Some time ago, RWA became one of the focuses in the currency circle and caused some discussion. Of course, as expected, many people are optimistic about RWA, but there are still some different opinions here. RWA should actually be viewed comprehensively rather than blindly praised. In fact, RWA assets still have a long way to go in development and are now in a very early stage. Under the premise that countries now have imperfect blockchain regulations, RWA also has greater risks.
What is RWA
RWA is the abbreviation of Real World Assets, which means real-world assets. In short, it is to tokenize various assets in the real world so that they can circulate and trade on the blockchain. The benefits of doing so are also obvious. It increases the liquidity of traditional assets, allowing people to buy assets just like buying goods online and place orders at any time. At the same time, another benefit of asset tokenization is increased transparency, which is relatively easy to understand. Because blockchain has the attribute of being tamper-proof, it makes it impossible for falsehood and fraud to escape detection. Therefore, before the proposal of RWA assets, in fact, the asset tokenization and the application of blockchain technology to the real economy mentioned by people are already the application scenarios of blockchain technology in the traditional financial industry, and RWA is another way of saying this scenario. The two are essentially the same.
The most common example of many assets in the real economy is the tokenization of real estate assets, as well as various types of equity, debt, etc., which are all part of the tokenized real assets, even including the USDT we often use. In theory, USDT is a tokenization of US dollar cash in the real world. Other similar examples include debt tokens, equity tokens, and precious metal tokens, such as tokens backed by gold, etc.
Why the market emphasizes RWA
From the above, we can see that RWA is not a new concept. In fact, it has been integrated into the blockchain industry since 2017 or even earlier, and has gradually established a user group in the currency circle. It is now mentioned mainly because of the prosperity of DeFi, which will promote more gameplay for RWA assets.
We are all familiar with how DeFi works. Common methods include staking, lending, DEX trading mining, and AMM liquidity mining and LP grouping. Similar operations can also be performed for RWA assets, such as staking USDT to borrow cryptocurrencies, or forming AMMs to provide liquidity for the market, etc. As long as it is a cryptocurrency, DeFi methods are basically applicable.
After DeFi Summer ignited the bull market, in fact, most of the DeFi we play are still native crypto assets, not RWA assets. Therefore, according to the law of development, there will be a deep integration of RWA assets and DeFi in the later stage, thereby enhancing the flexibility of traditional finance.
In other words, judging from the development of blockchain, the prosperity of RWA assets is bound to come, so it is not surprising that the market emphasizes RWA.
At the same time, another key point is that RWA needs to penetrate into the crypto industry to change the existing inefficient state, so that traditional finance can still develop the last bit of potential and promote traditional financial assets to young people of the millennial generation. This is also one of the manifestations of the refinement of the financial industry.
It is difficult for the next generation to take over and buy traditional assets. The new generation of investors generally have a high degree of recognition for cryptocurrencies. The reason why they are unwilling to take over traditional assets is that the dividends of traditional assets are very small. For example, the real estate we often talk about has reached a near-limit at present, and real estate is closely related to people's income level, and the early dividend period has ended. That is why the new generation of young people will not take over traditional assets, but seek emerging asset categories for investment. Cryptocurrencies still have a certain dividend period, so millennials are basically willing to accept cryptocurrencies.
Legal risks faced by RWA
The essence of RWA is still traditional assets, just like tokenized Apple stocks and gold ETFs, as well as tokenized real estate, etc. Their benefits are naturally lowering the purchase threshold for crypto users and making transactions very convenient, but RWA will also bring a series of problems. The biggest problem is legal risks and regulatory issues.
Let’s take USDT as an example. When USDT came out, it faced a lot of controversy. USDT had previously faced investigations from the US SEC and CTFC due to “increase in issuance”. Currently, the mainstream compliant stablecoin in the market is USDC, which is also issued under US supervision. Some time ago, BUSD was hit by unregulated regulation, which led to Binance Exchange abandoning BUSD as its main stablecoin. Therefore, it can be seen that the main problem of RWA assets has actually appeared.
The core reason why USDT was hit is the immature supervision. Since its birth, USDT has been widely used in many scenarios in and outside the currency circle. For example, for domestic foreign exchange control, USDT and stablecoins are a good solution tool. At the same time, USDT is often used for illegal and criminal activities such as money laundering. Although Tether is cracking down on such behavior, it still continues.
At the same time, we will bring the impact of USDT to other RWA assets, so the anonymity of such RWA assets will be further enhanced, which will further increase illegal foreign exchange or money laundering and other criminal activities, or unqualified investors holding these RWA assets will increase the risk of the system.
Another example is the tokenization of stocks and bonds. When we open an account at a securities company to buy stocks, it is actually strictly supervised by the China Securities Regulatory Commission and other institutions. At least these assets are real-name registered. The same is true for real estate. If these assets are tokenized and transferred and sold at will, it may cause more problems, and these problems will also lead to a series of supervisions, which will also hit the further development of blockchain.
Anchoring of RWA assets RWA assets still have anchoring problems. The most common one is the de-anchoring of stablecoins. Because there must be corresponding collateral behind the RWA assets, and whether the collateral is sufficient is the key. USDT has been questioned for insufficient assets many times before. Generally, this situation requires regular audits by auditing agencies to ensure that the assets are sufficient. In addition to the audit, it is also necessary to obtain the approval of the regulatory authorities to ensure that the risks within a certain range are controllable.
Summarize
RWA assets are the first step in the integration of blockchain with traditional assets, and are also the key to technological upgrades in the traditional financial industry. Although the popularization and popularity of RWA assets will be a major trend in the future with the development of blockchain, the main problem with RWA at present is still the regulatory attitude. Once RWA assets become popular, it also means that the degree of financialization of real-world things will be further enhanced. On the one hand, the enhancement of financialization can represent the acceleration of capital flow, which is conducive to economic prosperity, but it will also bring more risks. It is like houses could only be used for living in the past, but the development of the modern industrial revolution has made houses not only residential, but also financial, and used for the preservation and appreciation of residents' assets. This also brought about the 2008 financial crisis. Therefore, for RWA assets, it is only the beginning. The future path still needs continuous exploration and improvement to ensure its reasonable operation.