Web3 Insights: How long will it take for Hong Kong to tokenize RWA?

Authors: Wang Lele, head of Ouke Cloud Chain Research Institute, Jiang Zhaosheng, senior researcher at Ouke Cloud Chain Research Institute

Trump recently announced the issuance of his personal meme currency $Trump on social platforms, once again attracting the attention of global investors to the crypto market. After returning to the White House, Trump may usher in a new era of encryption supervision in the United States and promote more institutions to join the wave of encryption innovation. Kara Calvert, head of U.S. policy at Coinbase, also said recently, " Trump has sent a signal that the United States has returned and we are ready to lead this industry. What this means to other countries is that you have to be careful, otherwise you will not be able to keep up. "

The participation of traditional institutions determines the “

acceleration ” of RWA tokenization

Tokenization is moving from concept to implementation, and has been called "the third revolution in asset management" by the Boston Consulting Group. It is expected to achieve explosive growth in the next five years. OKG Research predicts that non-stable currency tokenized assets will exceed US$30 billion in 2025.

As a global financial center, Hong Kong is also actively embracing the wave of RWA tokenization. The Chief Executive's Policy Address in 2024 proposed promoting the tokenization of RWA and the construction of a digital currency ecosystem. The Hong Kong Monetary Authority also launched the "Digital Bond Funding Scheme" to encourage the capital market to adopt tokenization technology. These initiatives demonstrate Hong Kong’s hope to reshape financial competitiveness through tokenization and take the initiative in future competition.

However, the main force currently driving global tokenization innovation still comes from the United States. While traditional American institutions, represented by Wall Street, are allowing traditional funds to flow onto the chain through the Bitcoin spot ETF channel, they are also using tokenization to accelerate the onboarding of traditional financial assets and businesses. BlackRock, Goldman Sachs, JPMorgan Chase and other institutions are setting off the first wave of tokenization and radiating their influence around the world. BlackRock launched BUIDL, a U.S. debt tokenization fund with a scale exceeding US$630 million. JPMorgan Chase is also leading the tokenization of traditional assets such as U.S. Treasury bonds and money funds through the Onyx platform.

In contrast, Hong Kong has yet to see any institution or project with global influence in the field of tokenization. Although Hong Kong has been active in promoting tokenization policies, compared with the United States, where leading financial institutions lead innovation, Hong Kong’s traditional financial institutions have a relatively low sense of participation and are still cautious about the Web3 industry. " Wait and see " status . This prevents Hong Kong from fully realizing its potential in tokenized innovation despite its abundant financial resources.

The conservative attitude of traditional institutions in Hong Kong towards tokenization mainly stems from compliance requirements. Compliance is necessary but should not be a barrier to innovation. The core of tokenization lies not only in technical implementation, but also in institutional participation. The participation of traditional institutions will largely determine the early prosperity of the tokenization market. Although the stock tokenization plan recently proposed by Coinbase in the United States is still in the strategic conception stage, once it succeeds, it may be quickly copied and even create an "on-chain Nasdaq", injecting huge growth into the tokenization market. This also shows that only if more resource-rich institutions actively participate can the tokenized market develop faster.

As the current model cannot be changed in the short term, Hong Kong should attract more traditional institutions to participate through a more open tokenization sandbox mechanism and develop cutting-edge practices with innovation and market potential. At the same time, in order to avoid the fragmentation of the sandbox, Hong Kong can incorporate stablecoins, DLT and other related explorations into the sandbox for joint pilots; and encourage more institutions to freely explore tokenized applications based on their own endowments, whether it is tokenized funds and stocks. Or other assets, as long as you have the willingness and ability, you can conduct a small-scale pilot in the sandbox, sum up experience during exploration, and gradually enhance the institution's willingness and ability to innovate in the field of tokenization.

Only when more institutions with resources and assets actively participate in tokenized innovation can Hong Kong take more initiative in the change and avoid being quickly pulled away from the competition with the United States.

Only by focusing on standardized financial assets can we expand **the

size of the** RWA market.

In addition to stimulating market innovation vitality, Hong Kong also needs to further clarify its development focus at the level of tokenized assets. The global exploration of tokenization mainly focuses on standardized financial assets. Although Hong Kong has previously explored the tokenization of funds and bonds, the tokenization of non-financial assets such as new energy and agricultural products is currently attracting the most attention. Although these explorations are helpful for the long-term development of the tokenized ecosystem, it is difficult to establish market advantages in the short term.

As OKG Research previously proposed, there will be a significant time difference in the tokenization process of different assets: Bonds, funds and other standardized financial assets with stable returns and considerable scale are the most suitable asset classes for tokenization at this stage, and the Tokenization experience will also lay the foundation for subsequent tokenization of asset classes that are smaller in scale, have less obvious benefits, or have more severe technical challenges. Therefore , in the short term, Hong Kong should focus on standardized financial assets that are most suitable for tokenization, give full play to Hong Kong’s geographical and institutional advantages as an international financial, trade and shipping center, focus on tokenization applications in trade and cross-border related scenarios, and quickly Expand the scale of Hong Kong’s RWA tokenization market.

In addition, although technology is not the key to the success or failure of tokenization, an open technology system is more conducive to tokenization innovation . Some overseas institutions choose private chains due to regulations, but more financial and technology giants are embracing public chains. Public chains are significantly better than other technical systems in terms of global liquidity and openness, and have become the preferred platform for more than 60% of tokenized bonds and funds. In terms of security, thanks to the development of data openness and on-chain analysis technology, asset tracking and review on the public chain are becoming easier. In addition, tokenized assets are mostly managed off-chain, and the real risks are actually more concentrated off-chain, while on-chain mainly ensures business compliance. Therefore, under the premise of compliance, Hong Kong should be more confident in exploring tokenized applications and innovations in public chains, and gradually make it a key direction of tokenized innovation.

Finally, RWA tokenization is a product of the integration of two different financial systems. The ideal state is to accelerate the migration of real assets to the chain, but not to allow its value to be limited to the chain. Ultimately, it must serve and feed back reality . Faced with the active actions of Wall Street institutions in the field of tokenization, there is not much time window left for Hong Kong. If Hong Kong can leverage its institutional and market advantages to accelerate its embrace of innovation, give traditional institutions more room for innovation while exploring a balance with regulatory compliance, and rely on the support of trillions of assets that the mainland can provide, Hong Kong will definitely be in the process of tokenization. It has absolute advantages in the field and has broad prospects for the future. The Boston Consulting Group estimates that Hong Kong’s potential tokenized assets have reached HK$36 trillion.

We look forward to Hong Kong’s “acceleration” in the RWA field by 2025.