Definition of RWA Project Concept and Discussion on Compliance

Recently, the RWA( Real World Asset ) project has sparked heated discussions in the Web3 space. Many observers believe that RWA will reshape the new financial ecosystem in Hong Kong and achieve breakthrough development under the existing regulatory framework in Hong Kong. However, there are still differences in the industry's understanding of "Compliance," which stems from different interpretations of the RWA concept.

This article will discuss the definition of the concept of RWA and the compliance red line from a professional legal perspective.

1. Definition of RWA Concept

(The background and advantages of the ) RWA project

RWA has become a market hotspot, mainly based on two backgrounds:

1. Token financing can compensate for the shortcomings of traditional financing, with advantages such as fast financing speed, asset diversification, and lower costs.

2. Hong Kong's compliance innovation provides domestic investors with channels to participate in RWA, attracting attention from both crypto assets and traditional sectors.

(The elements and characteristics of the ) RWA project

A genuine RWA project should have the following characteristics:

1. Based on real assets
2. Asset Tokenization on Chain
3. Digital assets have ownership value.
4. The issuance and circulation comply with legal regulations and are subject to administrative supervision.

(The type and regulation of the ) RWA project

RWA projects can be divided into two categories:

1. Narrow RWA: Physical assets on-chain

2. STO( Security Token Offering ): Financial Assets on the Blockchain

STOs are subject to securities regulations, and the criteria for their recognition varies by country. The United States employs the "Howey Test" to determine whether an "investment contract" exists.

2. Legal Logic of RWA Project "Compliance" Layering

The compliance of RWA can be divided into four levels:

1. Sandbox Compliance: Hong Kong Monetary Authority Ensemble Sandbox Project

2. Hong Kong Administrative Regulation Compliance: Incorporation into the STO Framework Management

3. Clear regulatory framework for crypto-friendly regions

4. "General Compliance": Not yet deemed non-compliant in certain offshore regions.

Currently, most projects find it difficult to achieve the first two types of Compliance, and are trying the third path.

3. Lawyer Recommendations for RWA Projects

1. Choose a policy-friendly jurisdiction
2. Ensure that the underlying assets are real and redeemable.
3. Obtain investor recognition
4. Ensure compliance in the entire chain operation
5. Preventing Post-Compliance Risks
6. Focus on brand reputation management

4. Conclusion

RWA projects vary and need to be studied individually. The biggest challenge lies in the uncertainty of the system, and "practical standards" should be explored. However, caution should be exercised regarding compliance risks, and existing legal frameworks should be respected.