Definition of RWA Project Concepts and Compliance Analysis

Recently, RWA projects have sparked widespread discussion in the Web3 space. Many observers believe that RWA will reshape the financial ecosystem in Hong Kong. In conversations with industry insiders, it was discovered that there is controversy surrounding the "Compliance" issue, and the understanding of "what is Compliance" varies. This stems from differing interpretations of the RWA concept.

As a professional legal team, we will clarify the definition of the RWA concept and the compliance red lines.

1. Definition of RWA Concept

( One ) Background and Advantages of RWA Projects

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

1. The advantages of the tokens themselves can compensate for the shortcomings of traditional financing. Compared to traditional IPOs, RWA has advantages such as faster financing speed, asset diversification, and lower financing costs.

2. Hong Kong's "Compliance" has driven the heat. Through regulatory innovation, Hong Kong provides domestic investors with channels to participate in "Compliance" RWA.

( two ) 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.

( Three ) Types and Compliance of RWA Projects

RWA projects can be divided into two categories:

1. Narrow RWA: Physical assets on-chain
2. STO: Financial Assets On-Chain

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

• Mainland China: The Securities Law defines securities
• Singapore: The "Digital Token Offering Guidelines" define "capital market products"
• Hong Kong: The Securities and Futures Ordinance regulates securities.
• United States: SEC adopts Howey test to determine securities

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

The compliance of RWA is a hierarchical system:

1. Sandbox Compliance: Hong Kong Monetary Authority Ensemble Sandbox Project
2. Hong Kong Administrative Supervision Compliance: Included in the STO Framework Management
3. Clear regulatory framework for crypto-friendly regions
4. "General Compliance": Not yet identified as non-compliant in certain offshore jurisdictions.

3. Legal Advice 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 that the institutional operations in the link are compliant.
5. Preventing Post-Event Compliance Risks
6. Emphasize Brand Reputation Management

4. Conclusion

The types of RWA projects are diverse and need to be studied and categorized one by one. The biggest challenge lies in the uncertainty of the system. We should explore "practical standards" to promote industry compliance. However, we must also be vigilant about compliance risks and respect the existing legal regulatory framework.