the chain”, but in reality, the confirmation of real estate rights needs to break legs, and the blockchain only records the results, not the offline legal process.

Level Three: Investor Protection

Traditional finance has a mature investor protection mechanism, such as regulation by the Securities and Exchange Commission, bank custody, risk warnings, etc. But what about RWA? Under a decentralized framework, who supervises the project parties? Who ensures the investors’ right to know and the right to redeem? If the token price plummets, can investors redeem it like buying a fund? If the underlying asset is fraudulent, do investors have channels to protect their rights? Unless these issues are resolved, RWA will always be just a “castle in the air.”

Ironically, many RWA projects are now playing tricks to evade regulation: for example, placing the issuer in the Cayman Islands and using the name “Decentralized Autonomous Organization (DAO)” to evade legal responsibilities, claiming to be “not subject to any national regulation.” But the reality is that as long as you target investors from specific countries, you must comply with local laws—DAO is not a lawless land, and tokens are not a “get-out-of-jail-free card.”

The Future of RWA: Shedding the “Myth” Label and Returning to the Essence of “Tool”

Saying so many “cold water” remarks does not deny the value of RWA. On the contrary, RWA indeed has tremendous potential: it can improve asset circulation efficiency, reduce financing costs, and provide liquidity for niche assets, such as art shares, real estate investment trusts (REITs), and corporate receivables, among others. But the premise is to remove the filter of “blockchain is万能” and honestly address the core issues of law, regulation, and compliance.

The future RWA should be like this:

Compliance first: Issuing under specific legal frameworks, such as the Reg D private placement exemption in the United States and the asset securitization pilot in China, first becoming a “legal financial instrument” before discussing “on-chain innovation.”

Technical assistance: Blockchain is used to improve the efficiency of certificate circulation and enhance transparency, rather than to subvert the legal system. For example, using smart contracts to automatically execute dividends and utilizing on-chain data for real-time regulatory compliance checks.

Focusing on vertical scenarios: starting with standardized assets such as funds, bonds, commercial papers, and REITs. These assets have clear legal relationships and mature regulatory frameworks, making them easier to implement. Instead of jumping straight into high-complexity and high-regulatory-risk areas like “real estate fragmentation” and “artwork splitting.”

The most important thing is that investors need to be clear-headed: RWA is not a “get-rich-quick” magic tool, but a more efficient financial instrument that also requires risk assessment, legal review, and compliant investment. Projects packaged with “asset on-chain, global circulation” are either run by amateurs who don’t understand the industry or scammers looking to exploit investors—true RWA players are quietly dealing with regulatory agencies in various countries, rather than shouting slogans on social media.

Conclusion: Don’t be deceived by “on-chain”, see the essence of RWA clearly.

Back to the original question: what exactly are we talking about when we talk about RWA assets going on-chain? It is not a technical gimmick of data on the chain, not a utopia of global circulation of assets, but a compliance revolution of “reconstructing the equity certificate system with blockchain technology”. At the heart of this revolution is not technology, but law; Not decentralization, but regulatory compatibility; It’s not about creating new assets, it’s about making old assets flow more efficiently.

Those who talk about RWA out of the law are like building tall buildings on the beach; Those who ignore regulation and talk about global circulation are like walking through a powder keg with a torch. The true value of RWA is hidden in the compliance documents of each jurisdiction, in the mapping of assets and tokens, and in the specific terms of investor protection - not in the beautiful words of “disruption”, “reconstruction” and “trillion market” in the white paper.

Next time someone tells you “RWA assets on-chain will change the world”, you might want to ask him three questions:

1. In which country’s legal system is your Token recognized as a valid proof of rights?

2. How do you prove that on-chain tokens correspond to real-world assets and are not just vapor?

3. If the asset defaults, what legal channels can you use to protect your rights as an investor?

The answer lies within these three questions. The story of RWA has just begun, but only by tearing off the packaging of the “myth” can we see the real value – or the bubble.