Current Status and Challenges of the RWA Market: Key Differences Between USD RWA and Other RWAs

The cryptocurrency market has been persistently sluggish recently, but the topic of RWA (Real World Assets) is gradually gaining traction. Some believe that RWA is a trillion-dollar market, citing that USD stablecoins, as the earliest and most successful RWA, have a market capitalization of nearly $300 billion, while a large number of off-chain assets such as real estate, stocks, and bonds have the potential to go on-chain.

However, this perspective has certain issues. RWA is not homogeneous, and there are significant differences between USD RWA and other RWAs, making comparison difficult. For non-USD RWA to achieve rapid development, it needs to not only draw on the experiences of USD RWA but also explore unique development models.

If investors want to capture Alpha opportunities in the RWA space, they first need to clarify the differences between dollar RWA and other RWAs. This article will analyze the differences between the two from four aspects, revealing the current status and challenges of non-monetary RWAs, and providing guidance for investors seeking opportunities in the RWA sector.

1. Use Cases: Clear Requirements vs Ambiguous Requirements

Dollar stablecoins are a digital extension of the US dollar, primarily serving the trading settlement, cross-border payments, and hedging needs of the cryptocurrency market. These scenarios are high-frequency and essential, especially in countries with severe inflation, where dollar stablecoins have become an important tool for wealth protection.

In contrast, other RWAs (such as real estate tokenization) primarily aim to achieve global financing or enhance asset liquidity through blockchain. This type of demand occurs less frequently, and the user base is limited. Cryptocurrency market participants are more inclined to invest funds into native assets such as Bitcoin, Ethereum, or Meme coins. Assets with good off-chain returns already have mature financing channels, while those with poorer returns are the ones actively seeking to go on-chain, which further restricts market size.

In short, the dollar RWA provides liquidity to the crypto market, playing the role of the "supplier," while other RWAs seek liquidity and belong to the "demand side." Although the names are the same, their natures are vastly different. It is worth considering whether there are other non-monetary RWAs that can provide liquidity to the crypto market.

2. Compliance and Trust: Mature vs. Lacking

Regulatory Adaptability

The US dollar stablecoin is issued by regulated institutions, with reserves audited regularly and compliant with relevant currency regulations. Despite previous controversies, it has gained market trust through deep collaboration with exchanges. The regulatory situation for other RWAs is much more complex. For example, real estate on the blockchain involves legal ownership confirmation and cross-border judicial issues, and there is currently a lack of unified standards, making it difficult to promote quickly.

Trust Foundation

The core of RWA is the tokenization of credit. USD RWA is anchored to the US dollar and is supported by national credit, which has a very high level of user trust. Other RWAs rely on the credit of off-chain asset issuers, such as the tokenization of real estate, which requires authoritative institutions to prove ownership; otherwise, users find it difficult to trust the correspondence between on-chain tokens and physical assets.

The trust foundation of USD RWA is unparalleled, and other RWAs find it hard to match. In the short term, attention should be paid to RWA categories with lower compliance thresholds and easier trust establishment.

3. Technical Implementation: Simple vs Complex

The technological logic of USD stablecoins is clear: on-chain issuance and redemption with low thresholds. USD and US Treasuries are standardized assets with low auditing and tracking costs. Other RWA involves complex processes such as asset valuation, dividend distribution, and settlement, which require oracles to verify off-chain data in real-time. The on-chain processes for different assets (such as real estate) vary greatly, with high compliance standards and technical implementation difficulties, leading to naturally slow development.

Non-standardized RWAs need customized standards for each asset class, making breakthroughs difficult in the short term. In comparison, RWAs that are easier to standardize, such as gold and bonds, are more achievable.

4. Approaches: Bottom-up vs Top-down

The rise of USD stablecoins stems from user demand: fiat currency purchases are subject to regulatory restrictions, and exchanges have introduced USD stablecoin trading pairs to solve this issue. As usage increased, it evolved into a digital dollar, integrating into DeFi and cross-border payments. This is a result of market demand from the bottom up.

Real estate, stocks, and other RWAs are largely driven by large institutions, due to financing or liquidity needs, which belong to a top-down model. The participation of ordinary users and entrepreneurs is low.

The bottom-up development approach is more suited to the characteristics of the cryptocurrency industry. RWA projects that focus more on community development are also more likely to gain user favor.

Summary and Outlook

The success of dollar RWA relies on clear demand, high liquidity, a solid trust foundation, low technical barriers, and bottom-up market driving. Other RWAs are hindered by ownership mapping challenges, regulatory uncertainties, technical complexities, and resistance from traditional interests, making their development arduous.

In the future, if other RWAs want to break through, they must at least strive in the following directions:

1. Regulatory cooperation: Promote cross-border legal recognition of on-chain asset ownership.
2. Compliance Framework: Develop segmentation standards by asset class to accelerate the compliance process.
3. Infrastructure: Improve the RWA oracle, issuance platform, and cross-chain liquidity protocols.

Investors should clearly understand the difference between USD RWA and other RWAs, and recognize the current development status of the RWA sector. Focus on the development of the compliance framework for US RWA, as well as RWA assets that are easy to standardize and make transparent (such as gold and bonds). Currently, more attention should be paid to infrastructure projects in the RWA sector, such as RWA oracles, RWA issuance platforms, and RWA liquidity protocols.