RWA, as the tokenization of real-world assets, is often associated with Tokenization, but focusing too much on Tokenization can overlook the core essence of RWA, which is corporate financing and institutional markets. The core of Tokenization on RWA exchanges is Crypto Corporate Finance.
Many people inquire about RWA, asking if their assets can be used for RWA projects or which assets are suitable for RWA. RWA encompasses not only the asset side but also various elements such as the funding side, market participants, and liquidity. Moreover, the feasibility of RWA issuance varies depending on who holds the asset – whether it’s in your hands, institutional funds, industrial trade and core enterprises, or arbitrage fund operators.
How should Tokenization on RWA be viewed? The term Tokenization at licensed exchanges or RWA exchanges can easily mislead teams or the market. Currently, the conservative approach for RWA is to focus on financial products before tokenization. Tokenization is a means and method, not the essence. So, what is the essence?
As discussed earlier, the core essence of RWA is corporate financing and institutional markets, while the core of RWA’s Tokenization is encrypted financing. To reflect the novelty of Web3.0, it may be necessary to use the term Tokenization, but internal teams must have a clear understanding and positioning.
For example, calling it the Corporate Financing Business Group emphasizes the essence of corporate financing, where the issuance is not just about issuing ABS but changing it into RWA tokenized form. Likewise, the Industrial Investment Banking Business Group focuses on industrial trade, supply chain finance, and industrial digital financial derivatives, expanding from corporate financing to integrating resources, funds, and capital in the industry chain where core enterprises operate.
Does it sound a bit old-fashioned? Some might think it’s a step backward. RWA products can appear sophisticated and Web3.0-oriented externally, but when running an RWA exchange, one cannot ignore the practical aspects. Despite flying the flag of Web3.0 high, it’s essential to encourage traditional enterprises and old money to participate more. On the internal front, the Corporate Financing Business Group must leverage the brand’s influence, collaborate with down-to-earth partners, establish channels, conduct marketing events, and develop new digital investment banks and agencies to address entrepreneurs’ anxiety and corporate financing needs.
Only by making profits with the new financial tools for corporate financing can the RWA exchange increase its membership and asset pool. As more medium-sized businesses enter the industry, how can top-tier enterprises not participate? When traditional IPOs become challenging, could issuing RWA become a digital IPO for industries?
Such an RWA ecosystem represents a new encrypted ecosystem for corporate financing, requiring not only RWA exchanges but also RWA digital investment banks, digital funds, digital brokerages, and market makers. It is impractical to expect licensed exchanges to handle everything; this requires specialization and division of labor.
The development of the RWA market will require professional institutions, especially professional consulting and research institutions, to act as consultants and financing advisors for enterprises seeking encrypted financing. Addressing current enterprise anxieties, such as their financing needs and exploration of overseas markets, can gradually be achieved by designing suitable RWAs.
The RWA market also requires down-to-earth channels and agents, similar to how projects in the crypto space are marketed through conference marketing and community outreach. However, in the corporate client market, more consultant-style marketing is needed, with KOLs or agent nodes primarily being professional institutions and financial advisors.
Corporate financing and encryption must progress hand in hand. From the perspective of corporate financing, one can explore various directions for corporate financing products. Just as brokerage firms have different departments for corporate financing, such as debt and IPO departments, tokenization in corporate financing can also be divided into digital bonds, digital IPOs, digital REITs, and innovative products that are neither equities nor debt.
– Digital bonds typically involve corporate credit bonds or fixed-income bonds, with more complex ones being asset securitization ABS.
– Digital IPOs involve tokenized equity financing or equity financing, similar to stock codes in ITOs, representing digital stocks on RWA exchanges with on-chain disclosures and audits.
– Innovative products that are neither equities nor debt, such as DGT’s cash distribution model, can be designed as a token cash flow distribution model combined with smart contracts on the chain.
– Digital REITs correspond to RWA digital REITs, combining DAO and smart contracts to form Crypto Funds.
The greatest challenge lies in how Crypto Corporate Finance can help enterprises with high-quality real-world assets achieve greater decentralization and native tokenization. How can it embrace a more Web3.0 environment?
From the perspective of industrial investment banking, corporate financing needs to tokenize upstream and downstream industrial chain resources and industrial transaction cash flows. It takes time for an industry to accept and undergo tokenization. Based on the experience of digital transformation in industries, it is often difficult for traditional means to surpass leading enterprises, which may lead to the motivation for mid-tier enterprises to try tokenization. When mid-tier enterprises drive industry changes, leading and core enterprises will begin to understand and participate, gradually involving the entire industrial chain. In some cases, a niche industry with concentrated resources or materials, under the guidance of core enterprises, can quickly adopt tokenization.
Compared to a single enterprise or asset package, an entire industry presents a different landscape. Within an industry, there are procurement needs, daily industrial trade, existing assets, standardized warehouses or warrants, enterprise and bank credit, trading volume and turnover, as well as mature financial and funding institutions like supply chain finance, commercial bills, leverage, futures, and arbitrage.
If the mid-tier can lead the top-tier and the community can engage the long tail, following the Pareto principle to gradually achieve RWA tokenization and RWA trading in an industry, the potential impact could be significant.
From a funding perspective, corporate financing is not just about assets; it inevitably involves discussing funding. In traditional financial markets, issuing bonds including IPOs entails negotiating shares under the table. Before issuing RWA, discussions must cover underwriting institutions, financing rhythms, and share terms – it’s not a situation where funds come pouring in as soon as RWA is launched.
When discussing funding, it is essential to consider global investment trends, multipolar trends, regional currency systems, and the changing focus of funds. In recent years, global funds have been focused on short-term cash flows, but this year, with expectations of interest rate cuts and inflation, the focus may shift. High-quality fixed-income bonds, inflation-resistant high-quality real estate, high-tech, biotechnology, and other sectors may become investment trends. The multipolar trend resulting from the decoupling of China and the US, along with regional settlement and clearing systems, will also impact funds, further influencing the issuance of RWA products tailored to suit their preferences.
It may seem like Middle Eastern funds friendly to China would be the top choice, but due to differences in economic structures, Middle Eastern funds seeking returns may not entirely match Chinese assets. Although European and American funds have been withdrawing due to US-China decoupling, there is a recent trend of capital inflow, suggesting that some potential funds may circle back after a diversion, seeking to invest in high-quality Chinese assets. Therefore, RWA must adhere to the principle of choosing the most suitable investor.
For products like DGT’s cash distribution model, considering their asset and funding structure, and in light of the global trend focusing on short-term returns from cash cows over the past two years, the asset targets primarily include assets from cash cow-like chain stores. By designing financial products that distribute cash daily in a non-equity and non-debt form and structuring them using guiding funds to attract various overseas funds, investments and short-term returns can be realized for the chain store assets of mainland cash cow-like brands.
From an asset perspective, as mentioned earlier, it’s crucial to match funds with assets. This year, global funds influenced by interest rate expectations and inflation may shift from cash cows towards high-quality bonds like US Treasury bonds, high-credit corporate bonds, technology stocks such as AI computing power, new energy, biotechnology, and cultural and entertainment assets.
From a channel perspective, RWA exchanges must learn from the funding, channels, and organizational structures of old money. The financial veterans in Central are quite adept at this; it’s just a matter of guiding and enticing them to quickly integrate into Web3.0 and then figuring out how to fuse resources for RWA.
For Central, the traditional financial professional service institutions are well-established. However, it’s essential not to simply copy and paste; instead, it’s crucial to research and develop the most suitable innovative mechanisms for Web3.0 and RWA in terms of corporate financing professional services, institutional markets, and information disclosure.
Traditional financial research, stock analysis, sales, and roadshows should learn from Web3.0 practices such as Alpha reports, communities, spaces, and DAOs. Educating and guiding traditional entrepreneurs and institutional clients using Web3.0 methods will likely yield positive results. The promotion and education of RWA digital investment banks and brokerages, as well as RWA project roadshows, will rely on existing mature channel models while also exploring new ways to raise funds and engage in digital IPOs in the new era.
RWA exchanges will require numerous ecosystem partners to collectively drive the maturation of the RWA market. This will also promote extensive RWA media and research advocacy, RWA analysts, new financial television and media programs, and a wealth of related professional courses such as business schools, seminars, and premium courses on crypto investments to educate investors (PI and retail) on how to invest in cryptocurrencies in the new era, such as Bitcoin ETFs and RWAs. It’s essentially a case of old wine in new bottles, with products transitioning from stocks to new digital asset products represented by RWA codes.
Through the discussions above, RWA exchanges and surrounding ecosystem markets may have a more open and corporate finance-oriented understanding of Tokenization.
