Author: Lawyer Niu Xiaojing

With the rise of the RWA (Real World Asset Tokenization) concept, more and more companies are considering:

Can I also move my assets on-chain? Can I also raise funds, create liquidity, and attract global investors?

But the reality is: RWA is far from being as simple as imagined.

From asset structure design, legal compliance, regulatory reporting, to smart contract deployment and token issuance and circulation, this is not a "token issuance" project, but a comprehensive system engineering that spans both on-chain and off-chain.

This article will help you understand at a glance:

• The 5 key issues that companies need to solve for RWA

• What challenges lawyers can help you address at each step

• Why these pitfalls must be avoided sooner or later

First Pitfall: Assets are not just there; you need to first "depict" them

Many projects immediately claim they want to do RWA, but—

• Are the underlying assets unclear?

• Are they rights to income, debt rights, or securities?

• Do they have sustainable income? Can they be legally transferred?

If these questions are unclear, the project cannot be initiated. What needs to be done at this stage is an asset eligibility analysis.

What lawyers can help you with at this step:

• Clarify what "tokenizable" assets you actually have

• Assess their income structure, risk level, and compliance suitability

• Initially identify whether they involve financial, securities, or commodity regulatory red lines

This step is actually quite simple; it helps you understand whether your assets can be tokenized and why you should do it. For example: if you want to send your child abroad for study, you need to first understand their academic foundation, interests, and budget capabilities; you can't just pay tuition without deciding on a major.

RWA is the same— not all assets are suitable for on-chain, and not all on-chain assets have financing value.

Second Pitfall: A dual approach of technology and law; don’t let the project get stuck in structure

RWA is not as simple as "on-chain registration"; it requires a full-chain design that clarifies legal ownership, closes the technical logic loop, and complies with regulatory perspectives. You need to solve at least three questions:

• Is the ownership and transfer of the asset legal? Is it transferable? Is it restricted?

• How is the legal attribute of the token defined? Could it constitute a security token?

• Does the technical architecture support on-chain compliance? Can it meet regulatory requirements (such as traceability, black and white lists, etc.)?

At this step, the lawyer team is not just "the stamp person for token issuance," but rather a structural designer + regulatory translator + compliance liaison.

1. Compliance Structure Design

Combining different asset forms, target investors, and business regions, design optional structural plans, such as:

• Cayman Fund + BVI SPV (suitable for overseas financing and redistribution)

• Singapore VCC + MAS exemption path

• Trust structure + domestic asset custody + offshore token mapping

These structures must consider tax compliance and regulatory penetration while avoiding unnecessary cross-border financial regulatory obligations.

2. Token Legal Attribute Determination (Token Classification)

This is the area most prone to "failure." We will assess the token based on the asset foundation, issuance purpose, investor rights, and regulatory classification standards to determine whether the token is:

• Security Token: Does it possess typical characteristics such as "investment contract," "efforts of others," and "profit expectation" (refer to Howey Test / MiCA / SFC Guidelines)?

• Utility Token: Is it limited to usage rights and does not promise returns?

• Payment Token: Does it have currency substitutability or broad trading purposes?

Additionally, it is necessary to further determine whether the token legally constitutes:

• Debt certificate (e.g., accounts receivable/income distribution rights)

• Fund shares (triggering fund law or investment company law)

• Trust beneficiary rights (requiring endorsement from the trustee)

• Forward Revenue Contract

Each legal attribute corresponds to completely different methods of issuance, trading, and tax treatment. If misclassified as a "utility token" when it is essentially a "security token," the project may trigger illegal securities issuance risks, leading to delisting or investigation.

3. Technical + Compliance Interaction Mechanism

Lawyers also need to delve into the technical team and participate in the following compliance embedding:

• Legal review of the white paper and token economic model

• KYC/AML mechanism design (including foreign personal information protection systems, such as GDPR, PDPA)

• Data on-chain and off-chain information synchronization structure (IPFS, Merkle Tree, or zk proofs)

• Whitelist management, address filtering, transaction limit design (e.g., in compliance with OFAC or FATF requirements)

Third Pitfall: Don’t let the project get "stuck" at the issuance launch line

You have designed the structure, and the assets are ready, so the next step is token issuance.

Lawyers can help you with:

• A full set of documents including token subscription agreements, income agreements, custody agreements, private placement documents, etc.

• Connecting with third-party institutions (valuation companies, custodians, accountants, etc.)

• Reviewing key terms of smart contracts to ensure on-chain logic matches legal logic

• Assisting in planning private placement paths and whitelist rules

Many projects get stuck at this step: rough contracts, vague rules, incomplete documents, resulting in issues during fundraising and lack of protection for investor rights.

Fourth Pitfall: Going live ≠ free trading; RWA liquidity is not necessarily "free"

Many project parties mistakenly believe: "My RWA token can start trading once it goes live."

In reality:

• Whether it can go live depends on whether it triggers securities issuance regulation

• Different countries/platforms have varying acceptance levels for RWA-type assets

• Is your asset transparent, has a pricing mechanism, and has credible returns?

Common reasons for limited liquidity include:

• Lack of transparency in asset base information (not meeting the trust logic of the DeFi market)

• Lack of oracle support

• No on-chain real returns or buyback mechanisms, making valuation difficult

• Asymmetric risks leading to difficulties in off-chain circulation

At this stage, lawyers can:

• Prepare compliance opinions, risk disclosures, and investor brochures required by exchanges

• Design token lock-up, phased release, and other circulation mechanisms

• Connect with compliant platforms domestically and internationally, providing legal support

• Regularly update regulatory policy analysis and adjust circulation strategies

Without a compliance opinion, don’t even think about going on a platform; you might even be denied access to DID.

Fifth Pitfall: Issuing is not the end, but the beginning

A successful RWA project is more like an on-chain operating REIT; it is not just "issue and forget," but requires long-term operation and continuous compliance.

Lawyers will also assist you in the follow-up:

• Establishing a mechanism for synchronous disclosure of assets on-chain and off-chain

• Optimizing token release, destruction, and buyback logic (in line with market value management)

• Building investor relationship management and compliance complaint channels

• Tracking regulatory changes and continuously optimizing structural design

• A truly qualified RWA project should have the same prudent operational awareness as a "public company."

Summarizing a table: What can lawyers do at different stages of RWA projects?

Conclusion:

RWA is not "new wine in an old bottle" for blockchain; it is a challenge and opportunity deeply coupled with law, finance, and technology.

If you are truly ready to take this path, please remember:

• Compliance must come first; don’t use the project as a trial and error

• Legal structures must be rigorous; don’t leave compliance loopholes

• Technical implementation must "understand legal language"; don’t let contracts cause problems

As lawyers, we are not just "the stamp and signature person," but rather the bridge builders between you and the law, regulation, and market.

After all this, you might ask:

"RWA is so complex, and compliance costs are so high; why should I go through all this? Isn’t it better to stay in my familiar field?"

This question is very normal. After all, RWA, as an emerging concept, comes with cognitive thresholds, structural difficulties, and technological iterations. But historically, every paradigm shift—whether from horse-drawn carriages to cars or from paper money to electronic payments—initially seemed "troublesome, unnecessary, and inefficient." Until one day, we realize: the new paradigm is not meant to replace a portion of people but to rewrite the entire market's rules of the game.

RWA is the same.

It is not just a technological innovation but the beginning of how traditional assets are repriced in the global financial infrastructure. For companies, it signifies a fundamental reshaping of financing logic, liquidity management, and investor outreach methods.

The earlier you understand and lay out your plans, the more likely you are to secure your place in the new rules.

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