RWA from a Web3 Perspective: Concept, Compliance, and Future

Recently, the RWA( Real World Assets) project has sparked extensive discussions in the Web3 field. As a professional legal team, we believe it is necessary to clarify the conceptual definition of RWA and sort out its compliance red lines.

1. Definition of RWA Concept

RWA is a broad concept that refers to financing projects that tokenize real-world assets through blockchain technology. A true RWA project must have the following characteristics:

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

The RWA project mainly includes two types:

1. Narrow Definition of RWA: Physical Assets on the Blockchain
2. STO( Security Token Offering ): Financial Assets On-chain

STOs are subject to securities regulations and must comply with the criteria for securities recognition in various countries. For example, the U.S. SEC uses the Howey Test to determine whether something constitutes a security.

2. RWA Project "Compliance" Layering

The compliance of RWA can be divided into the following levels:

1. Sandbox Compliance: such as the Hong Kong Monetary Authority's Ensemble Sandbox project
2. Hong Kong Administrative Regulation Compliance: Managed under the STO framework
3. Clear regulatory framework in crypto-friendly regions
4. "Pan Compliance": Temporarily not recognized as a violation in specific regions.

Currently, most RWA projects find it difficult to meet the first two compliance standards and are trying to achieve a formal "compliance" in friendly regions.

3. Legal Advice for RWA Projects

1. Choose a policy-friendly jurisdiction
2. Ensure that the underlying assets are real and redeemable.
3. Obtain investor recognition
4. Ensure the compliance of institutional operations in the chain.
5. Preventing Post-Compliance Risks
6. Focus on brand reputation management

4. Conclusion

The biggest challenge facing RWA projects is the uncertainty of regulations. We need to explore "practical standards" in practice and promote industry compliance. At the same time, we must remain vigilant about compliance risks and respect the existing legal regulatory framework. Regardless of how technology evolves, the law remains the bottom line in safeguarding market order and public interests.