Old Bai: Recent changes in RWA Next period's main track

Author | Lao Bai

In the previous article, I talked about the perspectives of the East and the West on the market. Today, coincidentally, with YZi Labs announcing the investment in Plume Network, an RWA platform, I want to talk about the recent changes I have observed in the RWA track.

This matter must be divided into four parts to explain

1. Does RWA really have application scenarios, or PMF
2. Which RWA assets are suitable for on-chain, and which are not
3. What were the past solutions, and what are the current solutions?
4. RWA Have you perceived the trend in recent months?

First, let's talk about whether RWA really has practical applications, or PMF - (here, first exclude the stablecoin track of US bonds on the chain, Usual, MKR, etc. are considered to have found PMF). Taking US stocks on the chain as an example, this is the most fierce argument on Twi. Many people think that putting US stocks on the chain is unnecessary. Those who really want to speculate in US stocks have their own channels. Anything on the chain is more volatile than US stocks, so there is no need to play stocks on the chain.

I have a different opinion on this, personally I think that the US stock market has its significance on the chain.

1. In terms of channels - indeed, most big shots above A8 and A9 use platforms like Futu, FirstTrade for securities trading, as well as investing in coins, stocks, gold, and other diversified assets. However, I believe that most retail investors in the circle do not have US stock accounts. Trading US stocks on the chain can at least open up their purchase channels without any threshold.

From another perspective, the total market value of stablecoins such as USDT/USDC is getting larger, which is another way of diffusion compared to the traditional financial system dominated by the US dollar. If Crypto one day truly moves towards Mass Adoption through stablecoins +Payfi+ Alipay-like smart wallet experience, do you think Americans would be willing to let the whole world take over the US stock market for them? Would people in most other countries prefer to open accounts with various banks and brokerages, spend a few days fussing over buying their own country's stocks that are half-dead, or simply place orders to invest in the seven sisters of the world's largest economy as easily as shopping on Taobao?

2. From the perspective of application scenarios, imagine such a case. As a P junior, you have recently made a huge profit of 100,000 U by charging Mubarak. You know in your heart that Tesla has recently plummeted, which is a good opportunity to buy low. Then you want to exchange this 100,000 U for Tesla's stock.

Even if you have a US stock account, you have to convert the 100,000 U OTC into fiat currency, send the fiat currency to the broker's account through the bank, and then start buying at the broker. This whole process will take 3-5 working days. (In 2017, before I came into contact with Bitcoin, I bought US stocks through FirstTrade in Australia. It took 4 to 5 days just for the Swift transfer, and I had to pay a hefty fee of tens of dollars). If one day Telsta rises and you want to sell it and exchange it for BTC or U, you have to go through this process again... Imagine if there were US stocks on the chain, and the U you earned from Meme could be instantly converted to Tesla. The reduction of friction cost is not just a little bit, but a tenfold or even a hundredfold improvement in experience.

Then talk about 2 - which RWA assets are suitable for on-chain

Similarly, T-Bill, which has proven itself, is no longer up for discussion, while other RWA assets actually depend on who the specific target audience is.

For C-end users, stocks are undoubtedly the most suitable. Most retail investors probably have never had access to first-level private equity. Even if you tokenize the equity of an unlisted company, probably not many people can understand, buy, and hold it. Also, assets like private credit collateral on Centrifuge, such as bridge loans in the real estate market, and loans for corporate accounts receivable, are similarly not suitable for C-end users. The most familiar thing for the majority of C-end users should be stocks. For C-end, the more applicable scenario should be to open up an asset to users who previously had no channels to purchase through the chain, which is a process from 0 to 1.

And for the B-end, there are many more things that can be Tokenized, but compared to the 0 to 1 for the C-end, the B-end should be more of a reduction of friction from 1 to 100, just as first-level private equity originally circulates between some institutions and high-net-worth investors, the bridge loans collateralized on Centrifuge can probably be borrowed by banks, it's just that the process is relatively cumbersome, with greater friction. Putting it on the chain is like Payfi compared to Swift, it can greatly enhance user experience and circulation speed.

Speaking of which, I remembered a RWA project we discussed last year, whose parent company is a well-known asset management institution in the United States. They plan to issue tokens on their own trading platform based on the first-level equity of clients, such as Elon Musk's SpaceX, allowing the tokens to circulate and change hands easily on their platform. When SpaceX goes public, settlement can be made directly at once. Therefore, for To B, besides being limited to institutional and corporate trading users, the issuer is also relatively restricted. Just like the example above, unless you already hold a large amount of SpaceX's equity on your own asset management platform, you are simply an STO or RWA platform. If you want to attract SpaceX equity holders to issue tokens representing SpaceX's equity on your platform, it involves a lot of friction in terms of resource cooperation, legal terms, and other aspects.

There are also many intermediate states, which can be To C or To B, such as the IP on-chain of Story Protocol, or the royalties of a novel, the box office of a certain movie, the sales of a certain game, etc. It feels like it's still in the early exploration stage, and needs to be tried and falsified one by one. Tokenizing things like influence, FT failed, while Kaito was relatively successful. Tokenizing celebrity time, it was popular for only a few days and then disappeared... These things need to be taken slowly.

Next is 3 - what were the past solutions, and what are the current solutions?

Using US stocks as an example - in the past, the solution was mainly based on synthetic assets, represented by SNX, Mirror from Terra, and GNS.

This road is currently basically falsified, and the above three platforms have also early removed the synthetic US stock assets previously listed. There are two reasons for this. First, people are not very interested in synthetic 'fake assets' synthesized from stable coins or native tokens (such as SNX); you can tell the difference by comparing the volumes of BTC, WBTC, and SNX's SBTC. To be honest, synthetic assets are not as reassuring as 'mapped assets' like WBTC. Second, the SEC used to frequently investigate without reason. Although synthetic assets are fake, the SEC doesn't need a reason to investigate you at all, so it's better to be safe than sorry. These platforms have also successively taken down these synthetic US stocks.

Now that Trump is in office, with a change in the SEC chairman, the regulatory environment in this area is clearly much better than the past two years, and there are currently two new plans for US stocks to go on-chain.

One is to follow the traditional compliant Broker Dealer route, where users trigger off-chain compliant Broker operations in the US stock market at the moment of buying tokenized stocks on the chain, essentially similar to the order placement and execution on Robinhood, carried out by Citadel in the stock market. The benefit is that the stocks you buy are 'real stocks,' or at least 1:1 backed by this Broker, similar to WBTC to BTC. The downside is that trading time is completely tied to the stock market, unlike Crypto, which operates 24x7. Additionally, you have to establish trust in this Broker or platform. Furthermore, selling will trigger a Taxation Event, and US citizens may need to submit tax-related forms, while non-US citizens will also need to go through KYC or similar processes, which is quite troublesome.

Second, the practice of Ondo Global Market was reviewed. They originally intended to follow the Broker Dealer route mentioned above, but later changed to a practice similar to stablecoins, allowing their partners or authorized Issuers to directly issue tokenized stocks (similar to Tether issuing USDT, Circle issuing USDC). The advantage is that it is more flexible and may be able to escape the restrictions of US stock trading hours, ultimately settling through the Issuer at a certain time. The disadvantage is that it is likely to be targeted only at non-US users, as US users may not be able to use it. Another concern is whether there will be different CAs for the same stock issued by different Issuers (similar to different bridges to USDC on a new chain being incompatible with each other), these specific details are not written in the document, after all, the product will not be launched until next year.

It seems that platforms like Plume are more like a framework, including KYC/AML, data storage/execution, consensus, ZKTLS verification, etc. In theory, it can allow partner institutions to issue various tokenized RWA assets here, which brings us back to the previous topic of 'which assets are suitable for on-chain' and will not be elaborated further.

Finally, let's talk about the direction of 4 - RWA in the past few months, have you noticed anything?

If you pay attention, you will notice that the RWA wind has actually blown quite strongly in the past two months. I'll just mention a few 'news' that I have observed.

1. The Ondo plan mentioned above will launch the Ondo Global Market at the end of this year or next year, an on-chain stock market. Ondo has also recently been very close to WLFI with Trump and will cooperate.

2. Sui also recently embraced the thigh of WLFI

3. Frax actively embraces Cedefi and recently launched frxUSD in collaboration with BlackRock+Superstate

4. Ethena's newly released product Converge - focusing on one of the two most important scenarios they believe in the fast-chain industry - Storage and settlement for stablecoins and tokenized assets

5. AAVE plans to launch a new coin, Horizen, causing a stir in the community. Stani personally came out to clarify - "The Horizen plan aims to fill the current missing RWA business sector of Aave. The plan is expected to surpass the current business line revenue of Aave in 5 years."

6. In February 2025, the Financial Services Commission of South Korea issued a release planning to gradually allow corporate entities to engage in virtual asset transactions. I learned from friends in the South Korean circle that there is a possibility of South Korea restarting the plan for Security Token Offerings (STOs, referred to as RWAs in the previous cycle). It is certain that allowing "corporate entities to trade virtual assets" is not for companies to speculate on coins, but to tokenize some real financial assets into "virtual assets" for circulation between companies.

7. YZi Labs announced today that they have invested in the recently popular Plume Network RWA platform

These messages form the Momentum, we can't just ignore them, so my current view on the main track of the next Circle is PayFI+RWA+ Web2.5 type Consumer APP, as for AI+Crypto, I can only say there is hope, still discussing + observing.