Author: Wang Lele, Head of OKLink Research Institute, and Jiang Zhaosheng, Senior Researcher at OKLink Research Institute
Recently, Trump announced the issuance of his personal meme coin $Trump on social media, once again drawing global investors' attention to the crypto market. Upon returning to the White House, Trump may usher in a new era of crypto regulation in the United States, encouraging more institutions to engage in the wave of crypto innovation. Kara Calvert, the U.S. Policy Director at Coinbase, recently stated, “Trump has sent a signal that America is back, and we are ready to lead this industry. This means other countries should be cautious, or they will fall behind.”
The Participation of Traditional Institutions Determines the "Acceleration" of RWA Tokenization
Tokenization is moving from concept to reality and has been referred to by Boston Consulting Group as the "third revolution in asset management," with explosive growth expected in the next five years. OKG Research predicts that non-stablecoin tokenized assets will exceed $30 billion by 2025.
As a global financial center, Hong Kong is also actively embracing the wave of RWA tokenization. The 2024 Policy Address by the Chief Executive proposed promoting RWA tokenization and the development of a digital currency ecosystem. The Hong Kong Monetary Authority has also launched a "Digital Bond Financing Scheme" to encourage the adoption of tokenization technology in the capital markets. These initiatives indicate that Hong Kong aims to reshape its financial competitiveness through tokenization and take the initiative in future competition.
However, the main driving force behind global tokenization innovation still comes from the United States. Traditional institutions in the U.S., represented by Wall Street, are channeling traditional funds onto the blockchain through Bitcoin spot ETFs while also accelerating the tokenization of traditional financial assets and businesses. Institutions like BlackRock, Goldman Sachs, and JPMorgan are leading the first wave of tokenization, with their influence radiating globally. BlackRock's tokenized U.S. Treasury fund BUIDL has exceeded $630 million, and JPMorgan is also leading the tokenization of traditional assets like U.S. Treasuries and money market funds through its Onyx platform.
In contrast, Hong Kong has yet to see institutions or projects with global influence in the field of tokenization. Although Hong Kong has been proactive in promoting tokenization policies, the participation of traditional financial institutions in Hong Kong is relatively low compared to the U.S., where innovation is led by major financial institutions, and they remain cautious towards the Web3 industry, often in a state of "wait and see." This means that despite having rich financial resources, Hong Kong's potential in tokenization innovation has not been fully realized.
The conservative attitude of traditional institutions in Hong Kong towards tokenization mainly stems from compliance requirements. Compliance is necessary, but it should not become a barrier to innovation. The core of tokenization lies not only in technological implementation but also in institutional participation. The level of participation from traditional institutions will largely determine the early prosperity of the tokenization market. Although Coinbase's recent proposal for stock tokenization is still in the strategic conceptual stage, if successful, it could be rapidly replicated, potentially creating a "Nasdaq on the blockchain" and injecting significant growth into the tokenization market. This also indicates that only with more resource-rich institutions actively participating can the tokenization market develop more rapidly.
In the short term, while the existing model cannot be changed, Hong Kong should attract more traditional institutions to participate through a more open tokenization sandbox mechanism, engaging in innovative and market-potential frontier practices. To avoid fragmentation of the sandbox, Hong Kong could incorporate stablecoins, DLT, and other related explorations into a joint pilot; and encourage more institutions to freely explore tokenization applications based on their own endowments, whether it be tokenized funds and stocks or other assets, as long as they have the willingness and capability to conduct small-scale pilots in the sandbox, summarizing experiences in the exploration process and gradually enhancing institutions' willingness and ability to innovate in the field of tokenization.
Only with more resource-rich and asset-holding institutions actively participating in tokenization innovation can Hong Kong gain more initiative in the transformation, thus avoiding being quickly outpaced in competition with the U.S.
Focusing on Standardized Financial Assets to Expand the RWA Market Size
In addition to stimulating market innovation vitality, Hong Kong also needs to further clarify its development focus in the realm of tokenized assets. Global tokenization exploration is mainly concentrated on standardized financial assets, and while Hong Kong has previously explored fund and bond tokenization, the current focus is on the tokenization of non-financial assets such as renewable energy and agricultural products. Although these explorations may contribute to the long-term development of the tokenization ecosystem, they are unlikely to establish a market advantage in the short term.
As OKG Research previously pointed out, there will be a significant time lag in the tokenization process of different assets: standardized financial assets like bonds and funds, which have stable returns and considerable scale, are currently the most suitable asset classes for tokenization, and the tokenization experience of these standardized assets will lay the foundation for the subsequent tokenization of smaller-scale, less profitable, or more technically challenging asset classes. Therefore, Hong Kong should focus in the short term on the standardized financial assets most suitable for tokenization and fully leverage its geographical and institutional advantages as an international financial, trade, and shipping center, with a particular emphasis on tokenization applications in trade and cross-border related scenarios, rapidly expanding Hong Kong's RWA tokenization market size.
Additionally, while technology is not the key determinant of the success or failure of tokenization, an open technological system is more conducive to tokenization innovation. Some overseas institutions choose private chains due to regulatory reasons, but more financial and tech giants are embracing public chains. Public chains significantly outperform other technological systems in terms of global liquidity and openness, becoming the preferred platform for over 60% of tokenized bonds and funds. In terms of security, thanks to the openness of data and the development of on-chain analysis technology, asset tracking and auditing on public chains are becoming easier. Moreover, since most tokenized assets are held off-chain, the real risks are primarily concentrated off-chain, while on-chain mainly ensures business compliance. Therefore, under the premise of compliance, Hong Kong should more confidently explore tokenization applications and innovations on public chains, gradually making it a key direction for tokenization innovation.
Finally, RWA tokenization, as a product of the integration of two different financial systems, ideally should accelerate the migration of real assets onto the chain while ensuring that their value is not limited to the chain, ultimately serving and reflecting reality. In the face of Wall Street institutions' proactive actions in the field of tokenization, the time window for Hong Kong is limited. If Hong Kong can leverage its institutional and market advantages to accelerate the embrace of innovation, while exploring a balance between providing traditional institutions with more innovative space and regulatory compliance, and relying on the trillion-dollar asset support that the mainland can provide, Hong Kong will undoubtedly have an absolute advantage in the field of tokenization, with a broad future ahead. Boston Consulting Group estimates that the potential scale of tokenized assets in Hong Kong has reached HKD 36 trillion.
We look forward to Hong Kong achieving "acceleration" in the RWA field by 2025.
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