Reflections on the RWA Track

Regarding RWA, my frequent viewpoint is:

• This may be an area of interest for institutions and traditional financial players.

• For retail investors, our interests in this are quite limited, and there’s not much to see. The only potential benefit we might gain is from the tokenization of unlisted equity in tech companies (especially American tech companies).

The reason I hold these views is that many core interests and key points in this field are firmly controlled by centralized regulatory agencies.

Essentially, it is 100% a centralized application, just packaged with decentralized technology.

However, I still have a strong interest and a strong desire to participate in the remaining opportunities for equity tokenization in this field. Therefore, I have recently observed several companies that are tokenizing and selling unlisted equity in American tech companies. But the conclusions drawn are not optimistic at all.

Users must apply for their accounts, and in addition to undergoing strict KYC, they must also be rigorously checked to see if they meet the SEC's definition of "accredited investors": whether their annual income meets the standard or whether their net assets, excluding debts, meet the standard.

These two criteria are quite harsh, not only for ordinary users in China but also for ordinary users in the United States.

Why set such review standards and thresholds?

The companies clearly state on their official websites that they must strictly comply with SEC regulations.

Therefore, according to this rule, at least the current equity tokenization companies are out of reach for the vast majority of retail investors. The potential benefits of this path are like flowers in a mirror or the moon reflected in water—visible but unattainable.

I believe that in the future, this will not change much.

In addition, there are two recent pieces of news that have gradually made me lose interest in the RWA development in Hong Kong, which I have been paying attention to.

First, at the request of relevant authorities, mainland internet companies are required to gradually withdraw from tokenization businesses in Hong Kong.

Second, mainland brokerages are required to suspend their RWA businesses in Hong Kong.

Earlier, I was relatively optimistic, believing that as long as mainland companies strictly adhered to the bottom line of not allowing mainland users to participate in tokenization or RWA businesses in Hong Kong, there would still be some room for development according to the regulations set by the Hong Kong government.

Doing so would, on one hand, attract some overseas buyers to mainland assets and businesses, as they still hold considerable appeal for overseas users after tokenization.

On the other hand, it would allow companies to use Hong Kong as a gateway to go global, maintaining communication and integration with the world, which would be beneficial in many aspects.

Now, with this approach also being restricted, the only two types of businesses that can still be conducted in Hong Kong are:

1. Local Hong Kong companies tokenizing or RWA-izing local or overseas businesses.
2. Foreign companies tokenizing or RWA-izing foreign businesses or local businesses in Hong Kong.

First, what kind of businesses can be tokenized or RWA-ized to attract customers in these two ways?

I can't seem to think of too much room for further improvement in this area in Hong Kong.

Second, even if these businesses can be tokenized or RWA-ized, who are their buyers?

Certainly, they cannot be mainland users. If they are targeting overseas users, wouldn’t the U.S., with its much looser regulations than Hong Kong, have an advantage?

From these observations, we can draw the following conclusion:

Businesses like RWA are essentially centralized, and the direction of such businesses completely depends on the values and mindset of the centralized institution.

If the values of this centralized institution are conservative (small government, loose regulation), then retail investors may (just may) have some opportunities; otherwise, discussing opportunities for retail investors is basically a pipe dream.