Real World Assets (RWA) are driving a structural reconstruction of the global financial system, centered on the digitization of traditional assets such as securities and real estate through blockchain technology. This enables traditional assets to be traded transparently, instantly, and audibly on-chain globally, achieving liquidity reconstruction and capital efficiency enhancement. Although RWA has the potential to be the "cornerstone of on-chain finance" in macro logic, its implementation faces three challenges: the credible boundaries of the underlying technology, compliance paradoxes at the institutional level, and liquidity dilemmas in the market.
01 The Trade-off Framework for RWA On-Chain
In traditional financial systems, asset confirmation, trading, and settlement typically rely on paper contracts and centralized intermediary networks, which are relatively inefficient and costly, limiting the ability of assets to flow across borders. With the development of blockchain technology, especially the maturation of public chain infrastructure centered on smart contracts and decentralized ledgers, RWA tokenization is providing a new operational paradigm for global financial markets. Assets can achieve transparent and traceable transactions on-chain, with cash flows, rights relationships, and transaction histories recorded and executed through code and decentralized mechanisms, significantly reducing information asymmetry and operational risks.
In the practical implementation of RWA, public chains play a key role in connecting real assets with on-chain transactions. Through smart contracts, the ownership structure, profit distribution rules, and compliance constraints of assets can be encoded and executed on-chain, replacing the intermediary roles in traditional finance with programmed trust. This mechanism not only enhances transaction transparency but also provides a technical foundation for cross-border asset circulation. For example, through cross-chain protocols, underlying assets are registered in consortium chains or permissioned chains, while transactions are completed on highly liquid public chains, thus balancing compliance and liquidity.
In this process, the on-chaining of real-world assets is not merely a technical migration but involves a multidimensional trade-off among technological capabilities, regulatory requirements, and market practices. As the underlying infrastructure, public chains need to seek a balance between the ideal of decentralization and the reality of strong regulation while meeting multiple demands such as asset confirmation, data credibility, transaction efficiency, and liquidity. For different types of assets, such as government bonds and real estate, the trade-off framework varies significantly, determining multiple considerations such as the technical choices, architectural design, and ecological adaptation paths of public chains.
1.1 Asset Confirmation and Trust
The primary issue of on-chaining is how to ensure asset confirmation and transaction trustworthiness. RWA tokens typically do not directly represent the property rights of underlying assets but form claims or equity on assets through special purpose vehicles (SPVs). Public chains need to have the capability to map off-chain legal structures, allowing on-chain tokens to accurately correspond to the equity shares of SPVs, while also providing legal and compliance arrangements to offer investors bankruptcy isolation and recourse rights. In standardized assets like government bonds, this mapping is relatively straightforward; SPVs hold the underlying government bonds and issue tokens through smart contracts, with on-chain transactions directly corresponding to cash flows and profit distributions. However, in non-standard assets like real estate, there are complex legal gaps between on-chain tokens and underlying property rights. The on-chaining of such non-standard assets requires public chain platforms to provide more flexible rule coding technologies, supplemented by cross-jurisdictional legal recognition mechanisms to ensure asset liquidity and recourse rights.
In terms of data credibility, on-chain public chains typically rely on decentralized oracles (such as Chainlink) to provide net asset value (NAV), reserve proof, and cross-chain interoperability services. The cash flows of standardized assets can be directly verified through existing data sources, while the dynamic valuation of non-standard assets requires the integration of AI and the Internet of Things (IoT). IoT sensors collect operational data of assets in real-time, such as rental flows, equipment status, and energy consumption data, while AI models integrate market information and operational data to achieve dynamic valuation and risk pricing, providing a credible value anchoring for on-chain tokens. This "digital twin" approach serves as both a technical means and an important support for legal compliance, providing a foundational support for the tradability of non-standard assets.
1.2 Technical Performance and Stability
Public chains undertake high liquidity trading and cross-border circulation, finding a balance between compliance and market depth. Technical performance and stability are key to ensuring the safety, efficiency, and recourse of institutional-level assets. Traditional financial institutions have requirements for public chains that far exceed those of ordinary crypto projects, and different types of assets and regulatory environments have significantly different requirements for architecture. Institutional conservatives (such as the EU) tend to adopt permissioned consortium chains, sacrificing some decentralization and liquidity for compliance adaptability. Such chains can provide clear access control, audit trails, and data storage compliance, making them suitable for holding assets that are highly sensitive to legal constraints. In contrast, market-driven factions (such as the US and Hong Kong) prefer public chains like Ethereum and Solana to meet low-latency high-frequency trading and T+0 settlement goals, balancing compliance and performance through hybrid architectures. For example, CMB International has deployed a US dollar money market fund on Solana, valuing its theoretical TPS limit of 65,000 and block time of 0.39 seconds.
1.3 Liquidity and Ecological Integration
RWA itself has limited liquidity and needs to access the DeFi ecosystem to achieve asset recycling. The depth of liquidity and the ability to integrate with the ecosystem determine the trading convenience, composability, and capital recycling capability of RWA tokens, which are core to asset appreciation.
• Ecological Maturity and Liquidity Depth: RWA needs to have the ability to access global liquidity. Although Ethereum has efficiency issues in transaction throughput and confirmation time, its security, high level of trustlessness, and large ecosystem make it the preferred choice for most TradFi institutions. At the same time, it needs to rely on a mature DeFi ecosystem to expand scenarios. For example, AAVE Horizon has supported typical government bond RWA tokens, allowing users to convert tokenized assets into interest-bearing financial modules through lending operations. This ecological integration not only enhances asset liquidity but also provides a collateral basis for stablecoins, forming a closed loop of "issuing coins to purchase bonds."
• The Cornerstone Role of Stablecoins: Stablecoins are central to the pricing, settlement, and liquidity support of RWA, and their compliance directly affects ecological trust. The US "GENIUS Act" requires that US dollar stablecoins be fully backed 1:1 by US dollar deposits and US government bonds, forming a closed loop of "issuing coins to purchase bonds," deeply binding the credit of stablecoins with the sovereign credit of the US dollar. Hong Kong's "Stablecoin Regulation" (effective August 2025) is the world's first comprehensive regulatory framework for fiat stablecoins, providing clear compliance expectations for the RWA ecosystem.
• Cross-Chain Interoperability: RWA needs to achieve global circulation under a hybrid architecture of "permissioned chain confirmation + public chain circulation." Public chains need to build trusted channels through cross-chain protocols like Chainlink CCIP. For example, the "Two Chains, One Bridge" architecture of Guotai Junan and Ant Group connects compliant assets on consortium chains with global liquidity on Ethereum. However, the social trust dependency risk of cross-chain bridges remains difficult to eliminate. Such risks mainly stem from the trust foundations of bridging parties, validating nodes, and off-chain management institutions. If the behavior of bridging parties is opaque or operational errors occur, it may lead to asset freezes, delayed settlements, or distorted transaction data. The social trust dependency risk not only increases investors' concerns about the security of cross-chain assets but also affects the accuracy of asset pricing and liquidity. Specifically, both parties in a transaction must rely on intermediaries or third-party services to confirm the asset status, which complicates the transaction process, reduces on-chain transparency, and may lead to liquidity fragmentation, where assets cannot flow freely and efficiently between different chains, limiting the potential for the globalization of RWA circulation.
02 Adaptability Disassembly of Public Chain Practices
2.1 Public Chain Practices for Standardized Assets
Government bonds, as standardized and highly liquid financial assets, have become the preferred target for RWA on-chaining due to their stable returns, transparent cash flows, and widely recognized market mechanisms. Public chains primarily undertake three types of functions in the tokenization of government bonds: compliance embedding, trading efficiency support, and data credibility verification.
2.1.1 Asset Attributes and Compliance Adaptation
The tokenization of government bonds (especially US government bonds) is the most mature and largest field in the RWA sector. The reason government bonds can lead the way in achieving large-scale breakthroughs in the RWA market lies in their standardized, low-risk asset attributes, perfectly aligning with the underlying requirements of public chains for "data verifiability" and "structural replicability," making them a safe entry point for institutional capital into the RWA field.
As a global benchmark for low-risk assets, the yield, maturity date, default probability, and repayment path of government bonds can all be precisely quantified and audited, meeting the stringent requirements of institutional investors for risk control and compliance. The stable, risk-free yield they provide matches the allocation needs of institutions and high-net-worth investors for "coupon-replacement" type assets, becoming the cash flow foundation in the evolution of RWA. As of the third quarter of 2025, the total scale of tokenized US government bonds has reached $7 billion to $8 billion, occupying an absolute dominant position in the on-chain RWA market, confirming the widespread recognition of the advantages of safety and liquidity.
In terms of the tokenization path, government bonds have formed a highly standardized operational process that is easy to replicate and expand on public chains: typically, special purpose vehicles (SPVs) or funds hold the underlying short-term government bonds (T-Bills)/MMF and entrust regulated custodians to safeguard the assets; the platform issues redeemable token shares on the public chain through smart contracts; dividends and net asset value (NAV) are fully recorded and updated on-chain, achieving full transparency in issuance, custody, and circulation, significantly reducing the costs of redundant technical and compliance construction.
2.1.2 Technical Adaptation and Performance Optimization
The tokenization of government bonds requires extremely high efficiency for on-chain trading and settlement. Public chains need to meet high TPS, low latency, and be able to connect with traditional financial market clearing cycles (T+1), while also fulfilling commitments on data credibility.
The technical adaptation of standardized assets in RWA public chain practices mainly relies on compliant token standards (ERC-1400/3643), the embedding of KYC/AML whitelists in smart contracts, and oracles to bridge off-chain data. Chainlink oracles provide dividends and net asset value (NAV), reserve proof, and cross-chain interoperability services, ensuring that the token value is synchronized with the underlying government bond assets. This mechanism ensures the transparency of on-chain data and provides institutional investors with an auditable transaction bridge. Moreover, to meet strict compliance requirements, many RWA projects adopt permissioned whitelist contracts, ensuring that only qualified investor addresses that have undergone KYC/AML reviews by off-chain institutions (such as licensed financial institutions) can hold tokens or participate in transactions.
Performance optimization can be achieved by strategically selecting high-performance public chains (such as Solana) or Layer 2 scaling solutions to alleviate the performance bottlenecks of Layer 1 public chains, with the ultimate goal of achieving instant and secure atomic settlement. Layer 2 solutions (such as Polygon, Arbitrum, Optimism) significantly enhance transaction processing speed and reduce gas fees by moving transaction processing off-chain while maintaining the security of the Ethereum mainnet. However, while improving performance, it often requires a trade-off between performance and the degree of decentralization, where seeking high efficiency (such as Solana) often means making certain compromises in decentralization and security. For institutions, finding a balance between performance and compliance is key to the success of RWA projects.
2.2 Public Chain Transformation of Non-Standard Assets
Real estate, as a typical non-standard asset, presents both potential and challenges in the tokenization process within the RWA (Real World Assets) on-chain practice. The dilemma lies in how to leverage public chain technology to overcome the inherent bottlenecks of complex legal confirmation and insufficient valuation transparency in off-chain real estate. This technological transformation is not a simple "asset on-chain" operation but involves a multidimensional system engineering that includes ownership structure adjustments, data credibility verification, and automated management through smart contracts, requiring deep collaboration between technological innovation and legal frameworks.
2.2.1 Ownership Segmentation and Liquidity Release
The tokenization of real estate achieves asset fragmentation by splitting real estate rights into tradable tokens. This fragmentation allows real estate rights to be divided into standardized tradable tokens, theoretically significantly lowering the investment threshold, enabling global retail investors to participate in asset allocations such as commercial real estate and private equity, which were previously limited to large institutions. Pilot projects for the tokenization of commercial real estate ownership have emerged in Dubai, validating the feasibility of this path.
However, the segmentation of ownership on public chains essentially relies on the support of off-chain legal structures. Currently, most institutional-level projects do not directly achieve the tokenization of the underlying real estate property rights but instead establish special purpose vehicles (SPVs) in "legal enclaves" such as the Dubai International Financial Centre (DIFC), anchoring the tokens as claims or equity in the SPV. This requires public chain technology to adapt to complex legal rights mapping, such as through securities token standards like ERC-3643 or ERC-1400, which embed compliance control functions to ensure a one-to-one correspondence between on-chain tokens and off-chain SPV rights, meeting regulatory requirements for asset ownership clarity.
2.2.2 Data Credibility and the Integration of AI + IoT
As a non-standard asset, real estate lacks a unified standardized valuation system, and its value is dynamically influenced by various factors such as operational status and market environment. Public chain technology needs to introduce external credible data to support the authenticity and transparency of on-chain token values, which relies on the deep integration of artificial intelligence (AI) and the Internet of Things (IoT).
In terms of data authenticity verification, IoT technology is a core support. By deploying smart sensors to collect real-time operational data of assets (such as rental income records, commercial real estate foot traffic, equipment operational status, energy consumption data, etc.), this data can be encrypted and placed on-chain to ensure the transparency and traceability of asset revenues. For example, Ant Group's "Blockchain + IoT" AntChain Inside architecture applied in the new energy sector has achieved real-time on-chain data for new energy equipment operations, addressing the consistency issue between on-chain data and the physical asset status. This model can be extended to commercial real estate, alleviating investors' concerns about information asymmetry regarding the actual value of assets through real-time monitoring of cash flows and operational conditions.
In terms of dynamic valuation and risk pricing, AI technology becomes a key supplement. To address the pain point of the lack of a unified standard for non-standard asset valuation, AI models can integrate operational data collected by IoT with external market data (such as regional land price indices, rental fluctuation trends, macroeconomic indicators) to achieve automated valuation and risk pricing, providing a dynamic and fair value anchor for on-chain tokens. This requires public chain platforms to possess strong computing and data processing capabilities, able to integrate and analyze multi-source heterogeneous data to provide a valuation basis for asset liquidity. A JLL report indicates that automated valuation models (AVMs) are widely used in commercial real estate valuation, combining AI technology to process multidimensional data including net operating income, leasing conditions, and market changes, significantly enhancing valuation efficiency and transparency. C3.ai's "Commercial Property Appraisal" system integrates structured and unstructured data to support various valuation methods (income method, comparative method, cost method) to enhance valuation accuracy. Although currently mainly applied in the traditional real estate sector, introducing AI models into the valuation and risk pricing processes of RWA tokenization is not merely a theoretical concept but has operational pathways. However, it is also necessary to be cautious, as current practices mainly focus on tangible real estate or built assets, and transferring this capability to on-chain RWA (especially involving cross-border underlying assets, jurisdictional differences, and tokenization structures) is still in its early stages, making the simultaneous advancement of technology, data, and compliance particularly critical.
2.2.3 Programmable Trust Automation and Compliance Integration
Smart contracts are the core technology that endows real estate tokenization with "programmable trust," serving dual functions of automated asset management and embedded compliance logic, acting as a key link between technical architecture and regulatory requirements.
In terms of revenue management and fund supervision, smart contracts can codify rules for rent distribution, asset dividends, etc., enabling automatic calculation and distribution of revenues, significantly reducing friction costs and delays associated with traditional intermediaries. In trust-sensitive scenarios such as real estate pre-sales and advance rent payments, smart contracts can set up fund supervision accounts, ensuring that fund usage complies with agreements through code logic such as "designated use" and "payment as agreed," providing performance guarantees in the absence of traditional trusted intermediaries.
In terms of compliance control, smart contracts need to embed KYC/AML whitelist mechanisms and restricted transfer clauses. For example, contracts based on securities token standards can use permission control functions to allow only qualified investors who have passed compliance reviews to hold or trade tokens, while automatically intercepting non-compliant transfer actions, meeting regulatory requirements for investor suitability management and providing a compliance foundation for traditional financial institutions to participate in real estate tokenization.
2.3 Common Technical Support and Competitive Landscape of Public Chains
From the perspective of market competition, public chains in the RWA implementation exhibit three characteristics:
• High decentralization public chains (e.g., Ethereum): mature ecosystem, strong liquidity, but limited performance.
• High-performance public chains (e.g., Solana, Sei): suitable for high-frequency trading and settlement, but with lower degrees of decentralization.
• Permissioned/consortium chains (e.g., AntChain, Euroclear DLT): compliance-friendly, legally controllable, but with limited liquidity.
Additionally, the Pharos Network, focusing on RWA and stablecoin scenarios, emerges as a new differentiated option, offering high-performance support while adapting to compliance needs, further enriching the range of technical choices. Different assets and investors have varying preferences for chains, forming a mainstream practice path based on hybrid architecture:
03 Multiple Barriers to RWA Implementation
Although the tokenization of real-world assets (RWA) has formed initial practices in areas such as government bonds and real estate, significant barriers remain before large-scale commercial implementation. These bottlenecks stem not only from technological and performance limitations but also reflect deeper structural misalignments between legal systems, regulatory logic, and decentralized financial mechanisms.
3.1 Structural Bottlenecks of Law and Regulation
The adaptability of law and regulation is the primary obstacle to the large-scale implementation of RWA, with the core contradiction being the inability to bridge the gap between on-chain token transfer records and off-chain legal rights, leading to fundamental judicial uncertainties regarding asset confirmation and circulation.
Most RWA tokens (such as tokenized government bonds and private credit) do not directly represent the property rights of the underlying assets but rather the claims or equity interests in special purpose vehicles (SPVs). The substantial legal challenge posed by this structure is whether token holders can "pierce the SPV" and exercise recourse rights over the underlying assets in judicial practice when the custodian bank goes bankrupt or the issuer defaults. This issue lacks clear precedents in common law jurisdictions such as the US and UK, resulting in high uncertainty in judicial outcomes. Legal opinions can only interpret rights relationships within the existing framework and cannot create property rights effects not explicitly granted by law, further exacerbating the fragility of rights protection.
The global circulation of RWA and the regionality and sovereign regulation of underlying assets increasingly highlight conflicts, forming multiple legal fault lines. In dual-jurisdiction areas like Dubai, the underlying real estate follows civil law property rules, while the contractual rights represented by tokens may be established in common law financial centers (such as DIFC). This difference in legal systems may lead to contradictory rulings by courts in different jurisdictions when pursuing ownership, raising the risk of "judicial civil war." In the US, regulatory agencies continue to engage in a tug-of-war over the nature of tokens, with the SEC adhering to the principle of "substance over form," classifying most income-generating RWA tokens as securities through the Howey Test, forcing them to comply with strict registration processes under the Securities Act, imposing extremely high compliance costs and uncertainties on project parties. Compliance teams must seek a difficult balance between ongoing transparency in information disclosure and the confidentiality of ICT information security, further increasing the friction costs of regulatory adaptation.
For RWA projects involving assets from mainland China, data sovereignty and cross-border transmission restrictions constitute unavoidable compliance bottlenecks. China's Data Security Law explicitly states that "important data shall not be exported in principle," forcing projects to adopt cautious data localization and cross-border flow strategies. Enterprises must undergo cross-border security assessments by the National Cyberspace Administration, with approval cycles lasting 45 to 60 working days, becoming a key factor affecting project progress. These restrictions may prevent global investors from accessing original complete underlying asset data, weakening asset transparency and ultimately impacting pricing and liquidity.
3.2 Financial and Institutional Cost Bottlenecks
High initial investment, lengthy implementation cycles, and strict capital controls limit RWA innovation to a few large institutions, creating significant industry entry barriers.
Institutional-level compliance costs constitute the core threshold for RWA projects, making them appear more like "luxury goods" tailored for industry giants at this stage. The complete implementation process of RWA typically takes 18 to 24 months, and the long cycle combined with dynamic changes in regulatory policies excludes many small and medium-sized innovative projects. For example, the average approval time for a German crypto license is 18 months, during which policy adjustments may render initial investments void, exacerbating project uncertainty risks.
The complexity of cross-border capital repatriation is a key vulnerability in the RWA closed loop. Foreign capital must flow back to domestic entity accounts through official channels such as QFLP (Qualified Foreign Limited Partner) and ODI (Overseas Direct Investment), which are complex and fraught with policy uncertainties. When a single dividend exceeds $5 million, it must be filed with the foreign exchange bureau, and any attempts to disguise virtual asset investments through superficial trade settlements may fail under penetrating scrutiny, restricting the flexibility of capital flows.
3.3 Technical and Security Vulnerability Challenges
RWA has stringent requirements for technical adaptability, but the core technical components connecting off-chain and on-chain are often the weakest links in the system, and performance improvements often come at the cost of sacrificing decentralization, creating inherent tensions between technical security and efficiency.
Cross-chain bridges, as key hubs connecting the permissioned/consortium chain confirmation layer with the public chain circulation layer, are widely regarded as the weakest and most controversial links in the ecosystem. Their security often relies on the "trust assumptions" of a few participants rather than cryptographic trustlessness guarantees, making cross-chain bridges hotspots for hacker attacks. In most hybrid architectures, cross-chain bridges, oracles, or underlying Layer 2 still have centralized control points. For example, high-performance Layer 2 often sacrifices decentralization, requiring users to return some trust to operators while enjoying high throughput, deviating from the core trust logic of blockchain technology.
The external risks of underlying public chains constitute significant technological and geopolitical exposures. Relying critical financial infrastructure on overseas public chains like Ethereum means that sovereign entities cannot exert direct influence over them. If external networks encounter regulatory restrictions, protocol upgrades, or changes in community governance, they may unilaterally alter RWA trading rules or cut off circulation channels, a risk that cannot be completely avoided through the project's own technological optimizations.
The inherent tension between technology and law further exacerbates system vulnerabilities. The characteristic of smart contracts as "code is law" faces friction within the real judicial system. When code conflicts with the legal intentions of the white paper due to vulnerabilities, courts typically prioritize tangible legal meanings over the execution of flawed code. The RWA system heavily relies on oracles to transmit off-chain asset information; if the oracles lack sufficient decentralization or have a single point of failure in data sources, attackers can manipulate data to undermine the asset's value foundation, creating systemic security risks.
3.4 Systemic and Market Acceptance Risks
Liquidity mismatch is the most critical systemic risk for RWA, fundamentally arising from the temporal misalignment between the immediacy of on-chain transactions and the long-term cash flow of underlying assets. On-chain transactions can occur in real-time, but the cash flow recovery cycle for underlying assets (such as 180-day receivables, long-term bonds, and real estate) is lengthy. In the event of market panic, a large-scale demand for immediate redemptions may far exceed the project's cash reserves, triggering liquidation mechanisms and causing token prices to plummet. For instance, a receivables RWA project once faced a surge in redemption requests of $300 million on a single day due to mismatched asset terms and redemption commitments, ultimately leading to liquidation, highlighting the real dangers of this risk.
The valuation challenges of non-standard assets constrain the standardization process of RWA. Non-standard assets such as real estate, intellectual property, and artworks lack a unified valuation system, with their value influenced by multiple factors including market conditions and asset status. This necessitates a deep integration of traditional auditing with technologies like AI and IoT to construct a dynamically credible digital mirror to alleviate valuation fairness issues, but the current level of technological integration is still insufficient to completely eliminate valuation disputes.
The "identity crisis" of market acceptance further hinders the popularization of RWA. For traditional financial institutions (TradFi), RWA must possess absolute regulatory certainty and security; for crypto-native investors, RWA products led by licensed institutions with strict KYC on permissioned chains are seen as a departure from the spirit of decentralization. This identity dissonance may lead to a drift in pricing power. If the primary source of liquidity for RWA comes from overseas crypto markets, its price will be influenced by speculative sentiment and macro liquidity shocks in that market, disrupting the independence and stability of local asset valuation systems.
04 Breaking the Trust Dilemma in RWA Public Chain Practices
The core challenge of tokenizing RWA (Real World Assets) lies in finding a sustainable balance between the traditional financial demand for stability and control and the decentralized technological logic of public chains. In other words, the breakthrough path for RWA is essentially a fusion of institutional trust and algorithmic trust. It is not a single-dimensional technical breakthrough but a systematic solution encompassing regulatory adaptation, architectural innovation, and asset strategies. This solution must ensure legal clarity of ownership and regulatory accessibility while maximizing the liquidity and efficiency advantages brought by public chains.
The essence of RWA is the "digital mapping of real assets," with its value foundation still residing in off-chain legal rights and regulatory frameworks. Therefore, any RWA project that cannot effectively connect the regulatory system with on-chain mechanisms will find its on-chain tokens, even if technically perfect, to be merely "rootless symbols."
Thus, the first breakthrough for RWA public chain implementation lies in how to embed compliance within decentralized systems, constructing a verifiable, traceable, and regulatory-compliant on-chain trust bridge.
4.1 Embedded Compliance
Trust in traditional finance comes from regulatory agencies, custodial banks, and legal contracts, while the goal of RWA is to "code" this trust. In practice, mainstream RWA projects generally adopt a whitelist mechanism, setting identity access conditions at the smart contract level, allowing only qualified investors who have passed off-chain KYC/AML (Know Your Customer/Anti-Money Laundering) reviews to be granted on-chain rights to hold and trade tokens. For example, the securities token issued by Securitize is developed based on the ERC-1400 standard, which allows transfer restrictions to be embedded at the contract level, ensuring that tokens can only circulate between wallet addresses that meet regulatory requirements. This mechanism achieves the automated migration of the traditional financial "qualified investor system" onto the chain.
At the same time, establishing a legal bridge is key to ensuring RWA compliance. Typically, project parties will map the ownership or income rights of underlying assets (such as bonds, real estate, or fund shares) to on-chain tokens through special purpose vehicles (SPVs) or trust structures. Token holders possess economic rights in the SPV rather than direct property rights to the underlying assets. This structure effectively separates the legal risks of the assets from the on-chain trading risks, allowing tokenized assets to comply with legal requirements while maintaining on-chain liquidity.
Innovations in compliance do not imply strict tightening but rather the intelligent evolution of the regulatory model. The "regulatory sandbox" mechanism has become a core strategy for global financial regulators to promote the implementation of RWA. The Monetary Authority of Singapore (MAS) "Project Guardian" and the Hong Kong Monetary Authority's "Ensemble" plan both allow institutions to issue and test tokenized financial instruments in a controlled environment. This mechanism enables innovators to explore new models without violating existing laws while providing regulators with real-time observation and intervention interfaces.
Accompanying this is the rise of the "functional regulation" concept. Regulators are gradually shifting from "form-based risk assessment" to "function-based risk assessment," focusing not solely on the token's form but on whether its economic function constitutes a security, fund, or derivative. The "substance over form" principle proposed by the U.S. Securities and Exchange Commission (SEC) in the Howey Test reflects this thinking.
This shift allows RWA to find adaptable space within existing legal frameworks, avoiding regulatory vacuums due to formal differences.
4.2 Multi-layered Systems and Cross-chain Interconnectivity
The second breakthrough direction for RWA comes from the evolution of technical architecture. The tokenization of real assets must not only meet high throughput and low latency performance requirements but also address the complex circulation issues across jurisdictions and systems. Therefore, public chains need to transition from a single ledger to a multi-layered, cross-chain structural system.
The development of Layer 2 provides the technical foundation for this transformation. For assets such as government bonds, bills, and funds that require high-frequency settlement and periodic income distribution, Layer 2 solutions can handle a large number of high-frequency tasks, while Layer 1 is responsible for final rights confirmation and auditing. For example, StarkNet's zero-knowledge proof-based Rollup architecture maintains high performance while achieving verifiability of results on Layer 1. This means that RWA assets can operate in a division of labor across different layers, with yield calculations and transaction matching completed on Layer 2, while regulatory audits and asset registrations occur on Layer 1, ensuring both security and enhanced liquidity.
Cross-chain interoperability is another key condition for the global circulation of RWA. Differences in virtual machines, consensus mechanisms, and data formats among different public chains make asset movement between chains difficult. The emergence of protocols like Chainlink's CCIP, Cosmos's IBC, and LayerZero provides the underlying communication capabilities for assets to move freely across multiple chains. For instance, a token representing a U.S. Treasury bond can be registered on Ethereum, settled on Avalanche, and participate in liquidity pools on Solana, with all states maintained consistently through cross-chain protocols. This "multi-chain recognition" architecture enables on-chain finance to genuinely possess the potential for global distributed settlement.
Currently, mainstream projects are gradually adopting high-performance public chains or Layer 2 expansion solutions to achieve efficient operation at the transaction level. L2 solutions like Polygon and Arbitrum significantly enhance throughput and reduce gas costs by migrating most transaction computations to off-chain batch processing and then placing the results on-chain. For example, some RWA protocols on Arbitrum have achieved processing efficiency close to that of traditional securities trading systems while maintaining transaction settlement within the security framework of the Ethereum main chain.
In terms of high-performance chains, Solana has become the preferred platform for some institutional RWA projects due to its extremely high TPS (approximately 65,000 transactions per second) and very low fees. CMB International and some fund management institutions in Hong Kong have deployed money market funds (MMFs) on Solana, achieving high-frequency settlement of on-chain fund products.
However, there remains a fundamental trade-off between performance and decentralization. High-performance chains often rely on fewer validating nodes, which means that security and censorship resistance may be compromised, necessitating a balance through institutionalized audits and hybrid technical architectures.
For markets with strict regulatory requirements and sensitive asset ownership (especially in mainland China), the practical path for RWA leans more towards a "hybrid chain" model. This places asset rights confirmation and compliance management on a consortium chain, while connecting to the public chain ecosystem through cross-chain bridges. This "dual-chain architecture" ensures local regulatory controllability while releasing global capital liquidity.
For example, the exploration by Ant Group and Guotai Junan International adopts a "two chains, one bridge" architecture. The rights confirmation, registration, and compliance processes for assets are completed on AntChain, while interactions with international investors and liquidity acquisition are achieved through bridging into the Ethereum ecosystem. This model balances the three major goals of data sovereignty, regulatory access, and global liquidity, representing a practical compromise for institutional-level RWA.
In Europe, similar concepts are reflected in permissioned distributed ledger systems like Euroclear DLT and SG-Forge. These systems are operated by regulated financial institutions, allowing regulatory access to transaction data in real-time while connecting with open public chains through cross-chain interfaces, thus forming a dual-layer trust system of "regulatory visibility—liquidity accessibility."
4.3 Liquidity Flywheel
Technology and regulation are merely the supporting systems for RWA; what truly determines market scale and sustainability is the asset and liquidity selection strategy. For RWA to form a stable ecosystem, it must start with the most standardized, easily valued, and regulatory-recognized asset classes, gradually building an institutional-level liquidity flywheel.
4.3.1 Standardized, Low-Risk Assets as the Starting Point for the Ecosystem
The initial development of RWA prioritizes asset classes that are highly standardized, controllable in risk, and clear in valuation. The cash flow structure of these assets is transparent, with high credit ratings and strong regulatory recognition, capable of establishing market trust and valuation consensus in the early stages.
Current mainstream practices mainly focus on government bonds, money market funds (MMFs), and high-quality credit assets. RWA tokens related to government bonds, such as BlackRock's BUIDL fund and Ondo Finance's OUSG product, rely on U.S. Treasury yields, providing a "risk-free rate benchmark" for the DeFi ecosystem and becoming core underlying assets for stablecoin reserves and DAO treasuries. The on-chain implementation of these assets not only brings transparent revenue distribution and programmable financial contract structures but also promotes the institutional development of the on-chain fixed income market.
At the same time, private credit is gradually becoming a high-yield growth pole within the RWA ecosystem. Protocols like Centrifuge and Maple directly match loans for small and medium-sized enterprises with institutional investors through on-chain matching mechanisms, achieving asset tokenization with yield ranges between 8% and 18%. This model effectively broadens capital supply channels, reintegrating the previously illiquid financing market for small and medium-sized enterprises into the on-chain financial system. More importantly, on-chain credit protocols realize real-time auditing, risk measurement, and automated yield distribution through smart contracts, fundamentally enhancing transparency and capital utilization efficiency, laying the groundwork for the formation of an "on-chain credit market."
This bottom-up asset evolution path allows RWA to gradually transition from "low-risk anchoring" to "high-yield innovation," establishing a multi-layered market structure between liquidity and yield.
4.3.2 Institutional Leadership and Capital Flywheel
The scaled growth of the RWA ecosystem relies on the deep participation of traditional financial institutions. The entry of leading global institutions such as BlackRock, Franklin Templeton, and J.P. Morgan marks the transformation of RWA from a marginal experiment in the crypto world to an innovation in financial infrastructure. Institutional participation not only brings credit endorsement and brand trust but also promotes the unification and upgrading of infrastructure standards in compliance, custody, clearing, and valuation.
With the influx of institutional capital, RWA tokens gradually become important underlying collateral assets for DeFi protocols, participating in lending, derivatives pricing, and stablecoin issuance. This structure forms a self-reinforcing cycle of capital efficiency:
Tokenized Assets → Collateralized Lending → Capital Reuse → Enhanced Liquidity → Attracting More Institutional Assets
In this process, on-chain assets evolve from mere passive holding tools into "Composable Assets" within the financial network, serving as both yield generators and reusable across different protocols, creating a systemic capital multiplier effect.
This mechanism not only enhances the efficiency of asset utilization but also reshapes the risk pricing and yield structure of financial markets.
The continuous entry of institutional capital has led to the formation of a closed-loop system in the RWA ecosystem, driven by both institutional trust (compliance regulation, custody security) and algorithmic trust (smart contracts, verifiable transparency).
05 The Financial Future of "Dual-Track Trust"
From government bonds to real estate, the on-chain process of RWA is becoming the core engine of the global financial digital transformation. In the foreseeable future, the evolution of RWA will shift from the superficial action of "asset tokenization" to a deeper transformation of "value reconstruction." The process of on-chain transformation allows assets to transition from static ownership certificates to dynamic value units, which not only possess rights confirmation functions but also enable yield distribution, collateral refinancing, and even cross-border circulation through smart contracts. This capability positions RWA as the core vehicle for reconstructing financial production relationships.
The future financial market will no longer be a binary opposition of "on-chain" and "off-chain," but rather a multi-layered, nested, and dynamically collaborative hybrid structure. Assets will be generated and confirmed on permissioned chains, distributed and circulated on public chains, and achieve atomic-level settlement of value transfer on cross-chain bridges. Cross-border capital flows will no longer be solely constrained by geopolitical financial power but may realize mutual trust within a broader, technology-neutral rule system. This reconstruction is not limited to the financial realm; it will profoundly impact the operation of the real economy. Fields traditionally difficult to access for capital markets, such as small and medium-sized enterprises, green energy projects, creative industries, and scientific research innovations, will have opportunities for financing and risk diversification through tokenization. The future capital market will no longer be an exclusive arena for a few large financial institutions but an open, networked, and algorithm-driven financial ecosystem. The logic of value creation will also shift, with capital no longer passively chasing returns but actively participating in the value capture of productive activities.
In the long run, the development of RWA will ultimately drive finance from "value transfer" to "value generation." Assets will no longer merely symbolize existing wealth but become part of a network of productive factors. Financial activities will also extend beyond the flow of capital to encompass the value creation process. The secure yields of government bonds, stable rents from real estate, derivative values of data, and the tradability of carbon assets will all be re-priced and organized under the same logic.
When government bonds, real estate, and other assets can be expressed and exchanged using the same digital syntax, the meaning of finance will no longer be limited to the flow of funds but will represent a reconstruction of social production relationships. This is the most profound significance of RWA, not merely a technological revolution but an institutional innovation at the level of civilization.
References
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[2] Compound. (2024). Proposal: Real World Asset (RWA) Markets on Compound. https://www.comp.xyz/t/proposal-real-world-asset-rwa-asset-markets-on-compound/4419
[3] Pharos Research. (2025). New Asset Revolution: RWA Panorama Research and Investment Opportunity Analysis.
[4] Binance Research. (2023). When we talk about RWA assets on-chain, what are we really talking about? Binance Square.
[5] https://www.binance.com/en/square/post/24746283784361
[6] Boston Consulting Group. (n.d.). On-Chain Asset Tokenization. https://web-assets.bcg.com/1e/a2/5b5f2b7e42dfad2cb3113a291222/on-chain-asset-tokenization.pdf
[7] Oberheiden, N. (2023). An Introduction to Real World Assets (RWA). Oberheiden P.C. https://federal-lawyer.com/real-world-assets-rwa/
[8] Treasury Borrowing Advisory Committee. (2025). Digital Money. U.S. Department of the Treasury. https://home.treasury.gov/system/files/276/Digital-Money-TBAC-Report-2025.pdf
[9] CertiK. (2025). 2025 Skynet RWA Security Report. CertiK. https://www.certik.com/resources/reports/2025-skynet-rwa-security-report
[10] Chainlink. (2023). Real-World Assets (RWAs) Explained. Chainlink Education. https://chain.link/education/rwas
[11] JLL. (n.d.). AI + Human Valuation: A Powerful Team of Real Data and Insights. JLL Insights. https://www.jll.com/en/trends-and-insights/investor/ai-human-valuation-a-powerful-team-of-real-data-and-insights
[12] C3.ai. (n.d.). Commercial Property Appraisal. C3 AI Products. https://c3.ai/products/c3-ai-property-appraisal-old/commercial/
Core Contributions
Author: Huijie Tang (X:@web3sensen)
Reviewed by: Colin Su, Grace Gui, NingNing, Owen Chen
Design: Alita Li
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