Hong Kong's Chinese Institutions Are Flocking to RWAs: Why Does the Fever Need to Cool Down?

The wave of stablecoins has yet to subside, and a delicate tug-of-war has emerged between the collective influx of Chinese institutions into RWAs and calls for calm in the industry. Hong Kong's financial landscape is showing a clear stratification. Foreign institutions continue to delve into traditional areas such as quantitative investing, hedging, and IPOs. Meanwhile, Chinese institutions, in addition to these businesses, are devoting more attention to a new area: research on RWAs (Real World Assets). This strategic shift stems from both policy support and financial institutions' anticipation of future capital market changes. 01. Chinese Institutions' RWA Craze. RWAs refer to the tokenization of real-world, income-generating assets (such as hotel leases, photovoltaic power generation, and even stocks, bonds, and commodities) through blockchain technology, enabling on-chain trading, management, and circulation. Currently, the exploration of RWA projects by Chinese institutions in Hong Kong has become a trend. This stems from the strategic deployment of their headquarters in China, with most institutions viewing them as "assigned homework or assignments." Many institutions have already received instructions from their headquarters to actively explore related business opportunities. Similar to the implementation process of most financial products in Hong Kong, Chinese institutions' exploration of RWA projects requires the involvement of a large number of lawyers, which has directly driven the growth of cryptocurrency-related business at some Hong Kong law firms. Leading law firms such as King & Wood Mallesons and Jun He Law Firm are among them, making the work of practitioners at Chinese institutions in Hong Kong even busier. On August 7, Ant Financial and other institutions jointly held an RWA industry conference at the Hong Kong Stock Exchange. Leung Chun-ying, Vice Chairman of the National Committee of the Chinese People's Political Consultative Conference and former Chief Executive of the Hong Kong SAR, and Paul Chan, Secretary for Financial Services and the Treasury of the Hong Kong SAR Government, attended the conference. In his speech, Leung Chun-ying pointed out that standardization is a key bridge connecting real assets and digital finance, and that the Hong Kong Web3.0 Standardization Association should play the role of an "anchor" for standards, facilitating the internationalization of the RMB and boosting the vitality of the global capital market. Perhaps the organizers underestimated market enthusiasm. By the time the event opened at 2:30 p.m. that day, the venue was already packed. Most participants could only stand in the back, with a large number of people from traditional financial institutions gathered at the scene. This scene has not been seen in Hong Kong's cryptocurrency circle for a long time. The Driving Force of the Stablecoin Ordinance This wave of Chinese institutions' enthusiasm for RWAs is closely related to the introduction of Hong Kong's Stablecoin Ordinance. The Ordinance, which officially came into effect on August 1, 2025, is the world's first comprehensive regulatory framework for fiat stablecoins. Several senior executives from Chinese asset management institutions in Hong Kong have recently been traveling frequently between mainland China and Hong Kong, discussing business opportunities in Hong Kong with headquarters and some local regulators amid the introduction of stablecoins. This wave of exploration is characterized by a top-down approach, with headquarters hoping that institutions in Hong Kong will first deploy RWAs to lay the foundation for the ecosystem's development after the stablecoin's issuance. Prior to this, most Chinese institutions in Hong Kong hadn't engaged in the cryptocurrency market, and some hadn't even upgraded their asset management licenses to include cryptocurrency products. Only a few, including China Asset Management (Hong Kong), Taiping Asset Management (Hong Kong), Harvest Fund, and Bosera Asset Management, had issued related cryptocurrency products. Public information shows that China Asset Management (Hong Kong) plans to issue Bitcoin and Ethereum spot ETFs in 2024, launch a tokenized Hong Kong dollar money market fund in February 2025, and add tokenized RMB and US dollar money market fund products in July. As of the close of trading on August 21st, its Bitcoin spot ETF had approximately HK$2.072 billion in assets; its tokenized Hong Kong dollar money market fund had approximately HK$1.2 billion, with the US dollar portion representing US$40 million. CPIC Asset Management Hong Kong will upgrade its Type 1 and Type 4 licenses in September 2023, becoming one of the first asset management companies to receive virtual asset licenses. In March 2025, it will launch its first tokenized US dollar money market fund (CPIC Estable MMF), with an issuance size of US$100 million. With over HK$70 billion in assets in Hong Kong, its choice of US dollar money market funds as its primary tokenization strategy is primarily based on investor demand and market liquidity. At this stage, the significance of such products lies more in exploration and preparation than in pursuing scale. Industry Optimism and Concerns Currently, there are limited suitable financial assets for tokenization in Hong Kong. Beyond robust money market funds, some institutions are experimenting with equity tokenization and even exploring the tokenization of private credit products. Since most institutions have no prior experience with cryptocurrency products, following the surge in stablecoin activity in Hong Kong in mid-to-late July, many began scrambling to develop projects, even temporarily forming teams to build products to complete their "homework." Industry optimists believe that everyone will need to learn about blockchain-based products in the future, and that more financial products may subsequently become available. Some even suggest that all financial products will be on-chain within the next 5-10 years, solving the problem of 24/7 trading, improving efficiency, and reducing costs. The development of the financial industry aligns with current AI trends and is poised for comprehensive transformation. Success stories in the US market have further boosted industry confidence: BlackRock listed the iShares Bitcoin Trust (IBIT), a Bitcoin spot ETF, on the Nasdaq on January 11, 2024. As of August 20th, its market capitalization exceeded $86.77 billion, making it the fastest-growing ETF in history. On March 20th of the same year, it launched the first tokenized USD money market fund, the iShares USD Money Market Fund (BUIDL), which had approximately $2.38 billion in market capitalization as of August 20th. As of August, the US RWA market was approximately $24 billion to $25 billion (excluding stablecoins), of which over $13 billion was in private credit and $8 billion in US Treasury bonds. For Chinese institutions in Hong Kong, seizing the city's policy and industry changes presents an opportunity to overtake competitors in the evolving capital markets. Many institutional leaders believe that they should not be limited to the "red ocean" of traditional financial markets, such as bonds and stocks, but should emulate BlackRock's "self-revolution" and expand into new areas to adapt to industry trends. This is also the motivation behind the surge in RWA products among many asset management institutions in Hong Kong. However, not all views are optimistic about the current RWA craze. Some within the industry point out that the current Hong Kong RWA market is overheated and requires calm. While acknowledging blockchain technology, some emphasize that the new technology should not be deified. Not all assets need to be put on-chain; such placement must conform to financial logic and solve practical problems. At the same time, goals that are achievable many years in the future should not be mistaken for tasks that are achievable today. For example, if a certain type of asset can quickly raise funds in traditional finance, it indicates that its liquidity is not poor and it may not necessarily need to be put on-chain in the currently less liquid RWA market. However, for underlying assets of suboptimal quality, even putting them on-chain will still be difficult to improve liquidity.

Challenges and Opportunities in the Industry Ecosystem

Currently, the Hong Kong RWA ecosystem is still in its very early stages, with significant room for improvement in financing capabilities and liquidity. With the stablecoin craze driving increased interest in RWAs, the quality of many teams approached for RWA projects varies widely, with some even unclear about the legal rights underlying RWA assets.

In fact, RWAs are products built on a comprehensive legal system. Investors' rights to RWA asset tokens and the ownership of the underlying assets corresponding to these rights require clear legal regulations.

Notably, the implementation of Hong Kong's Stablecoin Ordinance is reshaping the industry landscape. According to the regulations, stablecoin issuers must meet strict reserve requirements (cash reserves ≥ 80%) and be subject to ongoing oversight by the Hong Kong Monetary Authority. This framework not only provides a compliant payment tool for RWA transactions, but also places higher demands on the authenticity and transparency of on-chain assets. For example, Ant Digital has initiated its application for a stablecoin license, aiming to bring blockchain technology and stablecoin innovations to real, reliable, large-scale applications. Chinese brokerages such as Guotai Junan International and CMB International have also officially entered the virtual asset trading services sector by upgrading their licenses. In the future, as the regulatory framework improves and the technological infrastructure matures, RWA is expected to move from proof-of-concept to large-scale deployment. However, balancing innovation with risk, and technical efficiency with legal compliance, will be key challenges for all participants. As Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, said: "The development of RWAs should not be a competition, but a long-term journey that requires patience and wisdom."