Chinese mainland institutions flock to RWA in Hong Kong: Why is there a need to cool down amid the craze?

Article Introduction

The wave stirred up by stablecoins has not yet subsided, and the collective influx of Chinese-funded institutions in Hong Kong towards RWA has formed a subtle tug-of-war with the calls for industry calm.

The financial sector in Hong Kong is showing a clear stratification trend. Foreign institutions continue to deepen their efforts in traditional areas such as quantitative trading, hedging, and IPOs.

In addition to the aforementioned businesses, Chinese-funded institutions are now focusing more energy on a new task - researching RWA (Real World Assets). This strategic shift is driven both by favorable policies and implies financial institutions' anticipation of future capital market changes.

01

The RWA Boom of Chinese Institutions

RWA refers to the tokenization of assets that can generate stable income in the real world (such as hotel rentals, photovoltaic power generation, and even stocks, bonds, commodities, etc.) through blockchain technology, enabling transactions, management, and circulation on the chain.

Currently, it has become a trend for Chinese institutions in Hong Kong to explore RWA projects, which stems from the strategic deployment of their domestic headquarters. Most institutions view this as "assigned tasks or designated homework." Many institutions have previously received requirements from their headquarters to actively explore related business opportunities.

Similar to the landing process of most financial products in Hong Kong, Chinese-funded institutions' exploration of RWA projects cannot do without the participation of a large number of lawyers, which has directly driven the growth of some law firms in Hong Kong involved in cryptocurrency-related businesses. Leading law firms such as King & Wood Mallesons and JunHe are among them, making the work of practitioners from Chinese-funded institutions in Hong Kong even busier.

On August 7, Ant Group and other organizations jointly held an RWA industry conference at the Hong Kong Stock Exchange, attended by Vice Chairman of the National Committee of the Chinese People's Political Consultative Conference, former Chief Executive of the Hong Kong Special Administrative Region Leung Chun-ying, and Hong Kong Special Administrative Region Secretary for Financial Services and the Treasury Christopher Hui.

In his speech, Leung Chun-ying pointed out that standardization is the key bridge connecting real assets and digital finance. The Hong Kong Web 3.0 Standardization Association should play the role of a standard "anchor point" to assist in the internationalization of the Renminbi and enhance the vitality of global capital markets.

Perhaps the organizers underestimated the market enthusiasm. By the time the event opened at 2:30 PM, the venue was already packed, and most participants had to stand at the back. A large number of traditional financial institution representatives gathered on site, a scene that has not been seen in the Hong Kong crypto community for a long time.

The Promoting Role of Stablecoin Regulations

The enthusiasm of Chinese institutions for RWA in this round is closely related to the introduction of the Hong Kong "Stablecoin Regulation". This regulation will officially take effect on August 1, 2025, and is the world's first comprehensive regulatory framework for fiat-backed stablecoins.

Several senior executives from Chinese-funded asset management institutions in Hong Kong have recently been traveling frequently between the mainland and Hong Kong, discussing the business opportunities in Hong Kong under the implementation of stablecoins with headquarters and some local regulatory agencies. This wave of exploration shows a "top-down" characteristic, with headquarters hoping that the institutions in Hong Kong will take the lead in laying out RWA to establish a foundation for the ecological development after the issuance of stablecoins.

Before this, most Chinese-funded institutions in Hong Kong had not ventured into the cryptocurrency sector, and some institutions had not even upgraded their asset management licenses to categories that allow participation in cryptocurrency products. Only a few institutions, such as Huaxia Fund Hong Kong, Taiping Asset Management Hong Kong, Harvest Fund, and Bosera Fund, have issued related cryptocurrency products. Public information shows:

Huaxia Fund (Hong Kong)

In 2024, Bitcoin spot ETFs and Ethereum spot ETFs will be issued, and in February 2025, a Hong Kong dollar money market fund tokenized fund will be launched, with new tokenized products for RMB and USD money market funds added in July. As of the market close on August 21, the scale of its Bitcoin spot ETF was approximately HKD 2.072 billion; the tokenized scale of the Hong Kong dollar money market fund was around HKD 1.2 billion, with the USD portion being USD 40 million.

Taibao Asset Management Hong Kong

In September 2023, upgraded its 1st and 4th licenses, becoming one of the first asset management companies to obtain a virtual asset license. In March 2025, it will launch its first tokenized US dollar money market fund product (CPIC Estable MMF), with an issuance scale of 100 million USD. Its asset scale in Hong Kong exceeds 70 billion HKD, choosing US dollar money funds as the preferred tokenized option, mainly based on investor demand and market liquidity considerations. At this stage, the significance of such products lies more in exploration and preparation, rather than pursuing scale.

Optimism and Concerns in the Industry

Currently, there are limited suitable financial assets for tokenization in Hong Kong. Apart from robust money market funds, some institutions are attempting equity tokenization and even exploring the tokenization of private credit products.

Due to the fact that most institutions had not previously been exposed to cryptocurrency products, after the stablecoin boom in Hong Kong in mid to late July, many institutions began to urgently "gather" projects and even temporarily formed teams to build products in order to complete their "homework."

Industry optimism suggests that in the future, everyone will need to learn about on-chain products, and subsequently, more financial products may be implemented on-chain. There are also views indicating that within the next 5-10 years, all financial products will be on-chain, which will solve the problem of 24/7 trading, enhance efficiency, and reduce costs. The development of the financial industry aligns with the current AI trend, both facing comprehensive transformation. Successful cases in the U.S. market further boost industry confidence:

BlackRock

On January 11, 2024, the Bitcoin Spot ETF (iShares Bitcoin Trust, IBIT) will be listed on Nasdaq, with a closing scale exceeding $86.77 billion as of August 20, becoming the fastest-growing ETF in history; on March 20 of the same year, the first tokenized USD money market fund iShares USD Money Market Fund (BUIDL) was launched, with a scale of approximately $2.38 billion as of August.

US RWA Market

As of August, the scale is approximately 24 billion to 25 billion USD (excluding stablecoins), with the underlying assets for private credit exceeding 13 billion USD and the scale related to U.S. Treasury bonds reaching 8 billion USD.

For Chinese-funded institutions in Hong Kong, seizing the opportunities presented by changes in Hong Kong's policies and industries is a chance to overtake in the transformation of the capital market. Many heads of institutions believe that one should not be limited to traditional financial market "red ocean" areas like bonds and stocks, but should instead learn from BlackRock's "self-revolution" and embrace new fields to align with industry development trends. This is also the original intention of most asset management institutions in Hong Kong clustering around RWA products.

However, not all viewpoints are optimistic about the current RWA craze. There are voices within the industry pointing out that the current Hong Kong RWA market has become overheated and needs to remain calm. While there is recognition of blockchain technology, some emphasize that new technologies should not be mythologized; not all assets need to be on-chain, and going on-chain must conform to financial logic and solve real problems.

At the same time, one should not mistake goals that can be achieved in the coming years for tasks that can be accomplished at present. For example, if a certain type of asset can be quickly financed in the traditional financial sector, it indicates that its liquidity is not poor, and there may be no need to put it on-chain in the currently less liquid RWA market; whereas for underlying assets that are not of sufficient quality, even if they are put on-chain, liquidity is still unlikely to improve.

Challenges and Opportunities in the Industry Ecosystem

Currently, the RWA ecosystem in Hong Kong is still in a very early stage, with significant room for improvement in financing capabilities, liquidity, and more. As the stablecoin boom drives the rise in RWA interest, many teams involved in RWA projects have varying levels of quality, and some teams are even unclear about the legal rights corresponding to RWA assets.

In fact, RWA is a product established based on a complete legal system, and the rights of investors holding RWA asset tokens, as well as the ownership of the underlying assets corresponding to those rights, require clear legal regulations.

It is noteworthy that the effectiveness of the Hong Kong "Stablecoin Regulation" is reshaping the industry landscape. According to the regulation, stablecoin issuers must meet strict reserve requirements (cash reserves ≥ 80%) and are subject to ongoing supervision by the Hong Kong Monetary Authority. This framework not only provides compliant payment tools for RWA transactions but also raises higher demands for the authenticity and transparency of asset tokenization.

For example, Ant Group has initiated a stablecoin license application, planning to invest blockchain technology and stablecoin innovation into real and reliable large-scale applications; Chinese brokerages such as Guotai Junan International and CMB International have also officially entered the virtual asset trading service field by upgrading their licenses.

In the future, as regulatory frameworks improve and technological infrastructure matures, RWA is expected to move from proof of concept to scalable application. However, in this process, how to balance innovation with risk, technological efficiency with legal compliance will be the core issue facing all participants.

As the President of the Hong Kong Monetary Authority, Eddie Yue, stated: "The development of RWA should not be a race, but a marathon that requires patience and wisdom."