Reflections on the RWA Track

Regarding RWA, my frequent opinion is that:

• This may be an area of interest for institutions and traditional financial players.

• For retail investors, our interests in this are quite limited and there isn't much to see. The only potential benefit we might gain is from the tokenization of unlisted shares in tech companies, especially American tech companies.

The reason I hold these views is that many core interests and joints in this track are firmly controlled by centralized regulatory agencies.

Essentially, it is 100% a centralized application, just wrapped in decentralized technology.

However, I still have a strong interest and a strong desire to participate in the remaining opportunities for equity tokenization in this sector. Therefore, I have recently observed several companies that are tokenizing the unlisted equity of American technology companies for sale. But the conclusions drawn are not optimistic at all.

Users need to apply for their accounts, and in addition to undergoing strict KYC, they must also strictly check whether the applicant meets the definition of "qualified investor" set by the U.S. Securities and Exchange Commission: whether the annual income meets the standard or whether the net assets excluding debts meet the standard.

These two standards are quite harsh not only for ordinary users in China but also for ordinary users in the United States.

Why set such review standards and thresholds?

The company states clearly on its official website that they must strictly comply with the regulations of the U.S. Securities and Exchange Commission.

Therefore, if we follow this rule, at least the current equity tokenization companies are unrelated to the vast majority of retail investors, and the potential benefits of this path are like flowers in a mirror or the moon reflected in water, desirable yet unattainable for most retail investors.

I believe that in the future, this will not change much.

In addition, there are two other recent pieces of news that have gradually made me lose interest in the Hong Kong RWA development that I have been paying attention to.

First, at the request of relevant authorities, mainland internet companies are required to gradually withdraw from tokenization businesses in Hong Kong.

Second, mainland brokers are required to suspend their RWA business in Hong Kong.

Earlier, I was somewhat optimistic that as long as companies in mainland China strictly adhered to the bottom line of not allowing mainland users to participate, there would still be some room for imagination in carrying out and planning tokenization or RWA businesses in Hong Kong, according to the regulations set by the Hong Kong government.

By doing this, on one hand, some assets and businesses in mainland China are still quite attractive to overseas users, and after tokenization, it should be able to attract some overseas buyers.

In addition, doing so also allows enterprises to use Hong Kong as a gateway to go global, utilizing Hong Kong to maintain communication and integration with the world, which is beneficial for all aspects.

Now, after this practice has also been restricted, there are only two types of businesses left that can be conducted in Hong Kong:

Firstly, local companies in Hong Kong will tokenize their local businesses or overseas businesses, or convert them into RWAs.

Second, foreign companies tokenize foreign business or local business in Hong Kong or convert it to RWA.

First, what types of businesses can be tokenized or RWA-ized to attract customers using these two methods?

I can't seem to think of much room for further improvement in this area in Hong Kong.

Secondly, even if these businesses can be tokenized or RWA-ed, who are their buyers?

It definitely cannot be mainland users; if we are facing overseas users, isn't the United States, where regulation is much looser than in Hong Kong, more advantageous?

From the above observations, we can draw the following conclusion:

Businesses like RWA are essentially centralized, and the direction of such businesses is entirely determined by the values and mindset of the centralized institution.

If the values of this centralized institution are conservative (small government, loose regulation), then retail investors may (just may) have some opportunity; otherwise, discussing the opportunities for retail investors is basically just a pipe dream.