Wall Street's securities on-chain game: Secret capital competition in the RWA track

Author: YBB Capital Researcher Ac-Core

1. Preface: Can RWA become the next watershed in the market

With the launch of Bitcoin spot ETFs, the crypto field is ushering in a new turning point in development. Policy trends during the Trump administration have laid the foundation for this field, and the entry of traditional financial giants such as BlackRock has further promoted the development of the RWA (real world asset) track. More and more financial institutions are beginning to explore how to implement on-chain transactions and management of traditional assets such as stocks and bonds through blockchain technology. This trend is reshaping the pattern of the financial market.

A series of measures such as Ondo Global Markets and Ondo Chain launched by Ondo Finance recently marks the gradual mainstream of the RWA track. This change has also triggered a new round of game on Wall Street, which is quietly changing the rules of the game between crypto markets and traditional finance.

2. Differentiation and commonality of RWA track projects

 Source: Ondo official website

2.1 Relying on BlackRock 's representative project Ondo Finance

Recently, Ondo Finance has made frequent moves. On February 5, they launched the Ondo Global Markets platform, which mainly provides block linking services for stocks, bonds and ETFs. Immediately afterwards, Ondo Finance announced their new Layer 1 public chain Ondo Chain, with the goal of building a stronger financial infrastructure and promoting the tokenization of RWA.

Ondo Chain is the infrastructure of Ondo Global Markets (Ondo GM), focusing on the combination of RWA tokenization and blockchain. Ondo Chain supports global investors to obtain on-chain access to US listed securities (such as stocks, bonds, ETFs) through blockchain platforms, breaking geographical restrictions, and providing 24/7 uninterrupted trading services.

Ondo Chain has launched a solution to embed institutional-level compliance into the public chain architecture, and through innovative means such as license verification node mechanisms and native cross-chain protocols, it is trying to overcome the pain points of existing RWA chaining technology and institutionally. Ondo Chain ensures network security by using traditional financial assets as collateral and interoperates with traditional clearing systems, further opening up on-chain and off-chain liquidity.

**2.2 Ondo Finance’s competitiveness and limitations in the same track

events**

This is not only related to its unique architectural design and powerful institutional resources, but also reflects the power and interests game between blockchain and traditional finance.

• Competitiveness

Through cooperation with top financial institutions such as BlackRock, a blockchain financial infrastructure that can support the large-scale tokenization of real-world assets has been built, ensuring a balance between compliance and decentralization.

1. Tokenization and free transfer of RWA: By pairing assets such as stocks, bonds, ETFs and other assets with tokens 1:1, investors can freely transfer these tokenized assets outside the United States and integrate them with DeFi to participate in lending and income. etc.

2. Combination of openness and compliance: Ondo Chain combines the openness of public blockchains with the compliance of license chains. The validator is licensed to ensure compliance, and any developer and user can issue tokens and develop applications on the chain to ensure innovation vitality.

3. Institutional participation and ecological construction: Ondo Chain's design consulting team includes financial institutions such as Franklin Templeton, Wellington Management, WisdomTree, etc., which have promoted its institutional-level applications in the fields of TradFi and DeFi.

4. Oracle mechanism and data security: The built-in oracle system can ensure the accuracy and real-timeness of on-chain data and reduce the risk of data manipulation. This design enhances the credibility of key data such as asset prices, interest rates, market indexes, etc.

5. Cross-chain functions and security guarantees: Cross-chain asset transfer is realized through Ondo Bridge, providing security guarantees for the decentralized verification network (DVN), and supporting institutional asset and liquidity management to adapt to large-scale transactions.

• limitation

Highly relied on institutions, restricting the participation of ordinary users and decentralized communities, and the centralization component is relatively high, and the main power is still in the hands of a few institutions.

1. Highly dependent on institutions and lack of community drive

Ondo Finance’s architecture relies strongly on the participation of traditional financial institutions, and the credibility and liquidity of its tokenized assets are mainly derived from the endorsement of these institutions. Although this model ensures the quality and compliance of tokenized assets, it also brings a core problem: its ecosystem is mainly designed for institutions, and ordinary users have low participation. Compared with the fully decentralized RWA project, Ondo is more like an extension of the traditional financial world, and the circulation and transaction of its tokenized assets are more conducted between institutions, and the influence of ordinary investors and decentralized communities is weaken.

2. The issue of power distribution under centralized control

Although Ondo Chain retains some openness, its validators are licensed, meaning core power is concentrated in the hands of a few institutions. This is in stark contrast to some fully decentralized RWA projects that emphasize that any participant can be a key node in the network. Ondo's design reflects to some extent the power structure of traditional finance, that is, most of the control remains in the hands of a few large financial institutions. This concentration of power can cause conflict in future governance and resource allocation, especially when token holders conflict with institutional interests.

3. The pace of innovation may be limited by compliance and traditional institutions

Since Ondo Finance’s core pillars are compliance and institutional engagement, this may also limit its pace of innovation. Compared to fully decentralized projects, Ondo may require complex compliance processes and institutional approval when introducing new financial products or technologies. This puts it at risk of slow responsiveness in the rapidly changing crypto space, especially when competing with more flexible DeFi projects, where its compliance and organization-oriented architecture can become a burden.

3. Real obstacles faced by RWA projects

Although blockchain technology provides a technical basis for RWA to be launched, public chains are still difficult to meet the needs of traditional finance in terms of high-frequency trading, real-time settlement, etc. At the same time, the separation and security issues of cross-chain ecosystems have further aggravated the difficulty of institutions to deploy RWA. The application of RWA in decentralized finance (DeFi) faces multiple practical obstacles:

First of all, the issue of trust and consistency between assets and on-chain data has become the core challenge for RWA to go on the chain. The key to RWA's on-chain is to ensure consistency between assets in the real world and on-chain data. For example, after real estate tokenization, the ownership, value and other information recorded on-chain must be exactly matched with the actual legal documents and asset status. However, this involves two key issues: one is the authenticity of the on-chain data, that is, how to ensure that the source of the on-chain data is trustworthy and tamper-free; the other is the synchronous update of the data, that is, how to ensure that the on-chain information can reflect real assets in real time Change of status. Solving these problems often requires the introduction of trusted third parties or authoritative agencies (such as governments or certification agencies), but this conflicts with the decentralized nature of blockchain, and the issue of trust remains a core challenge that RWA is inevitably unavoidable.

Inadequate network security is also an important issue. The security of blockchain networks often relies on the economic incentive mechanism of local tokens, but RWA's volatility is usually lower than that of cryptocurrencies, especially when markets are down, which can lead to network security. decline. Furthermore, RWA’s complexity requires higher security standards, and existing blockchain systems may not fully meet these needs.

The compatibility issue between RWA and DeFi architecture has not yet been resolved. The original intention of DeFi is to serve crypto-native assets rather than traditional securities assets. RWA on-chain involves complex financial behaviors (such as stock splits and dividend distributions), which are difficult to effectively manage through existing DeFi systems. What is particularly important is that oracle systems also have obvious shortcomings in real-time and security in processing large-scale traditional financial data.

The difficulty of RWA on the issues of cross-chain liquidity dispersion and security has further increased the difficulty of RWA on the chain. The cross-chain issuance of RWA leads to liquidity dispersion, which increases the complexity of asset management. Although the cross-chain bridging mechanism provides solutions, it also introduces new security risks, such as double-spending attacks and protocol vulnerabilities.

The issues of institutional regulation and compliance are the biggest non-technical barriers to RWA's on-chain. Many regulated financial institutions are unable to trade on public blockchains, mainly due to anonymity, lack of compliance frameworks, and differences in global regulatory standards. Compliance requirements such as KYC and anti-money laundering further increase the complexity of RWA's on-chain, which to some extent limits capital inflows.

Liquidity and institutional participation restrictions on the market side have also restricted the development of RWA. At present, the overall market value of RWA is mainly concentrated in low-risk assets (such as treasury bonds and funds), while the progress of major assets such as stocks and real estate is slow to go up. RWA's liquidity still relies on crypto-native protocols, and the overall market is still in its early stages of development.

Finally, the conflict between DeFi and the traditional financial trust mechanism is also a problem that RWA must solve. DeFi relies on code and cryptography to build trust, while traditional finance relies on legal contracts and centralized institutions. This difference in trust mechanisms has led traditional financial institutions to be cautious about blockchain technology, especially in key links such as custody and risk control.

Although blockchain technology provides the possibility for RWA to be chained, it still faces many challenges in practical applications. However, from data consistency, network security, compatibility, liquidity, compliance to the matching of technology and economic models, and the conflict between trust mechanisms, these problems need to be gradually resolved in the development to promote RWA in DeFi. Widely used.

4. If RWA is successful, Ondo Chain may become the redistribution of

power of the old and new financial systems of the "Wall Street Game"

 Source: Occupy Wall Street

When analyzing the core Wall Street interests involved in Ondo Chain, I personally believe that it is necessary to break out of the tokenization of blockchain and real assets and the driving factors behind the financial operation logic and interests competition. As mentioned above, the most core difficulty of RWA at the non-technical level is how to achieve compliance, and the recognition of a strong centralized rights organization is required.

BlackRock, the world's largest asset management company, participated in the investment and construction of RWA after completing the promotion of Bitcoin ETFs. This is essentially the first to strive for power between the traditional financial system and emerging decentralized technologies that rely on blockchain. Distribution, this struggle is not only a competition for technological changes or financial innovation, but also a competition for global financial rule-making rights, capital control rights and future wealth distribution mechanisms.

Although blockchain technology brings hope of decentralization, in the face of the reality of high concentration of capital and power, Wall Street is trying to include this technological revolution in its own control, through new forms of market manipulation and asset securitization. , continue its dominance in the global financial system.

4.1 Rebalancing of power in the global financial system

Wall Street has always dominated the global financial system, controlling key nodes in capital flows, asset management and financial services. Traditional financial institutions achieve control over global capital by monopolizing financial infrastructure (banks, stock exchanges, clearing systems, etc.). However, the rise of blockchain technology has broken this situation:

Decentralized Finance (DeFi) weakens the traditional financial infrastructure that Wall Street has long controlled by long-term use of decentralization. DeFi allows key functions such as capital flow and asset management to run on decentralized platforms. For example, users can directly perform asset management, lending, trading and other operations on the blockchain without intermediaries such as banks and investment banks. But this means a huge threat to Wall Street, and this transfer of power means that Wall Street may lose dominance over the global financial system.

**4.2 Asset Tokenization: Who can control the new financial

infrastructure**

Although RWA tokenization promoted by platforms such as Ondo Chain, although aimed at enhancing the liquidity of assets, is hidden behind it the battle for control over the new financial infrastructure. Blockchain networks are candidate platforms for the new generation of global financial infrastructure. Whoever can dominate this infrastructure will be able to dominate the future blockchain links real-world assets.

Wall Street’s interests are reflected in the intention to control these decentralized networks. They may not directly deny blockchain, but instead control these emerging blockchain platforms through investment, mergers and acquisitions or cooperation to allow the reappearance of capital centralization. Although blockchain is intended to be decentralized, a large amount of capital and liquidity are still easily concentrated in the hands of a few large financial institutions or hedge funds. In the end, the key resources (liquidity, protocol governance rights, etc.) on the blockchain platform will still return to the hands of a few players, resulting in the decentralized asset market completely requiring the driving force of centralized huge forces.

4.3 Regulatory arbitrage and extrajudicial powers

According to Cointelegraph on February 6, JPMorgan Chase's latest electronic trading survey of institutional traders showed that 29% of institutional traders will or are trading cryptocurrency this year, an increase of 7 percentage points from last year.

Arbitrage has always been a trading strategy that Wall Street elites are good at exploiting. Faced with the uncertain regulatory environment of blockchain decentralization, in the future, Wall Street institutions may take advantage of regulatory differences in different countries and regions to evade stricter supervision by setting up operating entities in jurisdictions with relatively loose supervision. For example:

In projects like Ondo Chain, tokenization of certain RWAs may bypass traditional securities regulations or financial market regulations. Manipulate asset flows and capital structure in different regulatory environments to further strengthen control over emerging markets. It is not ruled out that this "gray zone" operation is one of the means by which Wall Street obtains higher returns on profits through blockchain.

**4.4 Market liquidity and price manipulation: the battle for implicit

dominance**

Liquidity is the core of market manipulation, realizing implicit price manipulation in a seemingly "decentralized" market. Ondo Chain provides new investment opportunities for global investors through the tokenization of RWA, but its liquidity and trading depth are still highly dependent on the injection of big capital, and liquidity control will continue to become the core weapon of Wall Street players. Even in a blockchain decentralized environment, institutions with more capital, transaction technology and market insights can still dominate the market trends.

4.5 RWA Hedge Fund: Reconstructing Asset Securitization Game

Wall Street has historically achieved huge gains through asset securitization (such as subprime mortgage securitization). RWA tokenization on blockchain just provides opportunities for a new generation of asset securitization. For example, Wall Street can issue new financial products through a combination of tokenized assets to attract global investors. These products can be generated based on RWA, such as real estate trust fund tokens, corporate bond tokens, providing more options for the market.

At the same time, the derivatives market may also be expanded through blockchain. Wall Street can package and sell risks to global investors again by designing complex financial derivatives (such as options, futures, swaps). The game of risk transfer and profit acquisition will continue to be staged in the era of RWA tokenization.

5. The road to advancement in the crypto world, the development of the

industry was forced to press the acceleration button

We take the ETF transactions of crypto assets led by Bitcoin, Trump-related events and future RWA as examples. They are all accelerating the development of the industry to varying degrees, and the direct impact of this is to increase the industry. Difficulty in profitability. These factors affect the crypto industry through complex market dynamics, regulatory pressures and the gradual penetration of traditional financial ecology.

5.1 Market maturation brought about by the introduction of ETFs

The launch of ETFs marks the gradual acceptance of the crypto industry by mainstream financial institutions and investors, but it is not necessarily beneficial to the overall growth of the crypto industry. For example, gold has brought a long increase after passing the ETF:

Declining market liquidity and volatility

The introduction of ETFs means that crypto assets have entered the traditional financial market, and the investment style of the institutions attracted is more conservative, while the added more financial derivatives have also led to reduced volatility of crypto assets. This means that traders relying on high volatility (such as retail investors and crypto hedge funds) will reduce the opportunity for arbitrage and high-frequency trading, which in turn will reduce profit margins.

Concentrated capital flow

ETFs have made the flow of funds in the crypto market more concentrated, mainly focusing on several large assets such as Bitcoin. This could lead to the risk of liquidity exhaustion and price declines in small and medium-sized crypto assets, affecting the development opportunities of more small projects. The result is that more emerging projects have fewer profit opportunities and the overall profit difficulty of the industry has increased.

Competitive pressures in traditional finance

The launch of ETFs means that crypto assets are productized by traditional finance, bringing higher market transparency and competition. This also means that the crypto industry will compete more fiercely with traditional financial tools such as stocks, bonds and commodities, diverting funds and investors' attention.

5.2 Market uncertainty caused by the Trump effect

The actions of politicians such as Trump may influence crypto markets through their policies, regulatory attitudes and international relations, increasing uncertainty and complexity in the industry:

Increased policy uncertainty

Trump's policy stance and governance style are often full of uncertainty, especially when it comes to economic and financial regulation. During his tenure, regulatory policies that may be implemented (such as suppression of digital currencies or relaxation of regulation) will directly affect market sentiment and increase the instability of the crypto market. This uncertainty will put the crypto industry at greater policy risks and affect the stability of long-term profits.

Anti-money laundering and KYC requirements strengthened

Exchanges and crypto projects will face higher compliance costs as politicians such as Trump may implement stricter anti-money laundering and KYC regulations in the future. This will significantly increase operating costs and reduce profit margins, especially for crypto companies that lack compliance experience.

Presidential concept coin "TRUMP" leads to a "siphon effect" in the market

High volatility is more attractive to speculative funds. "TRUMP" has a natural marketing effect and can attract a large amount of funds to gather in this single asset. Limited liquidity and capital in the market are easily "siphoned" by Meme coins in the short term, forming a "capital concentration effect", but as the price falls later, liquidity is difficult to disperse to its original place.

**5.3 The development of RWA will bring about traditional financial

penetration**

The development of RWA in the field of crypto represents the trend of the crypto market gradually integrating with traditional financial assets, but this integration has also brought about an increase in profit difficulty:

The cost structure and competition introduction of traditional finance

When the RWA project is put on the chain on a large scale, traditional financial assets such as bonds, stocks, real estate, etc. will compete in the same ecosystem as crypto assets. The maturity, cost efficiency and low-risk nature of traditional financial products will attract a large number of institutional investors, which means that crypto assets need to compete with these mature financial products.

The contradiction between decentralization and compliance

RWA's backing involves complex regulatory requirements, especially in terms of compliance and legal liability. Compared with the current decentralized crypto assets, the introduction of RWA may force more crypto projects to be compliant, resulting in more projects exiting the market because they cannot meet regulatory requirements, thereby reducing profit opportunities.

Funds are prone to flow to low-risk assets

The on-chain real-world assets, such as treasury bonds and corporate bonds, will attract a large number of conservative investors to enter the on-chain market. As more funds flow into low-risk RWA, high-risk, high-return projects in the crypto market (such as the DeFi protocol or emerging tokens) may lose some of their financial support. This phenomenon of transferring funds to low-risk assets will further compress the profit margins of the crypto market.

6. Conclusion: Is RWA a narrative bubble or a market change?

Based on the above personal views, the rise of ETFs, the Trump effect and the future RWA will increase the profit difficulty of the crypto industry in different ways and intensity. The market maturity and institutionalization brought by ETFs reduce market volatility and high profit opportunities; Trump's policies may increase market uncertainty and bring policy risks to the industry; and the introduction of RWA means that the crypto market will Compete with traditional financial markets. In this ever-complex evolution process, the more "regular" crypto assets become, the more "bottleneck" the market becomes, and the future crypto market will bring more severe new challenges.

So whether RWA is a "narrative bubble" or a "market change" depends on its technical foundation, market demand and maturity of its implementation path. If we only look at the progress and challenges in the early stages, RWA has a certain "narrative bubble" component, but relying on the participation of well-known institutions, RWA is expected to become a new catalyst for the change in the crypto market.