Written by: Xiao Za Legal Team

RWA is undoubtedly the hottest term in the virtual currency field recently, and the Xiao Za team has published several articles introducing it. Currently, there are two compliant RWA projects in Hong Kong, namely the photovoltaic project of Xiexin Technology and the battery swap station project of Longxin Group, with underlying assets mainly focused on new energy and environmental protection. The Hong Kong government issued the "Hong Kong Digital Asset Development Policy Declaration 2.0" on June 26, 2025, reiterating its commitment to making Hong Kong a global innovation center in the digital asset field and further expanding the variety of tokenized products. It clearly states that the government will regularize the issuance of tokenized government bonds and provide incentives for the tokenization of real-world assets (including clarifying the stamp duty arrangements applicable to tokenized exchange-traded funds, etc.) to enhance liquidity and popularity. The government also emphasizes that it will promote broader asset and financial instrument tokenization, showcasing the diverse applications of this technology in various sectors, including precious metals (such as gold), non-ferrous metals, and renewable energy (such as solar panels). This provides an opportunity for precious metal companies to finance through RWA means.

Considering that RWA is still in the pilot stage, relying on a sandbox model for issuance, and under the premise that the Hong Kong government has clearly stated it will expand the types of tokenized physical assets, it is bound to explore more types of underlying assets. Therefore, the Xiao Za team predicts that the next RWA project is likely to return to traditional industries. Additionally, since the "Hong Kong Digital Asset Development Policy Declaration 2.0" explicitly mentions promoting the diverse applications of "precious metals (such as gold), non-ferrous metals, and renewable energy (such as solar panels)," there is currently no complete issuance process and underlying asset standards issued by the authorities. The actual ability to issue depends on communication with SFC (Securities and Futures Commission of Hong Kong) officials. Therefore, if there are quality underlying assets related to precious metals, there is a high likelihood of gaining favor from regulatory agencies during the RWA issuance process and obtaining issuance recognition. Today, the Xiao Za team will take gold as an example to deeply analyze the path, methods, and strategic choices for the implementation of precious metal RWA in Hong Kong.

01 Possible Issuance Paths for Precious Metal RWA

Currently, the two compliant RWA projects on the market convert the rights to income into digital certificates, allowing investors to map the rights to income of off-chain assets through RWA tokens. The current trading models for gold mainly include two types: one is the spot trading model, and the other is the futures trading model. The futures trading model is also an investment in potential future income, which is similar to the current two RWA projects.

On one hand, the "Hong Kong Digital Asset Development Policy Declaration 2.0" mentions that Hong Kong has been included in the LME global warehouse network as a licensed delivery location, enhancing Hong Kong's position in global commodity trading, which means more physical gold may be stored and traded in Hong Kong. On the other hand, the Hong Kong government also emphasizes that it will regularize the issuance of tokenized government bonds. Therefore, the Xiao Za team boldly predicts that future gold RWA will also feature two models: "income + physical," aligning with the global gold trading market.

(1) Future Income Rights Model

This model focuses on unmined gold (gold mines), splitting and circulating future income rights through digital equity certificates (such as blockchain tokens), essentially realizing and distributing the "expected value of gold" in advance.

This model can lower the investment threshold by splitting the income rights of high-value gold mine projects into smaller shares, allowing ordinary investors to participate in the mineral investment field that was previously only accessible to institutions. The specific operational process is also similar to existing RWA projects for new energy charging stations, but there are differences from the current two charging station income rights RWA. As a gold mine serves as the underlying asset, its quantity is at best a rough estimate rather than a precise valuation, meaning that if the actual reserves or gold prices exceed expectations, investors can achieve excess returns. However, this characteristic also leads to the biggest challenge of this model: how to choose a reliable third-party evaluation agency to assess the gold mine's reserves, mining costs, expected gold output, and market value, and ensure that this work is recognized by investors.

It can be said that the future income rights model focuses on expectations of gold value fluctuations, with a heavier investment attribute.

(2) Gold Spot Trading Model

This model uses physical gold (such as gold bars, gold ingots) as the underlying asset, achieving digital holding, trading, and delivery of spot gold through RWA tokens, essentially being a "digital certificate of physical gold."

This model establishes a right to income or related rights for physical gold, differing from existing RWA projects in Hong Kong. In terms of future income, it relies on the fluctuations in gold prices rather than the operation of the underlying asset, bringing gold trading back under the market framework.

Compared to physical gold trading, RWA tokens can be traded on the secondary market 24/7, with no physical transportation or storage costs, resulting in higher trading efficiency. It also addresses the inconvenience of traditional physical gold storage and the difficulty of division (e.g., 1 gram of gold is hard to split for trading), allowing investors to easily hold small shares of gold. Therefore, this model has strong liquidity, focusing on attracting more investor participation and promoting a thriving secondary market, which may be more suitable for precious metal exchanges, financial institutions, etc., indicating a heavier trading attribute.

02 Key Process Points of Precious Metal RWA Compared to Traditional Models

Precious metal RWA is essentially still a type of RWA, so the basic process can still apply the existing RWA framework. However, precious metal RWA has its characteristics, which inevitably means that some operations need to be adjusted. This section will use the basic process of the Xiexin project RWA as an example to highlight the operational process of gold RWA that differs from existing Hong Kong RWA projects.

(1) Key Points of Basic RWA Process—Using the Xiexin Project as an Example

Taking the Xiexin project as an example, its RWA basic process mainly includes asset confirmation and data on-chain, token issuance and smart contract design, on-chain subscription and fund custody, and operational dividends and compliance tax.

First, comprehensively sort out information such as power station ownership, power purchase agreements, and operation and maintenance records, and work with legal advisors to complete compliance due diligence to ensure the project is legal and compliant. IoT devices (Internet of Things) are deployed at the power station to collect power generation data in real-time, which is encrypted and uploaded to the blockchain through edge computing, forming a reliable data foundation.

Second, based on the expected future income of the power station, tokens are divided. For example, if Xiexin Nengke expects the power station to generate 200 million yuan in the next 10 years, it will be equally divided into 200 million tokens. The token is bound to the income distribution rules, which are written into the smart contract. When the power generation is below expectations, the contract automatically triggers a warning and suspends dividends, forming a "risk control closed loop." At the same time, the contract code is audited by a professional institution to ensure system security.

Then, communicate with the SFC, issue relevant legal opinions and audit documents, and provide further proof documents as required by the SFC. Through a licensed virtual asset trading platform in Hong Kong, tokens are issued to qualified global investors through private placement, supporting payments in stablecoins like USDT.

Finally, operational data is automatically captured on-chain daily, and monthly automatic income distribution is completed by the smart contract.

(2) Basic Points of Precious Metal RWA Process

If it is a gold RWA leaning towards income rights, it has essential similarities with the Xiexin project. However, due to the opacity of gold mines, more proof documents may be needed to confirm the authenticity of the underlying assets. In addition to traditional law firms and auditing institutions, specialized exploration and evaluation agencies need to be introduced, while other processes can generally be referenced.

However, in the tokenization of physical gold trading, unlike the Xiexin project, which relies on the expected income, real-time data, and compliance binding of specific assets (power stations), gold, as a standardized, easily divisible, and globally circulating precious metal, its tokenization process focuses more on asset custody, standardized verification, and global liquidity. Therefore, based on the basic RWA process, gold RWA may need to pay more attention to the following steps:

1. Asset Confirmation

Investors in physical gold RWA hold rights to income or related rights, so it is particularly important to focus on confirming the underlying assets at the time of issuance, ensuring there are no legal risks or ownership disputes. Technologies such as laser engraving codes and blockchain hash values can be used to give each gram of gold a unique digital fingerprint, achieving full-chain traceability from mining, smelting to storage. At the same time, third-party institutions should test purity and weight and store evidence on-chain to ensure "one item, one code," with clear ownership.

2. Institutional Custody

Investors hold rights to income or related rights to the underlying gold assets through RWA tokens, which means it is necessary to isolate the assets of the issuer. Otherwise, they will simultaneously hold the gold as the underlying asset and the funds obtained from issuance, which is highly risky. Therefore, it is necessary to introduce a third-party custody institution to manage the off-chain gold assets, especially choosing LBMA-certified international vaults, and the custody institution should also undergo regular third-party audits to verify the 1:1 correspondence between physical gold and tokens, preventing "one gold, multiple certificates."

3. Cross-Border Compliance

The existing two Hong Kong RWA projects use new energy infrastructure as the underlying assets, so there is only the flow of funds, and the underlying assets are limited to the policies of the project location. However, in the case of physical gold RWA, this situation is entirely different. Gold has global circulation attributes, which means that if trading globally, it must comply with FATF anti-money laundering rules, adapt to various countries' KYC/AML processes, and coordinate cross-regional regulatory requirements such as the EU's MiCA (Markets in Crypto-Assets) regulation and US MSB. In the design of smart contracts, special attention must be paid to avoid violating local regulatory norms during the settlement process, especially if it involves the redemption and delivery of physical gold.

03 Increasing Winning Chances: Strategic Choices for Precious Metal RWA

(1) Compliance is the Core Premise for Project Success

The biggest risk in issuing gold RWA in Hong Kong still comes from insufficient compliance. The Securities and Futures Commission of Hong Kong (SFC) has issued multiple circulars regarding tokenized assets in 2023 and 2024, emphasizing that RWA issuance must be incorporated into the existing securities regulatory framework.

(2) Structural Design Should Focus on Enhancing Liquidity and Investment Appeal

In physical gold RWA, the underlying assets must be deliverable gold bars that meet the standards of the London Bullion Market Association (LBMA), avoiding non-standard gold that could restrict circulation while facilitating ownership confirmation. It is recommended to store in internationally recognized vaults (such as the Hong Kong Gold and Silver Exchange, HSBC Vault) to enhance investor confidence.

Traditional gold investment has a high threshold, while RWA can split a 1-kilogram gold bar into smaller digital shares (such as 1 gram), attracting retail investors. Therefore, small-scale design helps increase trading volume and market activity, but it should be noted that companies also need to consider transaction fees and operating costs. Income-type gold RWA should also clarify the dividend cycle and calculation methods, and the fee structure (custody fees, management fees, transaction fees) should be transparent to enhance product predictability and increase investor trust, avoiding investor attrition. Additionally, investor profiling should be precise—high-net-worth individuals often seek safe-haven assets and diversification, institutional investors typically focus on liquidity, custody security, and compliance, while retail investors value low thresholds and convenient trading. When engaging in RWA, gold companies should target specific investor groups and develop smart contracts based on different investors' preferences.

(3) Strengthen Risk Awareness, Prevent Operational and Credit Risks

Wang Weihong, Vice President of Longxin Technology Group, and Yan Ying, Chief Scientist of Ant Group, stated in their interpretation of Longxin's new energy asset RWA that the biggest challenge and difficulty lie in how to achieve the credibility, integrity, verifiability, and usability of data. The risk of untruthful data is something that any virtual asset must face. Especially in relation to gold, the underlying asset itself holds significant value, so the relevant data disclosure may not only pertain to income but also to the underlying asset itself. During the issuance and actual operation process, it is recommended to use third-party independent custody to avoid the issuer misappropriating the underlying gold, and to have the custody situation regularly audited by an accounting firm, issuing corresponding evaluation and audit reports. The design of smart contracts should undergo security audits to prevent vulnerabilities that could lead to asset loss, and a multi-signature mechanism can be used for critical private keys to reduce single point failure risks.

In addition, it is advisable to ensure there are sufficient market makers or liquidity providers (LPs) before issuance. Currently, RWA is mainly aimed at professional investors, and there is no disclosure of investor information. If the issuance of RWA is merely an attempt at tokenization or to gain corresponding recognition, it is still recommended to have sufficient subscribers when issuing the first gold RWA for insurance purposes. Since physical gold RWA itself is a tokenized mapping of income rights or related rights, attention should also be paid to designing a reasonable buyback and redemption mechanism to provide investors with an exit channel.

In terms of applicable law, it is recommended to clearly specify the applicable law and dispute resolution method (optional Hong Kong law + Hong Kong arbitration) in the issuance documents. Relevant legal opinions should be obtained for gold ownership, custody contracts, and token issuance agreements to eliminate potential legal risks as much as possible. It may also be beneficial to attempt collaboration with internationally renowned custody and auditing institutions, and further file with authoritative institutions such as gold exchanges and industry associations to enhance credibility.

04 In Conclusion

If gold enterprises or related institutions are indeed determined to pursue RWA, it is advisable to clarify the underlying assets and complete the issuance of legal opinions and compliance reviews while communicating with the SFC. Obtaining a legal opinion recognized by the SFC before issuance can significantly reduce approval time and further shorten the project cycle. While putting gold inventory information on-chain, it is also important to retain offline audits to improve transparency. Additionally, considering simultaneous issuance in multiple markets, while issuing in Hong Kong, it may be beneficial to communicate and list simultaneously in markets such as Singapore and the UAE to expand the investor base. If capable, it is also recommended to continuously promote investor education through roadshows, white papers, and briefings to reduce investors' unfamiliarity with RWA. Furthermore, companies should develop a long-term operational plan, focusing not only on initial issuance financing but also on planning secondary market liquidity and subsequent product expansions (such as gold ETFs and collateralized lending). In the secondary market, collaboration with market makers can be attempted to introduce liquidity market makers to maintain price stability, reduce volatility, and stabilize investor confidence, attracting more investors to participate and ensuring project stability and sustainability.

The Xiao Za team believes that precious metals, especially gold, will undoubtedly become popular assets in RWA in the future. Enterprises should have confidence but also solidify the procedural work, continuously conduct compliance and authenticity self-checks on the project, and be responsible to investors while avoiding regulatory red lines. Only in this way can they achieve longevity, sustainability, and excellence in their endeavors.

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