RWA has become one of the most powerful use cases of Blockchain technology

Tokenization of real-world assets ( RWA ) has become one of the most influential applications of blockchain technology globally. This technology is expected to bring greater efficiency and security to financial markets, driving financial innovation in the digital age.

Industry experts point out that with the compression of on-chain yield and the Federal Reserve's interest rate hikes, there is a significant disparity between on-chain and off-chain interest rates. RWA may be able to bridge this gap. Although the stablecoin market is the cornerstone of the crypto ecosystem, these stable assets have long been underutilized. The emergence of RWA is expected to address this issue, becoming a disruptive force in 2023, unlocking the potential of this asset class, and fundamentally changing the ways value is created, transferred, and stored.

Currently, the industry's focus has shifted to the tokenization of regulated financial instruments, with treasury bills, real estate, precious metals, and artworks being considered the most viable tokenized assets. A platform's tokenized short-term treasury bill (STBT) has received positive feedback, raising $123 million in just over five months. This reflects the market's demand for risk-free rates and the willingness to avoid the execution and settlement hassles of traditional bond trading.

With the widespread adoption of tokenized government bonds, the prospects for exploring other liquid listed securities in a similar form are also very broad. RWA is expected to extend to areas such as real estate, corporate bonds, and fine wines, which is anticipated to add hundreds of thousands of billions of dollars to the market. This will greatly enrich the variety and scale of available assets on the blockchain.

Although RWA is currently still in the early stages of the tokenization cycle, interest from both native cryptocurrency and traditional financial participants is growing significantly. The industry has made some noteworthy progress, such as the successful application of DeFi by the central bank of Singapore in the wholesale financing market, conducting foreign exchange and government bond trading experiments, as well as Deutsche Bank testing tokenized funds on the Ethereum public network.

One of the biggest advantages of RWA tokenization is the democratization of financial markets by eliminating intermediaries, speeding up transaction times, and reducing costs, while opening up investment opportunities that were previously available only to high-net-worth individuals. This is expected to fundamentally change the financial landscape, creating new sources of income and even entirely new markets.

Compared with traditional lending, on-chain lending has advantages such as greater international accessibility, accessibility of crypto financial instruments, and a more democratic decision-making process. These factors help make loans more inclusive and transparent, facilitate a wider range of borrowers and lenders, while also promoting the stability of the lending ecosystem and reducing risks.

However, one of the biggest obstacles currently facing RWA is regulatory uncertainty. The legal framework is struggling to keep pace with the rapid development of tokenization technology, especially in the area of RWA infrastructure integrated with DeFi. To overcome this obstacle, industry experts recommend adopting a gradual regulatory approach, focusing on establishing a comprehensive framework compatible with DeFi standards, and strictly enforcing risk management protocols to enhance transparency and security.

The demand for on-chain deep liquidity will remain strong in the future, especially for large protocols. Although STOs have some restrictions and licensing requirements, using securities as underlying assets for other products will offer some flexibility. The industry is actively exploring these possibilities in pursuit of innovative breakthroughs.

As RWA reaches sufficient scale within the industry, it is expected to ultimately促使 the traditional finance and cryptocurrency worlds to merge into a unified financial domain, which will be a significant transformation to look forward to.