Hong Kong Leads RWA Innovation: Global on-chain assets to exceed $22 billion by 2025

Recently, the global asset tokenization process has shown a trend of accelerated development. According to data, by April 2025, the total value of on-chain RWA assets worldwide has surpassed 22 billion USD. Deloitte's research report also predicts that the tokenized real estate market will reach a scale of 4 trillion USD by 2035.

In this wave of financial innovation, Hong Kong has quickly become a pioneer in the compliant development of the RWA field due to its unique institutional advantages. From the tokenization of charging pile assets to the launch of Asia's first compliant tokenized fund, the landing of multiple benchmark cases confirms the application potential of this innovative financing method in the field of physical assets.

RWA refers to "Real World Assets", that is, the tokenization of real-world assets ( or "tokenization" ), which is an innovative financial model based on blockchain technology. It maps physical assets or financial assets to on-chain through blockchain technology, converting them into digital tokens with high liquidity and divisibility. This conversion process not only achieves the digital representation of assets but also endows these real-world assets with unprecedented transparency and traceability through blockchain technology.

From a legal compliance perspective, RWA is actually a broad concept with no so-called standard answer. All processes of asset tokenization achieved through blockchain technology can be referred to as RWA.

The advantages of choosing RWA are as follows:

First, it can activate heavy asset financing scenarios that are difficult for traditional finance to reach. The RWA model combines blockchain technology to segment the ownership of physical or equity assets, transforming them into highly liquid digital tokens, opening up new financing methods for these assets. For investors, the divisibility of tokens also lowers the investment threshold for specific assets.

Secondly, RWA can reduce financing costs and improve financing efficiency. Compared with the traditional securities issuance process, the financing requirements and restrictions under the RWA model are relatively fewer, effectively lowering financing costs.

Furthermore, RWA provides enterprises with the flexibility of customized trading structures. Enterprises can tailor financing structures according to market demands and their own development goals, designing key terms such as yield distribution models, redemption mechanisms, and token unlocking mechanisms.

RWA has changed the financing logic under the traditional financial framework, achieving an effective separation between "corporate credit" and "asset credit". Even if the credit status of the issuer is average, as long as the underlying assets are of sufficient quality, financing can be obtained based on the credit of the assets themselves.

The participants in the RWA market are more diverse, which can create a strong community cohesion and ecological stickiness, supporting the long-term value growth of RWA Tokens. The prosperity of the on-chain ecosystem can also feedback into the off-chain business development of project parties, significantly enhancing the brand visibility of the project parties. This positive feedback development model of on-chain-off-chain collaboration is the true brilliance of the RWA model compared to traditional financing methods.

The Hong Kong Securities and Futures Commission adopts the "perspective principle" when regulating RWA products. The core of this principle is that the main focus of regulation is not whether the product is in the form of a "Token", but rather on the financial attributes of the real assets corresponding to the token.

In November 2023, the Hong Kong Securities and Futures Commission issued a circular titled "Regarding Tokenization of SFC-Recognized Investment Products", clarifying the tiered regulatory concept for the issuance of security tokens. Security tokens are subject to the Securities and Futures Ordinance and must meet the relevant requirements set forth by the SFC. Non-security tokens are included under the regulatory framework of the Anti-Money Laundering Ordinance.

In the same month, the Hong Kong Securities and Futures Commission also issued a circular regarding intermediaries engaging in tokenization securities-related activities, emphasizing that although tokenized securities are issued using blockchain technology, their essence still belongs to traditional securities and must comply with current securities regulations.

In March 2024, the Monetary Authority launched the "Ensemble Project", focusing on exploring the application scenarios of tokenization technology. Several RWA projects have already been successfully implemented, covering multiple industries including green bonds, carbon credits, real estate, and supply chain finance.

Due to the regulatory red line that cannot be crossed for token issuance in mainland China, the issuance of tokens for RWA projects in mainland China must take place overseas. Hong Kong, with its sound regulatory framework, friendly policy attitude, and rich industry ecosystem, has become one of the optimal choices for Chinese enterprises to implement RWA projects.

When carrying out RWA projects in Hong Kong, the following key compliance points need to be noted:

1. Compliance of underlying assets:
   • Asset confirmation: Ensure clear legal ownership of underlying assets.
   • Asset Audit: Hire a professional auditing firm to audit the underlying assets.
   • Asset divestiture: Separating the underlying assets from the actual operating entity of the project party to achieve risk isolation.

2. On-chain data compliance:
   • Adopt the "two chains and one bridge" model: RWA asset data is stored on-chain as proof on the domestic alliance chain, and RWA tokens are deployed on the foreign public chain, mapped and bound through cross-chain bridges.
   • Or rely on the Hainan Free Trade Port's cross-border data flow pilot zone to complete the on-chain and circulation of cross-border data.

3. Compliance of fund circulation:
   • Design the framework and pathways for the collection and circulation of overseas funds.
   • Funding channel selection: QFLP, FDI or QFII.
   • Design taking into account factors such as tax burden, entry barriers, procedural requirements, and compliance costs.

When implementing RWA projects in practice, it is necessary to have a professional legal team providing support throughout the process, ensuring compliance first, and properly handling the preparation of various declaration materials, responding to window opinions, as well as adjusting and improving the corresponding framework.