Web3 Meets Finance: The Rise of Tokenized Real-World Assets
Blockchain technology, the foundation of Web3's third-generation internet, enables secure, transparent, and immutable transactions. Through smart contracts, it transforms coins into tokenized assets (Tokenization), offering liquidity, authenticity, low cost, transparency, and consensus mechanisms for digitized physical assets. This bridges Traditional Finance (TradFi) with Decentralized Finance (DeFi), facilitating Security Token Offerings (STOs) and Real-World Asset Tokenization (RWA-T).
The Current RWA Landscape
The "RWA" trend continues gaining momentum, with new enterprises and services emerging rapidly. However, most referenced cases predominantly highlight limited domestic "success stories" while overlooking RWA's core innovation: Tokenization.
Key Questions:
- Can China host genuine RWA projects under current regulations?
- How can domestic assets integrate global capital via compliant RWA tokenization models?
Critical Oversights in Domestic RWA Narratives
Many domestic RWA promotions emphasize "Real-World Assets" while downplaying the essential financial tool: Tokenization. Unlike TradFi's securities or bonds, RWA leverages blockchain to:
- Enable global asset digitization
- Reduce investment thresholds
- Split asset equity for public participation
👉 Discover how leading platforms tokenize assets
Three Common Domestic RWA Models (And Their Challenges)
- Foreign Investment in Domestic Assets
Legally structured investments into Chinese assets by international entities. - Offshore Asset Financing
Domestic assets leveraging overseas financial channels for fundraising. - Domestic-Focused Projects
Operations publishing data online (though not necessarily on-chain).
Universal Requirement:
All models must demonstrate legal trust frameworks ensuring asset-backed token issuance. Without this, can they truly qualify as RWA?
Red Flags: The ICO Parallels
Recent observations reveal concerning trends reminiscent of 2017's ICO craze:
- Premature projects seeking funding via speculative RWA claims
- Assets purportedly gaining "instant" market value through tokenization
- Unviable assets targeting RWA as a last-resort funding channel
Reality Check:
RWA enhances liquidity but cannot artificially inflate asset value. Tokenization works only for assets with:
- Proven intrinsic value
- Demonstrated commercial ROI
DeFi's RWA Pioneers: MakerDAO & Centrifuge
Market Snapshot (2025 Q1)
- Total DeFi TVL: $300B+
- RWA valuation: ~$50B
Case Study 1: MakerDAO's Evolution
- Founded in 2017 as a decentralized stablecoin (DAI) protocol
- Initially collateralized by Ethereum (ETH)
- Pivoted to RWA-backed lending via SPVs (Special Purpose Vehicles)
2024 Strategic Shift:
- Rebranded DAI as "USDS" to emphasize payment stability
- Introduced SKY governance tokens (24,000:1 conversion from MKR)
Case Study 2: Centrifuge's Asset Bridge
- Early RWA-focused lending protocol (est. 2017)
Partners with MakerDAO to tokenize:
- Real estate loans (New Silver Series)
- Structured credit (Block Tower Series)
- Receivables financing (Harbor Trade Credit)
Operational Model:
Borrowers use asset-backed NFTs (DROP tokens) as collateral to borrow DAI, achieving:
- 4-15% APY returns (vs. DeFi's 4% average)
- $2B+ pooled assets (80% of Centrifuge's TVL)
The Tokenization Process: More Than Minting Tokens
Comprehensive Workflow Includes:
- Asset acquisition & custodianship
- Legal structuring (SPVs, trust agreements)
On-chain issuance via:
- Blockchain protocols
- Smart contracts
- Oracle networks
- Cross-chain interoperability checks
Regulatory Foundations Matter:
Existing laws determine which assets qualify for tokenization and govern transactional compliance. Technological infrastructure must ensure:
- Data integrity
- Privacy preservation
- Auditability
FAQs: Navigating China's RWA Frontier
Q1: Can Chinese law recognize NFT-based asset ownership?
A: Currently debated—while NFTs may represent contractual rights, direct asset ownership claims face legal ambiguities.
Q2: What's the risk profile of RWA investments?
A: Varies by asset class. Tokenized real estate typically carries lower volatility than speculative crypto-backed loans.
Q3: How do SPVs mitigate counterparty risk?
A: By isolating assets in bankruptcy-remote entities, ensuring lenders' claims remain prioritized.
Q4: Are there tax advantages to RWA structures?
A: Potentially—some jurisdictions offer tax efficiencies for tokenized securities, but China's stance remains evolving.
Strategic Recommendations for Domestic RWA Growth
- Prioritize Regulatory Alignment
Collaborate with policymakers to establish sandbox frameworks. - Focus on High-Quality Assets
Start with stabilized cash-flowing properties or commodities. - Build Hybrid Infrastructure
Combine private/permissioned chains for compliance with public chain liquidity.
👉 Explore compliant tokenization frameworks
Final Note:
As China explores RWA models, studying blockchain fundamentals and TradFi principles becomes non-negotiable. By learning from global pioneers while adapting to local regulations, sustainable innovation can emerge—without repeating the ICO era's mistakes.