RWA: Redefining Financing Boundaries in the Digital Asset Landscape

Breaking traditional financing boundaries, RWA takes center stage in the digital asset arena

RWA (Real World Asset) is increasingly active overseas, emerging as a new trend for cross-border financing among enterprises. From thousands of charging stations for electric vehicles to idle resources in Dalian’s Xiaoping Island scenic area, and even a cluster of Malu grapes in a Shanghai orchard, these assets can now be “tokenized” and traded on blockchain networks, opening up new possibilities for asset financing.

On one hand, RWA demonstrates significant potential for real-world applications, while on the other, skepticism regarding its speculative nature has surfaced. Is it a new opportunity or merely another bubble? Industry experts believe that a robust legal and regulatory framework is still needed, and Chinese companies should actively participate in setting international standards while adhering to compliant development.

Tokenization of Real World Assets

In the field of green energy financing, an innovative exploration is catching widespread attention. Recently, at the Web3 summit in Dubai, the first photovoltaic RWA project from China made its debut overseas. This project not only marks the first RWA in the domestic solar energy sector but is also the largest RWA issuance in China to date.

RWA, or Real World Asset, fundamentally involves trading the rights to real-world physical assets in the form of digital tokens on blockchain networks. According to reports, GCL-Poly Energy Holdings issued this RWA, which is pegged to its distributed photovoltaic power stations with a total installed capacity of approximately 82 megawatts in Hunan and Hubei provinces. By integrating artificial intelligence, blockchain, and IoT technologies, the company successfully stored the value, operations, and revenue data of these power stations on the blockchain, securing 200 million yuan in cross-border financing.

As a new darling of the digital asset stage, RWA is attracting various participants. At the end of April, the first RWA digital island project in China, the revitalization project of idle resources on Xiaoping Island in Dalian, was officially signed, with an initial planned investment of 2 billion yuan, including 1,000 healthcare hotels, an 110,000 square meter complex, and an indoor ice and snow complex.

As early as 2024, some companies began to explore this new avenue: listed company Longshine Technology collaborated with Ant Group to issue 100 million yuan in RWA, becoming the first mainland enterprise to cross-border RWA announced by the Hong Kong Monetary Authority. Additionally, Shanghai-based Left Bank Xinhui issued the first RWA backed by the data assets of the landmark agricultural product “Malu grapes,” completing an equity financing of 10 million yuan.

Expanding New Paths for Corporate Overseas Financing

So far, domestic companies’ attempts with RWA have primarily focused on the green energy financing sector. Industry insiders have revealed that new energy enterprises often encounter challenges such as heavy assets, lengthy cycles, and high leverage. The introduction of RWA brings new solutions.

For instance, in the case of the first RWA financing based on new energy assets, Longshine Group used over 9,000 charging stations and some revenue rights operated on its New Electric Path platform as anchor assets to issue RWA, raising 100 million yuan. “Through tokenization, the revenue from each charging station is transparent, verifiable, and immutable on the blockchain, eliminating the possibility of concealing profits as seen in traditional models,” the project team stated. The real-time data transmission via IoT technology not only allows for clear monitoring of the charging stations’ status but also enables the fixed execution of revenue-sharing agreements through smart contracts. “This breaks the boundaries of past financing for green assets that relied heavily on traditional financial instruments and regional markets.”

Ant Group’s CEO Zhao Wenbiao described such RWA financing as a “mini IPO,” allowing more companies to connect with global funds through blockchain networks. “From practice, the most direct value of RWA tokenization lies in lowering the barriers to asset participation, releasing undervalued resources, and enhancing financing capabilities in areas not covered by traditional finance,” said Yu Jianing. He believes that mainland companies can leverage Hong Kong’s advantages as a global financial hub to expand cross-border financing routes through RWA.

Compliance Mechanisms Still Need Improvement

In China, the term “RWA” is increasingly appearing in the communications of various institutions and enterprises. On April 29, the Industrial and Commercial Bank of China mentioned in its financial report an increased focus on managing risk-weighted assets (RWA). On April 30, Ant Group announced the launch of a new blockchain platform for efficient global RWA transactions. On May 14, JD Technology posted multiple RWA-related job openings on its recruitment platform, indicating its strategic layout in the intersection of new energy and blockchain.

However, it is important to note that according to current foreign exchange management regulations in China, cross-border capital flows must be monitored by the State Administration of Foreign Exchange. The domestic market also imposes regulatory restrictions on the Web3 industry, particularly concerning cryptocurrencies, data protection, and financial compliance.

“Mainland enterprises seeking to finance abroad through RWA must consider various factors, such as whether asset ownership and rights are clearly defined, whether asset evaluation and pricing mechanisms are effective, and if cross-border data transmission, transactions, and capital flow channels are compliant,” stated Gao Zelong, Vice President of the Digital Economy Platform of the China Communications Industry Association.

There is also a need to be vigilant against phenomena of technological abuse and speculation. Reports indicate that some projects in the market are misusing blockchain narratives without real asset backing, packaging pure token behavior as asset mapping, which severely undermines market trust. Additionally, the lack of valuation logic and transparency in data sources also results in a lack of replicability and verifiability in RWA tokenization concerning risk pricing and asset classification.

“For RWA to develop in compliance, a sound legal and regulatory framework must be established,” Yu Jianing emphasized. Currently, the legal status of RWA is not yet fully defined globally, presenting challenges for Chinese enterprises while also providing them with a first-mover advantage in participating in standard establishment. In March of this year, the China Academy of Information and Communications Technology, spearheading a project with nearly 20 companies, initiated the drafting of the “Technical Specifications for Trustworthy Blockchain Entity Asset On-Chain,” which is expected to systematically propose a comprehensive technical framework for data on-chain scenarios related to manufacturing equipment, energy equipment, and other physical assets.