Crypto investment and entrepreneurship: How to identify the base color of RWA projects?

Recently, in the blockchain circle, the term RWA (Real World Assets, tokenization of real-world assets) has been hotly discussed. Especially after the sandbox case in Hong Kong came out, many people immediately became excited, as if they had caught a "divine weapon". Whether it is equity stake financing for startups or non-performing asset packaging financing for mainland enterprises, it seems that as long as RWA is involved, it can turn decay into magic.

 

As a Web3 business service law firm that is at the forefront of industry compliance, Mankiw Law Firm has recently received many inquiries from clients, hoping that we can provide them with full-process legal services for RWA projects. However, in the communication process with these entrepreneurs, we found that they generally have a very serious misunderstanding: They think that RWA is simply issuing coins and then raising funds from the market. As for whether their projects and assets are suitable for RWA and whether they meet regulatory requirements, there seems to be no clear and rational understanding.

This blind following behavior exposes entrepreneurs' misunderstanding of RWA.

 

Is RWA a financing dream or fantasy?

Let's not talk about those mysterious concepts for now. What exactly is RWA? Essentially, RWA tokenizes assets in the real world through blockchain technology, and implements operations such as asset circulation, mortgage, and splitting through smart contracts. In other words, it divides real assets such as real estate (such as houses), debts, and commodities into small pieces on the blockchain and trades them digitally. It sounds cutting-edge and "futuristic", but reality has always been harsh. For the vast majority of ordinary entrepreneurs, RWA is probably just a beautiful fantasy about financing.

Whether it's Web2 or Web3, financing has never been an easy task, especially for startups. Traditional equity stake financing requires companies to have mature business models, stable revenue expectations, and reliable market data. However, the emergence of RWA has made many people feel that " financing can be achieved by bypassing these conditions ". The problem is that these basic requirements do not become irrelevant just because you use blockchain technology. Investors on blockchain are not fools, they are just as shrewd, and even have stricter risk control because there are too many bubbles and scams in the blockchain world.

 

There are also some people who hope to solve the problem of non-performing assets through RWA, especially in Chinese Mainland. These people think that by tokenizing non-performing assets, they can evade the complex approval process of the traditional financial system, finance quickly, and even some people think they can make a profit. What I want to say is that real-world assets are very complex, and not everything can be solved by tagging them with "Token". The regulation of non-performing assets in China is very strict, and any attempt to evade the law through tokenization may ultimately lead to your own imprisonment.

 

In cities such as Shenzhen, which are well-known gathering places in the cryptocurrency circle, since the creation of RWA, many illegal fundraising CX gangs have been using the banner of RWA to deceive high net worth individuals, including but not limited to elderly people and Moments, into participating in related investments. The phenomenon of illegal fundraising under the banner of RWA is extremely covert, and many investors have only a vague understanding of the basic principles of blockchain. They cannot judge the true risks of RWA. Such projects are often easily trapped in legal gray areas. Once the project collapses, participants not only lose their funds, but also may have to bear legal responsibility if there are any tactics to recruit people.

Many trend-following entrepreneurs pin their hopes on "technology" rather than "business". They believe that as long as they package their projects with RWA and add blockchain support, these assets will suddenly have "global liquidity", which can attract global investors and easily obtain financing.

But the problem is that girls are usually beautiful because of their good looks. How did these assets suddenly generate economic value after being tokenized? Is the actual liquidity really that high? The legal structure, risks, and market attractiveness of these assets are still a huge problem. It's not that something without value suddenly becomes a hot cake once it's on the chain. This is not scientific.

 

The monk can touch it, but I can't?

Many Chinese Web3 entrepreneurs have been influenced by RWA, most likely due to the recent RWA project of Ant Digits. As a leading fintech company in China, Ant Digits' RWA project has received high attention from the market. Many entrepreneurs saw Ant Digits' layout on RWA and thought they could replicate this model and easily obtain financing. However, reality is cruel.

 

* Hong Kong RWA sandbox four themes

 

The reason why Ant Digits' RWA project can succeed is not only because it has years of blockchain technology and financial strength, but also because it has a huge ecosystem and market resources behind it. Ant Digits has many partners in its ecosystem, who themselves have rich financial resources and investment capabilities and can provide strong support for RWA projects. For ordinary entrepreneurs, it is obvious that they lack such resources and market networks. Entering the RWA field rashly will only face technical and legal difficulties.

Lawyer Hong Lin communicated with many friends in the industry about this matter. Their basic viewpoint is: Ant Digital's RWA project is largely a means of public relations promotion. By showcasing successful cases of RWA, it conveys its leading position in the blockchain field to the market, but this does not mean that ordinary entrepreneurs can also enjoy the same market dividends. For most start-up teams, RWA is far from reaching the stage where it can be replicated on a large scale.

 

Give up illusions and prepare for battle

In the world of blockchain, there are too many glamorous concepts, but what truly brings value is the ability to solve real-world problems, not those fancy technical terms. RWA is just a tool, not a shortcut. Although RWA theoretically provides a new financing path, it is not suitable for most ordinary entrepreneurs in practice.

The success of entrepreneurs ultimately depends on whether they can provide valuable products and services to the market. Instead of pursuing seemingly glamorous concepts, it is better to be down-to-earth and return to the essence of entrepreneurship: solving customer problems and creating social value.

For those friends who hope to deceive under the guise of RWA, Lawyer Hong Lin wants to say: Don't cut too hard, after all, you will have to pay back sooner or later.

 

/ END.