Core Points

This article is from Tiger Research. The RWA market is growing rapidly, but many jurisdictions still lack supportive regulatory frameworks. Financial institutions in these regions must make strategic trade-offs among three options: wait for domestic legislation, use a regulatory sandbox, or directly enter overseas markets.

Cross-border RWA business requires high precision. Before entering, sufficient preparation must be completed in six core areas, covering jurisdiction selection, licensing, asset definitions, investor scope, and the design of settlement and operational arrangements.

The core goal is to accumulate real operational experience by choosing paths that fit their own situation. The two main paths are: directly entering jurisdictions with mature regulation and adopting a technology path based on on-chain native platforms.

1. Wait, Experiment, or Go Out

By the first half of 2026, the physical asset (RWA) tokenization market size has grown to about $25 billion to $36 billion. It shows clear efficiency improvements, including automated interest payments and redemptions, shorter settlement cycles, and broader customer coverage, attracting continued attention from institutional investors.

However, financial institutions still face practical barriers in a regulatory vacuum. Although there is no explicit prohibition on tokenization, the legal framework necessary to grant legal effect to distributed ledger records has yet to take shape, resulting in insufficient protection for investor rights. In response, financial institutions choose among three main directions: waiting for domestic legislation is favorable for risk management but carries the significant risk of missing early market positioning; using a regulatory sandbox allows for limited experimentation but can only be confined to fragmented investments and cannot be expanded to the issuance of standardized securities; first entering overseas markets means issuing digital bonds in jurisdictions where regulation is already in place, establishing performance records locally, and accumulating experience from overseas to seize early competitive positions.

The RWA market is essentially a global business; therefore, building operational capabilities under different regulatory environments is crucial. While there are practical constraints to overseas expansion, it is precisely those financial institutions for whom domestic regulation is still blank that have more reason to rush to overseas markets and accumulate firsthand experience ahead of their peers.

2. Tokenization is Not Magic

Cross-border RWA business is not the result of a series of isolated decisions. The choices involved are interconnected, with the outcome of one step determining the optional paths for the next. Tokenization is not magic; it is the process of migrating existing financial instruments to new infrastructure, and this process requires more precision than traditional issuance, not less.

Before deciding to enter the market, financial institutions should make an honest assessment of their preparedness according to the following six requirements.

First, building an overseas base. Institutions must determine how to utilize key jurisdictions such as Hong Kong, Singapore, or the United States, and whether the specific path will be through existing entities, newly established entities, or partnerships with local institutions. New entities offer stronger control but require a significant investment of resources; entering via partnerships is quicker but limits the depth of internal capability development.

Second, licensing. Institutions must meet the licensing requirements of the anticipated sales market. The choice typically lies between obtaining a license directly (which is time-consuming and resource-intensive) or borrowing an existing platform’s license (which is quicker but requires structuring the issuance according to that platform’s specifications).

Third, asset definition. The choice of which assets to tokenize directly determines the height of the entry threshold. Bond-like standardized security structures are mature and relatively easy to push to market; non-standard assets such as real estate or trade receivables require significantly more time for legal review and structural design.

Fourth, target investor definition. A typical practice is to cover all jurisdictions except the United States. Sales directed only at non-U.S. investors can rely on Regulation S’s overseas exemption; once U.S. investors are included, additional requirements such as Regulation D will be triggered, greatly increasing structural complexity. Additionally, many STOs and RWA platforms limit sales to accredited or institutional investors, so the sales strategy must be synchronized with the scope of investors.

Fifth, settlement currency and payment processes. Institutions must decide whether to accept local currencies, dollars, stablecoins, or wholesale CBDC for settlement. This is not just a choice of currency but a critical variable that determines investor accessibility, custody structures, and ultimately revenue. For example, accepting stablecoins introduces a demand for conversion and potential additional costs.

Sixth, other operational requirements. Depending on the structure, there are a series of considerations, including blockchain selection, custody, on-chain operations, and governance post-issuance. Institutions must particularly confirm who will control key functions such as interest payments and redemptions, registration management, and the ability to enforce token transfer or freeze during events. These matters correspond to the operational requirements of traditional financial instruments.

Tokenization is not magic. The work does not end after structural design; the business can only truly take off once securities are sold and investors are in place.

3. Where to Operate

Jurisdiction selection is a strategic decision that requires weighing regulatory compatibility and operational efficiency simultaneously.

For institutions that already have a presence overseas, the most efficient starting point is to first assess existing jurisdictions. If the primary goal of the overseas tokenization strategy is to accumulate firsthand experience as early as possible, then re-establishing in entirely new jurisdictions means a very high threshold of time and capital.

Hong Kong: Regulatory Completeness and Enforceability

Hong Kong is the leading market with the most advanced implementation. Security tokens are regulated under the existing Securities and Futures Ordinance framework, and a circular issued by the SFC in April 2026 allows licensed virtual asset exchanges to conduct secondary trading, completing the full chain from issuance to circulation. Infrastructure such as HSBC Orion is already online, and the policy support is also quite robust, including subsidies from the HKMA for issuance costs. Institutions need to pay attention to the compliance issues of transitional provisions if legislation introducing virtual asset dealers and custodians goes ahead as planned in 2026.

Singapore: Precise Framework and Regulatory Clarity

Singapore strictly applies the principle of "same activity, same risk, same regulation" under the Securities and Futures Act. The MAS revised the tokenization guidelines in December 2025, providing clearer guidance; the Variable Capital Company (VCC) structure simplifies asset segregation operations, making it particularly suitable for fund structure construction. However, even services aimed at overseas clients face strict licensing requirements, leading to higher entry thresholds.

The United States: Regulatory Clarity and Efficient Listing Paths

The joint interpretation issued by the SEC and CFTC in 2026 clarified the asset classification framework. The cost of directly obtaining a license as an issuer remains high, but efficient issuance can be achieved through vertically integrated platforms like Securitize: using Regulation D exemptions for U.S. accredited investors and Regulation S exemptions for overseas investors. BlackRock's BUIDL fund is the most representative case of this path.

Each of the above jurisdictions has mature platforms that can accelerate local entry. These platforms are licensed operators providing a one-stop service that includes regulatory coordination, fundraising channels within the investor network, and operational infrastructure covering the full lifecycle from issuance to settlement. When assessing entry into a specific jurisdiction, engaging directly with leading local platforms to test the feasibility of business is strategically more efficient than sorting through numerous regulatory documents in advance.

4. Bypassing Jurisdictions

The previous section discussed a direct path, establishing legal and entity presence in specific jurisdictions and obtaining necessary licenses. This section discusses a fundamentally different approach: the on-chain native path, designed from the outset around the on-chain environment for issuance and circulation.

This path does not invest the time and capital necessary to establish an entity base but collaborates with on-chain platforms with built-in compliance capabilities or borrows their structural logic to reduce entry barriers through such infrastructure. The territorial path from the previous section answers "where to operate," while the on-chain native path answers "how to construct the transaction structure."

Representative cases are as follows. Ondo Global tokenizes U.S. securities using a bankruptcy-remote special purpose vehicle (SPV) set up in the British Virgin Islands, minimizing friction with U.S. securities regulation by leveraging Regulation S's overseas exemption. Ondo also operates its secondary market, Ondo Global Markets, which directly handles trades of the issued tokens. Plume Nest holds a Class M DABA license issued by the Bermuda Monetary Authority through its Bermuda subsidiary KDAB (Kimber Digital Assets Bermuda), operating a regulated on-chain vault. Access to the Plume Nest platform is limited to investors that pass KYB and KYC checks. Additionally, an affiliated company is registered as a transfer agent with the U.S. SEC, providing a second layer of assurance for ownership registration management and distribution. Thanks to the platform's decentralized design, tokenization beyond this regulated structure is also possible, but this path is not suitable for regulated financial institutions.

The on-chain native strategy is essentially close to territorial tokenization but differs significantly at the execution level. Its primary advantages are speed of entry and coverage breadth: institutions are no longer limited to a specific base but can reach the market more quickly using validated infrastructure. Another advantage is particularly apparent when compared to territorial platforms: the closed ecosystems of territorial platforms may limit secondary market liquidity, while on-chain native platforms designed around scalability can organically connect to DeFi liquidity pools.

However, the complexity of structural design is a risk that needs careful consideration. The open nature of such platforms allows for the inclusion of a wider range of products, but in core structural decisions like issuance design, there is a lack of the mature regulatory guidance that territorial paths have. The structural differences of such platforms are divided by platform rather than by jurisdiction, potentially placing an operational burden on traditional financial institutions. Therefore, assessing whether there are local counterparties for relevant platforms in the target area is a necessary preparatory step.

5. No Need to Wait for Regulation; The Market Will Not Wait

Large financial institutions in the U.S. are already leading the market, either building their platforms or directly accumulating experience on Canton, Solana, and Ethereum. For financial institutions operating in regions still lacking regulation, launching overseas RWA business means redesigning the entire value chain locally, covering everything from establishing bases to issuance and distribution, typically requiring six months to over a year of preparation time.

Below is a hypothetical case that illustrates this process: a medium-sized brokerage "Company A," which already has entities in Hong Kong, will tokenize short-term investment-grade bonds and sell them to overseas institutional investors.

Step 1: Assess existing base and licensing status. Company A will utilize its existing entity (i.e., its Hong Kong subsidiary) to avoid the time and cost of establishing a new entity. Whether the existing license covers tokenization business is another independent issue. Local legal counsel will assess the scope of existing authorizations, and if necessary, Company A may consult with regulators (here being the Hong Kong SFC) to confirm whether changes in licensing conditions or additional filings are required.

Step 2: Choose platform and infrastructure. To shorten the time required to apply for a license independently, Company A considers conducting business through established platforms like DigiFT. Vendor due diligence encompasses the validity of the platform’s license, range of supported assets, custody partnership, and investor restrictions. During the contracting phase, legal review addresses design structures tailored to fit the platform’s specifications, liability allocations, and applicable laws.

Step 3: Compliance and product design. This phase finalizes the product structure of the bonds to be tokenized, including underlying assets, investor rights, and applicable laws. The standard practice is to leverage Regulation S exemptions to sell to overseas institutional investors outside the U.S. Legal opinions on local securities law compliance must be obtained for each target jurisdiction. Company A must also confirm that its logic for excluding domestic residents is justifiable under securities laws, before progressing to the drafting and approval phase of issuance documents.

Step 4: Design custody structure and on-chain operations. Company A sets up a dual custodial arrangement, with a global custodian managing the underlying assets and a specialized infrastructure handling on-chain tokens, obtaining relevant legal opinions through external lawyers. Operational details also need to be finalized, including interest payment schedules, settlement currencies (dollars or stablecoins), and redemption mechanisms.

Step 5: Issuance, execution, and verification. Company A completes actual issuance and sales according to the finalized structure and subsequently confirms that operational processes like interest payments and redemptions can function as designed. Structural design is just the starting point; business completion depends on investors being in place and sales being completed.

The overseas tokenization strategy outlined above is not limited to the "establishing bases in specific jurisdictions" direct path. The on-chain native path, which can more flexibly bypass jurisdictional boundaries, keeps the space for viable solutions open. Legal reviews will be the most time-consuming and costly threshold under any path. However, waiting for a complete regulatory framework is not the only answer. The ability to quickly outline feasible paths and accumulate experience through execution is more critical than any other factor because the essence of tokenized business does not lie in technical design but in the successful completion of the full sales process.

When regulation will finally come into effect is unpredictable, and the market will not wait. The time to take action is now.

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