Limitations and Adjustments in RWA Development


RWA is a pioneering approach that combines physical assets with digital assets. However, RWA still has limitations and faces challenges. Firstly, due to insufficient transparency, RWA regulation is strict. Due to the anonymity and irreversibility of DeFi, regulators need to set more regulatory constraints on RWA based on asset class, jurisdiction, and token issuance platform compliance. Secondly, security has always been the most concerning issue for both parties in the transaction. Maintaining the connection between physical assets and digital tokens is crucial. This connection must be unbreakable and prevent fraud and legal disputes. Finally, the scalability of transactions needs to be strengthened. Supporting RWA transactions requires a blockchain that can handle high data throughput. Currently, there is a significant gap between the overall transaction throughput on the blockchain and the traditional financial system, and the speed of executing smart contracts is limited by data throughput. There is still significant room for development in the underlying layer in the future.

Hong Kong leads RWA development with four key tools: policy+experience+regulation+compliance


In 2022, the Financial Secretary of Hong Kong issued a Policy Declaration on the Development of Virtual Assets in Hong Kong. Since the release of this guiding document, the Hong Kong government has frequently introduced policies to promote the development of virtual assets and spared no effort in promoting the development of Web3.0. In 2023, the Hong Kong Securities and Futures Commission issued two circular letters, namely the "Circular on Intermediaries Engaging in Token Securities Related Activities" and its appendix, and the "Circular on Token Securities and Futures Commission Recognized Investment Products". Two circular letters have been updated and further elaborated on the considerations and regulatory measures of the Hong Kong Securities and Futures Commission for tokenized securities, including the clarification and relaxation of some existing policies. These two circular letters will serve as policy opportunities for RWA's development in Hong Kong.

As a traditional financial center, Hong Kong has gradually accumulated rich practical experience in the RWA track of digital assets. Recently, Hong Kong has launched three plans for digital assets, namely the issuance of non fungible tokens (NFTs) during Hong Kong Fintech Week, tokenization of green bonds, and digital Hong Kong dollars. At present, all three plans have been completed or achieved phased results.

For example, in 2023, the Hong Kong government announced the successful issuance of HKD 800 million in tokenized green bonds. This is the first tokenized green bond issued solely by governments worldwide. For the sake of caution, the tokenization of green bonds this time will not be directly issued on the chain, but will be issued through RWA. The first step is to deposit the bonds in the Hong Kong Central Depository and Clearing System (CMU), and the second step is to tokenize the bonds. Compared to the traditional bond issuance model, tokenized green bonds still significantly improve issuance efficiency, shortening the settlement process from 5 working days (T+5) to 1 working day.


It is worth mentioning that this issuance covers all the processes of bond issuance, including secondary market buying and selling settlement, coupon payment, and redemption upon maturity, and has the potential to use automatically executable smart contracts for trading, further enhancing efficiency.


Hong Kong has always been renowned globally for its adaptable and rule-based financial regulatory environment. With the rise of blockchain and encrypted assets, Hong Kong is actively exploring the potential of RWA tokenization and developing corresponding regulatory frameworks to ensure the stability and innovation of the region's financial markets. Regulatory agencies in Hong Kong, such as the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC), have introduced multiple measures aimed at providing clear regulatory guidance for RWA tokenization, while safeguarding investor interests and promoting healthy market development. Specifically, there are clear regulatory guidelines. The attitude of Hong Kong regulatory authorities towards encrypted assets and blockchain technology is open and cautious. By issuing clear guidelines, regulatory agencies have provided a clear legal and compliance picture for RWA tokenization. These guidelines not only define what types of assets can be tokenized, but also specify compliance requirements during the issuance and trading process. Secondly, implement a multi-level regulatory system. Hong Kong has implemented hierarchical regulation for different types of RWA tokenized products. For products involving a wide range of investors, such as securitized tokens, strict regulatory and disclosure requirements are implemented; For products that are targeted or aimed at professional investors, more flexible regulatory measures are taken. Thirdly, promote cross departmental cooperation. Hong Kong regulatory authorities have demonstrated a spirit of cross departmental cooperation in RWA tokenization, with institutions such as the Hong Kong Monetary Authority and the Securities and Futures Commission jointly participating in the formulation of regulatory policies. This cooperation ensures policy consistency and provides a unified communication platform for market participants.