Discussion on the Concept Definition and Compliance Framework of RWA Projects

Recently, RWA projects have become a hot topic in the Web3 community. Many observers believe that "RWA will reconstruct the new financial ecosystem of Hong Kong," considering that the existing regulatory framework of the Hong Kong SAR provides breakthrough development opportunities for this sector. However, there are disputes within the industry regarding the "Compliance" issue, and the understanding of "what is compliance" is not uniform. This divergence stems from differences in the understanding of the RWA concept.

This article will explore the definition of the RWA concept and the construction of the compliance framework from the perspective of a professional legal team.

1. Definition of RWA Concept

(1) Background and Advantages of RWA Projects

RWA has become the focus of the market mainly based on two major backgrounds:

1. The advantages of token financing compensate for the shortcomings of traditional financing:

   • Fast financing speed
   • Diversification of asset types
   • The cost of financing is relatively low

2. Hong Kong "Compliance" Promotion Heat: Hong Kong's regulatory innovation provides domestic investors with compliant channels to participate in RWA, attracting attention from both the crypto asset and traditional sectors.

(2) Elements and Characteristics of RWA Projects

Real RWA projects must 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.

(3) Types and Regulation of RWA Projects

The RWA project includes two types:

1. Narrowly-defined RWA: Physical assets on-chain
2. STO( Security Token Offering ): Financial assets on-chain

Different countries have different standards for the identification of security tokens, mainly including:

• Mainland China: The Securities Law defines securities
• Singapore: Guidelines for Digital Token Offerings and the provisions of the Securities and Futures Act
• Hong Kong, China: The provisions of the Securities and Futures Ordinance
• United States: SEC's Howey Test

2. The Legal Logic of the "Compliance" Layering in RWA Projects

The compliance of RWA is a layered system:

1. Sandbox Compliance: Hong Kong Monetary Authority Ensemble Sandbox Project
2. Hong Kong Administrative Supervision Compliance: Incorporate into the STO framework management
3. Clear regulatory framework for crypto-friendly regions
4. "General Compliance": A state with no clear determination of violations.

3. Legal Advice on 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 of institutional operations in the chain.
5. Preventing Post-Compliance Risks
6. Emphasize brand reputation management

4. Conclusion

The intentions and mechanisms of RWA projects vary and need to be studied and categorized one by one. The biggest challenge lies in the uncertainty of the system, requiring exploration of "practical standards." Respecting existing judicial and regulatory frameworks is the basic premise for innovation, and the law is always the bottom line for safeguarding market order and public interest.