Discussion on the Definition and Compliance of RWA Projects

Recently, the RWA( real-world asset ) project has sparked heated discussions in the Web3 community. Many believe that RWA will restructure the financial ecosystem in Hong Kong, but there are disagreements regarding its definition and Compliance. As a professional legal team, we provide the following analysis on the definition of the RWA concept and its Compliance points.

1. Definition of RWA Concept

RWA is a broad concept that refers to the process of asset tokenization achieved through blockchain technology. A true RWA project should possess the following characteristics:

1. Based on real assets
2. Asset token on-chain
3. Digital assets have ownership value.
4. The issuance and circulation comply with legal regulations and are subject to supervision.

RWA projects can be divided into two categories:

1. Narrow RWA: Physical assets on-chain
2. STO( Security Token Offering ): Financial Assets On-chain

Different countries have different standards for the classification of security tokens. The United States adopts the Howey Test, while Hong Kong has specific positive and negative lists.

2. The Hierarchical Logic of RWA Project "Compliance"

RWA compliance can be divided into four levels:

1. Sandbox Compliance: Such as the Hong Kong Monetary Authority's Ensemble sandbox project
2. Hong Kong Administrative Regulation Compliance: Included in the STO Framework Management
3. Compliance under a clear regulatory framework in crypto-friendly regions
4. "Pan-Compliance": temporarily not recognized as a violation in certain offshore jurisdictions.

Currently, most projects choose the third path, but the turning point that can truly generate financial value has not yet arrived.

3. Lawyer Recommendations for RWA Projects

1. Choose a policy-friendly jurisdiction
2. Ensure that the underlying assets are genuinely redeemable.
3. Obtain investor recognition
4. Ensure compliance in the entire chain operation
5. Preventing Post-Compliance Risks
6. Value Brand Reputation Management

IV. Conclusion

The RWA project types are diverse and need to be studied and classified one by one. The current biggest challenge lies in the uncertainty of the system. We should promote industry standardization and compliance through practice within the existing legal framework, facilitating the evolution of a sound system. At the same time, we must also be vigilant about compliance risks, as respecting existing regulations is a prerequisite for innovation.