A Cold Reflection on the RWA Craze: Chaos or Opportunity?
At the recently concluded Token 2049 Dubai, no matter which venue you visited, discussions about RWA were omnipresent. Investors were on the hunt for promising projects and compelling narratives. Public blockchain platforms aimed to attract RWA projects to enhance their ecosystem. Project parties sought collaborations with RWA projects or even direct transitions. Investors and yield farmers were also on the lookout for worthwhile RWA projects. Everyone was extremely busy, all eager to make their mark in the RWA space.
Last year, amidst the bullish expectations of Bitcoin’s quadrennial halving, various segments of the crypto market were gearing up. At that time, RWA was already recognized as the hot narrative of the cycle, with the market leader $ONDO maintaining a high valuation. On the eve of the Meme Coin craze, $ONDO’s market cap continued to hit new highs, reaching $6B, becoming one of the brightest stars among Altcoins and drawing numerous investors to explore the essence and vision of the RWA narrative.
$ONDO introduced many in the crypto space to RWA. When Bitcoin broke through the $100,000 mark and went mainstream, RWA became the perfect bridge for traditional financial institutions to enter the crypto industry, linking Web2 and Web3, and welcomed another wave of growth.
1 From a Flash in the Pan to an Irresistible Trend — An Outline of RWA’s Development
RWA stands for Real-World Assets. This concept was not introduced and popularized by a single individual but gradually evolved with the development of blockchain technology. Early RWA can be traced back to projects like Colored Coins and Mastercoin on the BTC blockchain. These projects attempted to represent and transfer ownership of real-world assets on the blockchain. However, due to technological limitations and the absence of smart contract functionality, these early attempts remained conceptual.
With the introduction of Ethereum, the advent of smart contracts made asset tokenization more feasible. In 2018, Stephane De Baets, through Elevated Returns, tokenized the St. Regis Aspen Resort in Colorado, USA, issuing the Aspen Coin, the first digital security for commercial real estate. Yet, it did not make a significant impact on the market.
In the same year, the launch of the Centrifuge project truly unlocked the market’s imagination. Centrifuge aimed to tokenize real-world assets such as accounts receivable through its Tinlake platform. Subsequently, Centrifuge partnered with MakerDAO to introduce real-world assets as collateral into the DAI stablecoin generation mechanism, pioneering the practical application of RWA in DeFi.
In 2023, BlackRock introduced the BUIDL fund based on Ethereum, signaling the entry of traditional financial giants into the RWA domain. In 2024, Dubai-based developer DAMAC signed a $1 billion agreement with blockchain platform MANTRA to tokenize real estate assets in the Middle East. Centrifuge also completed a $15 million funding round that year.
Understanding RWA can begin with its participants. So, who needs RWA? Owners of real-world assets, such as real estate developers or small and medium-sized enterprises, typically seek financing. In the absence of going public, they can only resort to private market investments, which are highly uncertain and have significant barriers. The emergence of RWA allows them to issue security tokens or utilize protocols like Centrifuge to tokenize their assets and use them as collateral for borrowing. While the essence of financing remains unchanged, blockchain and smart contract technologies enable these asset holders to directly access funds from RWA platforms, reducing financing costs and improving efficiency. For retail investors, they seek low-risk, stable-yielding, and scalable investment opportunities. RWA meets their needs. For instance, by tokenizing traditional financial assets like U.S. Treasury bonds, investors can gain yields tied to these assets on-chain, unaffected by crypto market volatility.
Rather than being a product of technological adaptation, RWA is an inevitable evolution of blockchain development. How to maximize liquidity within limited risks is an eternal question in the financial industry. The significance of RWA lies in its ability to bring traditional assets on-chain, addressing issues that traditional Web2 finance cannot resolve. For example, once RWA combines with DeFi, investors can enjoy both the yields from real-world assets and DeFi lending returns, yet the actual risks are still confined to the real-world assets. In a recent speech, Xiao Feng frequently cited Nobel laureate John Hicks: “The Industrial Revolution had to wait for a financial revolution.” Progress in financial concepts and systems can often drive rapid societal productivity development. When blockchain technology intersects with the real world, RWA is precisely a broad path. This is why an increasing number of countries and regions are paying attention to and guiding the development of the RWA industry, and why numerous traditional Web2 financial institutions are entering the RWA space, supporting a variety of RWA projects that are emerging in droves.
Figure 1: RWA Market Value Overview
2 Who Are at the Forefront and Who Holds the Power — What Are RWA Giants Doing
– Centrifuge
For the crypto world, RWA can help capture opportunities in real-world commercial activities; for the real world, RWA can help assets capture the instant liquidity of the crypto space. As the first protocol to bring real-world assets on-chain, Centrifuge provides a channel to incorporate RWA assets into the decentralized finance ecosystem on-chain, enabling landmark adoption of RWA assets in the crypto space.
Centrifuge is a decentralized financing protocol for real-world assets, enabling borrowers to obtain financing without relying on traditional banks or intermediaries. Borrowers can create on-chain lending pools by pledging assets on Centrifuge, thereby gaining instant liquidity from the crypto world. By integrating the entire private credit market on-chain, the platform establishes a more transparent, lower-cost, and around-the-clock liquid decentralized financial system (The Platform for Onchain Credit). This helps reduce financing costs for small and medium-sized enterprises and offers stable income sources for investors unrelated to crypto market volatility. Tinlake, the core protocol of Centrifuge, allows borrowers to pledge real-world assets in the form of NFTs and convert them into ERC-20 tokens. Its Total Value Locked (TVL) currently stands at $250 million.
Figure 2: Centrifuge Market Value Overview
– Ondo Finance
Ondo Finance is an investment protocol for tokenizing real-world assets (RWA), dedicated to bringing low-risk, stable-yielding, and scalable financial products such as U.S. Treasuries and money market funds onto the blockchain. This provides on-chain investors with safer and more stable alternative assets. Unlike traditional stablecoins, Ondo’s products allow holders, rather than issuers, to receive yields from the underlying assets, achieving a shift in the yield distribution mechanism. As of April 2025, Ondo Finance’s Total Value Locked (TVL) has surpassed $1 billion, reflecting the market’s strong demand for tokenized U.S. Treasuries and similar products.
Figure 3: Ondo Market Value Overview
Ondo’s tokenization path primarily involves establishing independent Special Purpose Vehicles (SPVs) to isolate risks and combining trust structures to grant income rights to holders. Currently, due to compliance restrictions, these products are only accessible to eligible investors. To address the issue of open participation, Ondo has launched the DeFi lending protocol Flux Finance (built on Compound v2), allowing users to use stablecoins such as USDC and DAI as collateral to borrow RWA assets like OUSG, thereby enabling permissionless participation.
– BUIDL
On March 21, 2024, BlackRock collaborated with Securitize to issue the first publicly available tokenized fund on Ethereum, the BUIDL (BlackRock USD Institutional Digital Liquidity Fund). This marked the first compliant introduction of traditional financial products onto the blockchain, becoming a significant milestone in the tokenization of real-world assets (RWA).
On May 1, 2024, Securitize announced the completion of a $47 million funding round, led by BlackRock, with other participants including Hamilton Lane, ParaFi Capital, Tradeweb, Aptos, Circle, and Paxos. The proceeds will be used to accelerate product development, expand global business, and strengthen partnerships within the financial ecosystem, further solidifying its leadership in the on-chain securities sector.
On the surface, BUIDL resembles a stablecoin, but in essence, it is a compliant securities product. Investors can enjoy the stability of the token’s value while receiving yields. The BUIDL fund is an SPV (Special Purpose Vehicle) established by BlackRock in the British Virgin Islands. It has applied for Reg D exemptions under U.S. Securities and Investment Company Acts and is currently only open to eligible qualified investors.
All of BUIDL’s assets are invested in dollar-denominated cash instruments, such as cash, short-term U.S. Treasuries, and overnight repurchase agreements, ensuring that each token unit maintains a value of $1. Yields are distributed to investors’ wallets in the form of new tokens through a Rebase mechanism on a monthly basis. Securitize supports real-time subscription and redemption 24/7/365, offering a much more efficient fund settlement experience compared to traditional funds. Traditional funds often involve multiple ledgers (e.g., securities and bank ledgers), resulting in time delays ranging from T+3 to T+N. The BUIDL fund, through a unified on-chain ledger, achieves real-time settlement, significantly reducing transaction costs and enhancing capital efficiency. Other advantages include: all fund participants can view data on-chain, eliminating the need for multi-party reconciliation; subscriptions and redemptions can be directly settled to accounts, avoiding market and counterparty risks; and true atomic settlement, real-time pricing, and around-the-clock operation are realized.
3 Chaos Abounds? RWA Is Becoming a Lost Land
RWA has evolved from an initial buzzword to a gradually materializing application. As traditional financial and physical assets such as U.S. Treasuries, short-term notes, real estate, equity, and art continue to be tokenized on-chain, more institutions and projects aim to lower financing barriers and expand market boundaries through on-chain methods. However, the rapid development of RWA has also introduced unprecedented regulatory challenges and systemic frictions.
Currently, the RWA landscape is characterized by enhanced institutional participation, expanded application boundaries, and significant regulatory divergence. Projects like Ondo, Centrifuge, and Maple, representing the mainstream DeFi contingent, have successfully bridged on-chain and off-chain ecosystems. Leveraging traditional structures such as SPVs, custodians, and accredited investor regimes, they have enabled compliant issuance of assets like T-Bills and short-term credits. These assets are integrated into DeFi modules such as stablecoins and lending, forming a preliminary “on-chain financial system.” An increasing number of countries are beginning to recognize the potential and risks of RWA. Hong Kong has launched the first retail RWA fund, the U.S. SEC is actively reviewing the securities attributes of tokenized instruments, and South Korea has made clear plans to revive STO (Security Token Offering) policies. It is evident that a global regulatory framework is gradually taking shape around RWA.
However, the core issue facing RWA today is not its tokenization capability from a technical standpoint, but rather its sustainability within a multi-jurisdictional compliance architecture. RWA is fundamentally based on real-world securities investment instruments, and its premise lies in the securitization of assets in the real world. Real-world securities must adhere to the securities regulatory rules of their respective countries. From a legal perspective, RWA touches upon several sensitive regulatory boundaries, including securities law, fund law, anti-money laundering, and anti-terrorist financing regulations. A typical compliant RWA project often needs to meet several prerequisites: underlying assets must be genuine and custodiable, the issuance process must comply with regulations such as the U.S. Reg D, Reg S, Singapore MAS, and EU MiCA, and investment access must be restricted to accredited investors or whitelisted addresses. The complexity of operations and high legal costs mean that few projects can currently achieve large-scale compliant issuance. Even BlackRock and Securitize’s jointly issued BUIDL fund is only open to institutionally accredited investors who have passed KYC verification. Its structural design is essentially a traditional securities business mirrored on-chain.
More alarmingly, the current market is teeming with projects under the RWA banner, of varying quality and integrity. Some projects essentially use so-called “RWA” for market value management operations, hyping the narrative of “digital empowerment of the real economy” without any genuine asset tokenization on-chain. Others, particularly some projects from mainland China, misuse the “RWA innovation” label to peg tokens to real-world assets like baijiu (Chinese liquor) and green tea, promising high returns. In reality, these are blockchain-packaged crowdfunding and illegal fundraising schemes. Once they involve tradable, publicly offered, and return-promising elements, they easily violate Chinese criminal law provisions on illegal public deposit absorption and financial fraud, facing severe legal consequences.
Beyond regulatory and legal risks, RWA projects also face real-world market challenges. As they are essentially low-risk, stable-yield financial assets, they struggle to meet the high-volatility, high-leverage speculative preferences long cultivated in Web3. Additionally, RWA assets lack mature liquidity mechanisms and derivative ecosystems on-chain, leading to a “tokenization as endpoint” scenario and suboptimal capital efficiency. Furthermore, infrastructure such as cross-chain bridges and stablecoin pools has yet to fully meet RWA’s risk control requirements, leaving its composability and liquidity significantly lagging behind native crypto assets.
An increasing number of investors recognize that RWA is not a shortcut to quick wealth but a highly specialized field demanding stringent compliance, financial expertise, technological capability, and legal knowledge. The value of RWA does not lie in replicating DeFi’s growth miracle but in serving as a bridge between traditional finance and crypto networks, enabling on-chain finance to connect with the real world. In a sense, the projects truly deserving of respect are not those hastily adopting the RWA label but the builders who diligently cultivate industries within legal boundaries and are willing to bear the costs of compliance and trust. Regulatory clarity marks the starting point for RWA’s genuine outburst rather than an obstacle. FinTax will release more content in the future to provide an in-depth interpretation of RWA regulatory compliance.