The Outlook of RWA Under Hong Kong Regulation: Perspectives from Industry Insiders

Recently, three experts from well-known licensed virtual asset institutions in Hong Kong shared their views on RWA(Real World Asset) under the regulatory framework in Hong Kong.

Regulatory Approach to RWA

Experts believe that Hong Kong regulators adhere to the "same principle, same practice" approach towards RWA. The nature of the underlying assets will determine their regulatory treatment, rather than simply categorizing all tokenized assets as virtual assets.

For example, if the underlying RWA is a traditional financial product, its regulation will refer to the corresponding existing rules. This means that products originally available to retail investors can still be offered to retail investors after tokenization; while products limited to professional investors will also maintain the same restrictions after tokenization.

The Appeal of RWA

Experts point out that the reason RWA has attracted attention is mainly due to its potential risk-free excess returns.

Taking the tokenization of U.S. Treasury bonds as an example, in addition to the original bond yields, investors can also obtain additional returns through methods such as collateral mining. This model of compounded returns makes RWA more attractive in the current market environment.

Experts emphasize that investors always tend to choose assets with higher returns at the same level of risk. Therefore, if RWA can provide higher returns than traditional risk-free assets, it will naturally attract funds.

Opportunities and Challenges under Compliance Regulation

Within the compliance regulatory framework, experts believe that institution number 9 can look for opportunities in the following areas:

1. Manage low-risk funds, such as government bonds or money market funds.

2. As a bridge between traditional finance and Web3, assist Web3 projects in investing in traditional assets.

3. Provide traditional asset investment channels for investors holding virtual currency, meeting their demand to invest in traditional assets without converting to fiat currency.

However, challenges also exist. KYC( Know Your Customer) remains a difficulty, especially for some virtual currency funds with unclear sources. In addition, how to achieve efficient conversion between virtual currencies and traditional assets within the regulatory framework is also a problem that needs to be addressed.

Experts believe that the bridge between the world of virtual assets and the traditional financial world will become wider in the future, and the conversion costs will gradually decrease. In this process, Hong Kong, as a pioneer of financial innovation, will enjoy unique regulatory benefits and development opportunities.