RWA (Real World Assets) and Web3: A New Bottle of Old Wine?

Driven by the tide of technological innovation, RWA (Real World Assets) and Web3 have become hot topics in the financial industry. Traditional financial institutions – once regarded as conservative and stable giants – are now actively embracing these emerging concepts, vigorously promoting the development of RWA and DeFi (Decentralized Finance). However, behind this technology-driven transformation lies a core question worth pondering: Are these dazzling new concepts truly disruptive innovation, or simply giving traditional financial businesses a “new look”?

RWA and Web3: Decoding Core Concepts

RWA (Real World Assets), referring to real-world assets, are tangible or intangible assets from the physical world that are issued and traded as digital assets on a blockchain through “tokenization” technology. These assets can encompass real estate, bonds, private credit, artwork, carbon credits, and more. Its core value lies in:

Enhancing Liquidity: Dividing illiquid assets (such as real estate) into smaller shares, reducing investment barriers, and enabling them to be traded easily on secondary markets like stocks.
Improving Transparency and Efficiency: Utilizing blockchain’s immutability and traceability to simplify asset issuance, trading, and settlement processes, reduce intermediaries and human error, ultimately lowering costs and improving efficiency.
Expanding Financing Channels: Providing asset owners with a globalized, more efficient financing platform, breaking down geographical and traditional financial intermediary restrictions.

Web3, often referred to as “the next generation internet,” has core principles of building a decentralized, user-owned and controlled internet ecosystem. Unlike the Web2 era dominated by a few tech giants, Web3 is based on blockchain technology, aiming to return data ownership and control to users. Its key features include:

Decentralization: Information and applications are no longer stored on single company servers but distributed across numerous nodes in the network, reducing the risk of single points of failure and censorship.
User Sovereignty: Users have greater control over their personal data, choosing with whom to share it and how it is used.
Permissionless and Censorship-Resistant: Anyone can participate in the network, publish applications or use services without needing approval from centralized authorities.

Why Are Traditional Financial Institutions Embracing RWA and DeFi?

Traditional financial institutions are actively pushing for RWA and DeFi primarily due to the following strategic considerations:

Efficiency Gains & Cost Reduction: The traditional financial system is characterized by significant manual auditing, complex clearing and settlement processes, and burdensome compliance steps, leading to inefficiency and high costs. Through smart contracts and blockchain technology, DeFi and RWA can automate many of these processes, significantly reducing operational costs.
Creating New Revenue Streams & Markets: The emergence of RWA has opened up new asset classes and business models for financial institutions. For example, providing tokenized services for real estate or private credit projects, underwriting, and trading can generate new fees and consulting revenue.
Responding to Competition & Maintaining Leadership: Competition from fintech companies and crypto native enterprises is intensifying. By proactively positioning themselves in RWA and DeFi, traditional financial institutions can demonstrate their innovative capabilities, attract a new generation of clients, and secure a favorable position in the future financial landscape.
Enhancing Transparency & Risk Management: The transparency offered by blockchain helps improve the visibility of underlying asset information, allowing investors to better assess risks. Furthermore, standardized token protocols and automated compliance checks can also enhance risk management efficiency.

Business Essence: New Wine in an Old Bottle?

Despite RWA and DeFi bringing innovation in technology and models, from a core business logic perspective, the current RWA-related businesses undertaken by traditional financial institutions are largely extensions and digital upgrades of their traditional businesses.

Taking RWA as an example, its core is to tokenize traditional assets. This process bears a striking resemblance to traditional Asset Securitization (ABS). ABS involves transforming illiquid assets with predictable cash flows into tradable securities in financial markets through packaging and layering. RWA simply shifts the carrier of securitization from traditional electronic certificates to blockchain-based tokens. Its essence remains credit intermediation and asset management – selecting high-quality assets, structuring them, and selling them to investors. For example, packaging the future rental income rights of a commercial property into tokens is no different than issuing Real Estate Investment Trusts (REITs) in terms of its core financial nature.

Similarly, in the DeFi sector, although its “decentralized” concept aims to disrupt traditional financial intermediaries, the way current institutions are participating is primarily to utilize their technological advantages to optimize existing businesses. For example, using smart contracts to simplify loan approval and disbursement processes or conducting more efficient cross-border payments and settlements through decentralized exchanges. Its core business of lending, trading, and payment remains the cornerstone of the financial system.

It can be said that traditional financial institutions driving RWA and DeFi is more like a “self-revolution,” namely, without changing its core financial functions, using new technologies to improve efficiency, reduce costs, and expand markets. They are not trying to completely overthrow themselves but rather hope to consolidate and expand their industry position through technological innovation.

In conclusion, RWA and Web3 have undoubtedly brought profound changes to the financial industry. They have solved many pain points in traditional finance through technology. However, for traditional financial institutions at this stage, embracing these technologies is more like a cautious and pragmatic strategic choice. Its core business logic has not fundamentally changed, still revolving around assets, credit, and transactions – these ancient financial themes. As technology matures and regulation improves, we may see more disruptive financial innovations; however, given the current situation, “new wine in an old bottle” is perhaps the most accurate description.