Author: Zhao Qirui
On August 26, 2025, Guotai Junan International announced the successful issuance of the first batch of structured product tokens through Ant Chain technology, achieving cross-chain circulation to Ethereum.
This event is portrayed in public narratives as a financial innovation aimed at enhancing efficiency and reducing costs under the wave of Web3 in Hong Kong. However, when viewed against the backdrop of increasingly fierce geopolitical financial competition, especially the actions of the first Hong Kong Chinese-funded brokerage to provide "comprehensive virtual asset trading services" collaborating with a technology company for the first cross-border RWA transaction of mainland enterprises, its essence becomes clearer as a high-risk strategic experiment initiated by the two dominant forces in China's finance and technology sectors.
Chapter 1: A Carefully Planned Fintech Experiment
Guotai Junan International, as a Chinese-funded brokerage with state-owned background and deeply rooted in a culture of compliance, provides an ideal and highly credible vehicle for this sensitive test in the frontier field. As the technology driver, Ant Group's "Two Chains and One Bridge" platform serves as the core conduit connecting mainland Chinese assets with global trading markets.
Similarly, the choice of structured products for the first batch of tokenized assets is not coincidental: the financial structure is complex enough to effectively test technological feasibility; the scale is controllable enough to operate within Hong Kong's relatively open yet clearly defined "regulatory sandbox," thus avoiding direct exposure to the systemic risks of retail cryptocurrency trading.
In an era where data has been defined as a key production factor, after tokenization, how can assets or data originating from mainland China achieve legal and controllable cross-border circulation through what paths and frameworks? When the sovereignty of mainland data and capital control requirements collide with Hong Kong's openness as an international financial center, the balancing act attempted by this technological framework directly challenges the existing ambiguities in cross-border data and capital flow regulation, which we believe will inevitably force further clarification of the rules.
This seemingly singular collaboration is, in fact, an extreme test conducted simultaneously across three dimensions: technology, market, and regulation. It is a concentrated demonstration of China's fintech capabilities being exported to the global market, and it may significantly influence the future trajectory of RMB internationalization and the global digital asset regulatory competition.
Chapter 2: When Red-Chip Brokerages Meet Tech Giants
The collaboration between Guotai Junan and Ant Group in the RWA field can be seen as a carefully designed "asymmetric interdependence." The core of this strategic exchange is: Guotai Junan exchanges its irreplaceable "compliance stock"—that is, legitimate financial licenses, deep regulatory trust, and mature risk control systems— for the "technological increment" represented by Ant Group—a cutting-edge technological path to the future digital financial market.
Guotai Junan's dominance stems from the legitimacy it has accumulated in the traditional financial world. As a state-owned brokerage with a full license in Hong Kong, it not only possesses the qualifications to enter the market but, more importantly, its strict compliance management and data security practices make it an indispensable and highly trusted vehicle for mainland digital assets seeking compliant "going abroad." In contrast, Ant Group's dominance is rooted in its capability to build the future through technology. Its "Two Chains and One Bridge" platform, leading privacy computing technology, and high concurrency processing capabilities provide the underlying architecture for this experiment and serve as the engine driving the expansion of the digital asset market.
Therefore, this is not a simple resource integration. More accurately, Guotai Junan seeks a compliant "landing experimental field" for Ant Group's innovative technology with its "regulatory trust," while Ant Group empowers Guotai Junan with its technology, helping it explore new business boundaries. However, this asymmetry also presupposes the core contradiction of this chapter: when the boundaries of compliance conflict with the ambitions of technology, how will this alliance choose?
Guotai Junan's Transformation Anxiety
Guotai Junan's layout in RWA is deeply driven by a "strategic anxiety about being pipelined in the future." Under the global fintech wave, traditional brokerages are facing dimensionality reduction attacks from tech giants, and their existing market position as centralized intermediaries is being eroded. Like other Chinese-funded brokerages such as China Merchants Bank and Futu, the transition to crypto is not merely a simple opportunity capture but a matter of "survival and death, which cannot be ignored," aimed at ensuring that they can still maintain core dominance in the entire chain of asset issuance, trading, and settlement in the future, rather than becoming a "traffic channel" for technology platforms.
To tell a new story about a secondary growth curve to the capital market, Guotai Junan seized RWA as a bridge connecting real assets with the digital world. As a licensed institution with a state-owned background, it has a significant first-mover advantage in the policy environment promoting digital finance in Hong Kong. By participating in the regulatory sandbox mechanism and testing new products in a controlled environment, Guotai Junan can not only reduce its trial-and-error costs but also consolidate its leading position in the industry.
Under this strategy, the short-term profits of RWA products may be secondary. Their core value lies in attracting and locking in a new generation of clients interested in digital assets by fragmenting high-threshold assets; at the same time, through the collaborative practice with Ant Group, they accumulate full-process digital asset operation experience from asset confirmation, on-chain to risk control, laying the foundation for building a future one-stop digital asset service platform. More importantly, as a pioneer, Guotai Junan has the opportunity to deeply participate in the formulation of industry standards, constructing a moat that encompasses technology, compliance, and ecological partners, thus avoiding its business from being "disintermediated" in the future. The endgame of this chess match goes far beyond commercial interests; it is also about reshaping its value positioning in the future digital economy.
Ant Group's Long-Term Vision
Ant Group's strategic layout is indeed a "two-year sword sharpening," and its breadth and depth make it hard to say that the ultimate goal is not to once again recreate the absolute position of Ant Group in the early days of the internet, aiming to establish its technology stack as the de facto standard connecting Chinese assets with global liquidity. The collaboration with Guotai Junan serves as an excellent showcase of its protocol's superiority in security, compliance, and efficiency, acting as a "model project" and key "beachhead." In the future value internet, similar to the role of Alipay in the payment field today, it will play a foundational infrastructure role akin to "SWIFT + DTCC," thereby capturing and controlling the flow of global value.
To this end, Ant Group has built a set of technical solutions aimed at achieving strong network effects and ecological lock-in. Its "Blockchain + IoT" AntChain Inside architecture aims to unify the data standards of physical assets from the source, forming technological dependence; while the Layer2 solution Jovay, designed specifically for institutional scenarios, attracts financial institutions to deeply bind their trading logic with high performance and strong compliance. All of this ultimately integrates into the "Two Chains and One Bridge" platform, which not only provides technology but also offers a complete cross-border value transmission and settlement protocol embedded with compliance logic. **We speculate that, given that not all information about this transaction has been disclosed yet, this protocol is key to achieving *cross-chain* functionality.**
By providing a "one-stop tokenization" solution and leading the formulation of industry technical standards, Ant Group is systematically building an infrastructure ecosystem centered around itself. However, replicating its experience in physical asset fields such as new energy to the highly complex financial asset domain also presents new challenges. Financial assets far exceed physical assets in valuation dynamics, data complexity, and regulatory stringency, which raises higher demands for the adaptability of Ant's technical solutions. At the same time, reliance on oracles, off-chain custody, and cross-chain bridge security also constitutes potential weak links in its technical architecture.
In this ecological dominance structure, Guotai Junan, due to its unique leading position, resembles an empowered super user rather than an equal partner. Although financial institutions possess clients and assets, in determining the evolution of technology, data standards, and other core protocol rules, Ant Group, as the provider of underlying infrastructure, will undoubtedly hold greater dominance.
Synergistic Effects and Structural Fault Lines
In the short term, the collaboration between Guotai Junan and Ant Group demonstrates significant synergistic effects of complementary financial and technological resources: Guotai Junan gains urgently needed digital capabilities, enabling it to activate assets, reduce costs, and optimize its balance sheet; Ant Group finds key application scenarios and compliance endorsement for its technology. However, a deeper examination of the asymmetric structure within this collaboration reveals three profound structural fault lines that may trigger deep-seated games over dominance, data, and profits in the long run.
The first is the cultural fault line. Financial institutions are rooted in a risk-averse, compliance-first prudent culture, while tech companies advocate rapid innovation and agile iteration. Once faced with crises such as technical security vulnerabilities, the cultural differences in emergency response speed, intensity, and transparency may quickly erode the foundation of mutual trust.
The second is the interest fault line. The core of this game lies in the ownership of data and value distribution. Guotai Junan, as the asset side, derives its profits from value discovery and liquidity enhancement; Ant Group, as the technology side, earns from platform services. However, both parties may wish to leverage the massive data generated from the collaboration for secondary development. If the control and revenue rights over this data are not clearly defined, it will inevitably become a major conflict point in future profit distribution.
The third is the strategic fault line. Ant Group's ultimate goal is to build an open protocol that can widely interconnect with global multi-chain ecosystems, while Guotai Junan's every operational step must strictly adhere to the complex regulatory red lines in Hong Kong and mainland China. As the industry leader and state-owned "eldest son," this absolute insistence on compliance fundamentally conflicts with Ant's vision of globalization and open protocols. Once regulatory policies tighten, Guotai Junan's compliance needs will directly limit the application boundaries of Ant's technology platform, thereby threatening the depth and breadth of the collaboration.
In the long run, the outcome of this collaboration will oscillate between two trends: Ant Group will "pipeline" Guotai Junan's technology, or Guotai Junan will successfully utilize Ant's technology to incubate and internalize its digital capabilities. Initially, due to the complexity of technology, a certain degree of "pipelining" is inevitable. However, as a large financial institution, Guotai Junan's strategic goals extend far beyond merely procuring technology. Ultimately, the two parties are most likely to evolve into a mutually embedded symbiotic relationship: deeply integrated in technology and business, but Guotai Junan will ensure sufficient dominance in strategic direction by firmly controlling data sovereignty and adhering to compliance bottom lines, avoiding being completely pipelined.
Chapter 3: Analysis of the "Two Chains and One Bridge" Structure: The Gap Between Ideal and Reality
The "Two Chains and One Bridge" structure jointly created by Guotai Junan and Ant Group has many details that have not yet been disclosed. However, based on existing real-world cases, it is clear that this cannot merely be a simple technical solution; it should be understood as a carefully constructed "compliance sandwich" between regulatory realities and market demands. It is indeed a product full of compromises and trade-offs, with the core design seeking a delicate yet fragile balance among the three conflicting goals of compliance, liquidity, and decentralization.
To win the trust of traditional financial institutions, absorb their vast assets, and ultimately gain the tacit approval of regulatory bodies, this architecture has represented a significant strategic retreat from the ideal of blockchain's native decentralization since its inception, inevitably sacrificing certain native characteristics of blockchain on multiple levels. Its underlying logic is clear: using Ant Chain, a consortium chain, as a solid first layer to provide a controllable and traceable technical framework for asset compliance; at the top layer, it connects to Ethereum, the world's largest public chain, to access global liquidity on the trading side.
However, the most critical and fragile layer connecting these two philosophically opposing worlds is the cross-chain bridge. This layer is filled with technical compromises and potential trust risks. It attempts to connect a compliance island defined by permission and control with a liquidity ocean defined by openness and anonymity. Although this design theoretically meets mainland China's strict control over capital and data flows, as well as Hong Kong's cautious openness to financial innovation, it inevitably introduces more centralized control points and scrutiny mechanisms, returning some of the trust burden to credible intermediaries.
Is this carefully designed bridge a steel structure capable of withstanding market turbulence and regulatory shocks, or is it a fragile suspension bridge with hidden fracture risks at its connection points? The delicate balance it seeks between compliance and efficiency may indeed be its most fatal weakness in long-term development. A deep analysis of each layer of this "compliance sandwich" will reveal the true resilience and potential challenges of this alliance.
I. Blueprint: A Multi-Faceted Value Narrative System
The "Two Chains and One Bridge" structure, if viewed solely from a technical perspective, is a beautiful blueprint for interconnectivity. In the financial realm, it is a meticulously crafted "multi-layered narrative value system" aimed at telling a compelling story to three key audiences who hold the ultimate decision-making power over its success or failure.
First, it tells a compliance story of "controllable risks and traceable processes" to regulatory bodies.
The core of this narrative lies in firmly anchoring key links such as asset generation, rights confirmation, and compliance management on the Ant Chain consortium chain. The permissioned nature of the consortium chain itself is a technical confirmation of regulatory authority, fundamentally excluding the anonymity and disorder inherent in public chains, ensuring that every participating node and on-chain identity is known, controllable, and accountable. This "Chinese characteristic" of a self-controlled route aligns perfectly with the mainland's strict restrictions on virtual currency trading and its high emphasis on financial stability.
On this basis, the use of smart contracts further strengthens this compliance narrative. By coding regulatory rules, the issuance, circulation, and profit distribution of assets can be monitored automatically and audited independently, providing regulatory bodies with an unprecedented, near-real-time penetrating regulatory tool. Ant Group's proud privacy computing technology, such as the zero-knowledge proof (ZKP) and trusted execution environment (TEE) integrated into the "Morse" platform, adds a crucial element to this story. It aims to resolve the most challenging contradiction in cross-border data flow: how to meet regulatory requirements for data security and sovereignty (i.e., data not leaving the domain) while enabling necessary commercial data exchanges. By achieving data that is usable but not visible, Ant Chain demonstrates to regulators a technological path that protects national data security while participating in the global digital economy, which undoubtedly holds great appeal for a government that places data security at the core of its strategic position. This design of separating assets and transactions across different chains is a deliberate cut made to isolate risks and meet regulatory requirements in different jurisdictions, serving as the cornerstone of the entire compliance narrative.
Second, it tells a transformation story of "embracing innovation and connecting to the future" to traditional financial institutions.
For traditional financial institutions represented by Guotai Junan, the appeal of RWA lies in its provision of a clear path to a "secondary growth curve" to address the increasingly acute "pipeline anxiety." This architecture transforms traditionally illiquid and indivisible assets such as real estate and private equity into digital tokens that can be efficiently circulated globally through tokenization technology. This not only enhances the fair value of assets by eliminating illiquidity discounts but also breaks the geographical and investor restrictions of traditional financing, bringing lower-cost global capital.
At a deeper level, RWA provides traditional financial institutions with a powerful tool to optimize their balance sheets and achieve light asset operations, thereby potentially enhancing their capital return rates and overall market valuations. The combination of Ant Chain and Ethereum precisely meets financial institutions' dual demands for innovation and security: the former, as a consortium chain, ensures the robust operation of asset-side businesses with its high performance and strong stability, aligning with the stringent risk control requirements of financial operations; the latter, as a public chain, provides an outlet to a vast incremental market. Guotai Junan International's submission of its tokenized securities business plan for confirmation by the Hong Kong Securities and Futures Commission is the most compelling endorsement of this transformation story. It proves to the entire industry that traditional financial institutions can embrace distributed ledger technology and benefit from it without undermining their compliance foundations.
Finally, it tells a story of opportunity for global investors to "conveniently and securely invest in high-quality Chinese assets."
The success of this narrative directly depends on the ability to effectively connect the rich high-quality assets of mainland China with the abundant liquidity of global markets. Choosing Ethereum as the trading chain is the most pragmatic and critical step in this narrative. Ethereum is not only a technical node but also the strongest liquidity consensus in the global digital asset space, with its vast user base and mature DeFi ecosystem unmatched by any other platform.
Through a regulated cross-chain bridge, Chinese assets that have undergone compliance processing on Ant Chain can be safely "launched" in tokenized form into Ethereum, the "ocean of global liquidity," providing international investors with an unprecedented, regulated investment channel. As an international financial center, Hong Kong's gradually improving regulatory framework for virtual assets provides crucial institutional backing for the legitimacy and security of this bridge. From "penetrating review" to the "equally applicable" securities law for security tokens, Hong Kong's regulatory system offers clear expectations and protections for investors. Therefore, the combination of "Ant Chain + Ethereum" is not only a pragmatic response to the regulatory realities of mainland China but also the best practice for maximizing value by leveraging each other's ecological advantages. It attempts to construct a trust loop: investors trust Hong Kong's legal framework, Hong Kong's framework recognizes Guotai Junan's compliant operations, and Guotai Junan relies on Ant Chain's technology to ensure the authenticity and credibility of the underlying assets. The ultimate goal of this story is to allow global capital to share in the growth dividends of China's digital economy in a compliant and transparent environment.
II. The Fragile Reality Beneath the Ideal Blueprint
However, when this meticulously constructed narrative value system, designed to cater to multiple interests, is tested against the cold physical laws of distributed systems and the harsh realities of financial markets, every connection point of its ideal blueprint begins to reveal profound vulnerabilities. This architecture, in its pursuit of efficiency and compliance advantages, hides a series of technical debts and potential attack vectors that warrant caution. Every trade-off made between the "impossible triangle" constitutes a potential fracture point.
The "Ghost of Centralization" Haunting the Cross-Chain Bridge
As the key hub connecting the "compliance island" and the "liquidity ocean," we believe that Ant Chain's trusted cross-chain bridge is actually the weakest and most controversial link in the entire "compliance sandwich" structure. From a security audit perspective, although it claims to be based on a high-security heterogeneous protocol, its operational mechanism still harbors an indelible "ghost of centralization." The cross-chain bridge, as the most vulnerable part of the entire blockchain ecosystem, directly determines the life and death of this system.
This centralization risk first manifests in its verification mechanism. Although a committee-based Byzantine fault tolerance (Committee PTC) is employed to provide seemingly decentralized verification and endorsement, the security of this mechanism entirely depends on the degree of decentralization of the committee itself. If the number of committee members is limited, the composition is homogeneous, or their identities are easily identifiable, it will transform from a distributed security network into a centralized bottleneck that is easily susceptible to state-level attacks or internal collusion. Secondly, the locking and minting of cross-chain assets essentially rely on some form of private key management. If the underlying system still uses traditional multi-signature (multi-sig) schemes rather than more advanced distributed key technologies, then once a few key entities holding the private keys are breached or coerced, the consequences will be catastrophic. In the absence of sufficient transparency regarding the composition of committee members, election mechanisms, and anti-censorship designs, the trust foundation of this bridge remains built on the "trust assumption" of a few participants rather than on cryptographic "trustlessness" guarantees.
Moreover, reliance on external oracles and relayers introduces new attack vectors. These components are responsible for transmitting states and verifying transactions between different chains; if they fail to achieve sufficient decentralization or if their data sources have single points of failure, attackers can manipulate data or disrupt services to compromise the integrity of cross-chain transactions. Especially during extreme market fluctuations, delays or distortions from oracles may directly lead to a decoupling of on-chain tokens from the value of their underlying off-chain assets, thereby undermining the value foundation of RWA.
The Boundaries of Data Privacy and the Blind Spots of Risk
The second vulnerable aspect of this architecture lies in the data itself. Ant Chain's AntChain Inside solution attempts to address the authenticity of on-chain data from the source in the physical world through the combination of "blockchain + IoT." This can effectively ensure the credibility of operational data (such as power generation) on assets like new energy charging stations. However, this solution also has its inherent boundaries and risk blind spots.
Its core blind spot is that it addresses the authenticity of operational data but cannot guarantee the stability of the underlying asset value. The value of RWA tokens ultimately derives from the off-chain assets they represent, not merely from their operational data. For example, even if the power generation data of a photovoltaic power station is 100% authentic and credible, it cannot prevent the asset value of that power station from plummeting due to policy changes or technological iterations.
Existing solutions seem to inadequately demonstrate how on-chain tokens can effectively and timely convey and reflect such risks when significant risk events occur, such as defaults, damages, or bankruptcies of the underlying assets. This exposes a legal gap between on-chain technical solutions and off-chain legal enforcement—smart contracts may execute code perfectly, but they cannot enforce liquidation or disposal of assets in the real world.
At the same time, the advanced privacy computing technologies introduced to meet compliance needs are also a double-edged sword. Technologies like zero-knowledge proofs (ZKP) theoretically achieve "data usable but invisible," resolving the contradiction between data sovereignty and commercial applications, but this privacy comes at a cost. For global investors, excessive data encapsulation may weaken their ability to conduct due diligence on underlying assets, thereby reducing transparency and affecting the final pricing and liquidity of the assets. More importantly, these complex cryptographic computations can incur significant performance overhead, increasing system complexity and verification costs. Striking a balance between protecting privacy, meeting compliance, and ensuring transparency to attract investment will be an ongoing technical and business struggle.
The Hidden Costs of High Efficiency
Finally, the high performance and scalability touted by this architecture also come with hidden costs. Ant Group's Layer2 blockchain Jovay, designed specifically for institutional scenarios, claims to achieve extremely high transaction throughput (TPS) and very low user response times. However, this performance enhancement is often achieved at the expense of decentralization.
As a Layer 2 solution aimed at institutions, Jovay is likely a permissioned chain operated by a few trusted nodes, rather than a publicly open network. While this design meets the performance and controllability needs of financial institutions, it creates an inherent contradiction with the decentralized core philosophy of the Ethereum public chain it connects to. It reduces the system's resistance to censorship and transparency, forcing users to return some trust to the operators of Layer 2 while enjoying high performance.
Moreover, this layered architecture introduces new complexities and potential failure points. The data synchronization and security anchoring mechanisms between Layer 2 and the main chain are themselves potential sources of security risks. In the face of extreme market conditions such as flash crashes or large-scale redemptions, if the Ethereum mainnet becomes congested, delays in Layer 2 submitting settlements to the mainnet will directly affect the finality of on-chain RWA transactions and may even pose redemption risks due to insufficient liquidity in Layer 2. This reliance on the underlying public chain means that the resilience of the entire system is ultimately limited by the most congested bridge.
III. Real Challenges of the Architecture: Economic Sustainability and Ecological Isolation
The aforementioned trade-offs, compromises, and inherent vulnerabilities at the technical implementation level will inevitably translate into profound real-world challenges. These challenges transcend mere technical categories and point directly to two fundamental dilemmas of the model: economic sustainability and systemic isolation.
Luxury Goods for a Few Giants
Despite Ant Chain's strong technical support, such as the large-scale blockchain open architecture HOU, which can support transaction performance of hundreds of thousands of TPS, second-level transaction on-chain times, and PB-level data ledger storage and processing capabilities, its cross-chain data connection service ODATS utilizes Ant Blockchain's leading technology through the standardized UDAG full-stack cross-chain protocol, aiming to achieve trusted interoperability between homogeneous and heterogeneous chains. However, achieving such high performance and interoperability comes with extremely high technical and operational costs.
On top of these direct technical costs lies a heavier intangible burden—compliance costs and trust costs. Under Hong Kong's strict regulatory framework, obtaining and maintaining relevant licenses for virtual asset trading, establishing financial-grade anti-money laundering (AML) and know-your-customer (KYC) systems, and addressing complex cross-border data flow regulations require significant investments in legal, auditing, and human resources. At the same time, educating and promoting this emerging asset class, RWA, to mainstream markets, and building trust among investors, regulatory bodies, and partners in this complex "bridge" also requires continuous and substantial investment.
These high comprehensive costs make the "Two Chains and One Bridge" model, at this stage, more like a "luxury good" tailored for industry giants like Ant Group and Guotai Junan, rather than a widely replicable and scalable inclusive solution. Its commercial sustainability will heavily depend on whether it can handle a sufficiently large scale of high-value assets to dilute its enormous fixed costs.
The "Last Mile" of Interoperability
However, a more profound challenge than economic sustainability lies in the potential "ecological isolation" that this architecture may lead to. The "Two Chains and One Bridge" may struggle to cross the "last mile" of identity and credit recognition.
A compliant user on Ant Chain, who has undergone strict KYC checks and has a good credit record, finds their identity almost invalid in the decentralized finance (DeFi) world of Ethereum. Most DeFi protocols operate based on pseudonymous or anonymous addresses, and even with privacy protection technologies like zero-knowledge proofs, achieving cross-chain recognition of identity and credit while complying with KYC/AML requirements across different jurisdictions (such as mainland China, Hong Kong, and the Ethereum ecosystem) presents enormous technical and legal challenges. This means that while users on Ant Chain can transfer their asset "value certificates" to Ethereum, they cannot bring their accumulated "credit value" into broader DeFi application scenarios, such as participating in unsecured lending or more complex financial derivatives.
If the fundamental issue of trust transfer cannot be resolved, this bridge cannot become a truly bidirectional integration bridge, reverting to the one-way channel problem where "data and assets can flow out, but value and ecology cannot integrate." This will severely limit its potential to build an open and prosperous digital financial ecosystem, ultimately risking its evolution into a "data enclave" that, despite its advanced technology, remains isolated from the mainstream ecology in the global digital economy.
Chapter Four: Risk Assessment: Walking the Line Between Compliance and Innovation
The RWA collaboration promoted by Ant Group and Guotai Junan International involves all parties not merely addressing isolated technical or market challenges but rather existing within a systemic risk network.
In this network, the highest-level and most decisive variable is not known technical vulnerabilities or market fluctuations, but regulatory-defined risks—that is, how the RWA product and its cross-chain circulation behavior will ultimately be classified and adjudicated by regulatory bodies in key jurisdictions such as mainland China, Hong Kong, and the United States.
This definitional issue is the backbone of the entire structure, and its outcome will directly determine the legal foundation, technical compliance path, and market access qualifications of the model. The Hong Kong Securities and Futures Commission's principle of "same risk, same regulation," the mainland's strict prohibition of virtual currency trading and absolute insistence on data sovereignty, and the ongoing jurisdictional tug-of-war between the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are all complex and fraught with uncertainty.
The outcome of this multi-party "definition struggle" will directly determine the ultimate fate of the model—whether it opens a compliant highway connecting Chinese assets to global liquidity or leads to a one-way street into a regulatory dead end.
1. Structural Issues of Law and Jurisdiction
Every operational step of this collaborative model takes place within the existing complex and often conflicting legal and regulatory frameworks, exposing three inherent structural issues: the compliance of cross-border capital flows, the contagion risk of securities classification, and the "trilemma" of data governance. These are not obstacles that can be simply circumvented by technical solutions but are rooted in deep-seated contradictions between different jurisdictions.
How to Achieve a Closed Loop for Capital
The core design of this model is to create a seemingly efficient and compliant cross-border capital closed loop under the framework of licensed institutions in Hong Kong through the "Two Chains and One Bridge" architecture. However, at the end of this capital cycle lies a fragile link—how to legally and compliantly bring foreign capital into mainland entity accounts.
The fragility lies in its need to confront mainland China's strict foreign exchange control system, particularly the State Administration of Foreign Exchange's principle of "substance over form" in its penetrating review. Although Guotai Junan International can implement strict anti-money laundering (AML) and counter-terrorism financing (CTF) procedures on the Hong Kong side, the ultimate source of the funds—especially when traced back to global cryptocurrency investors—and the commercial substance of the funds entering the mainland are subject to the final interpretation of mainland regulatory authorities.
Any attempt to disguise the essence of virtual asset investment or cross-border financing through superficial trade settlements is extremely vulnerable in the face of penetrating reviews. Once the State Administration of Foreign Exchange determines that the nature of the fund flow is an attempt to circumvent existing foreign exchange controls rather than a legitimate settlement based on real trade backgrounds, the entire carefully designed technical and legal framework will immediately become ineffective. This potential qualitative risk means that the key to the capital closed loop is not in the hands of the technology providers or financial intermediaries but entirely depends on the final policy decisions of mainland regulatory authorities regarding this emerging phenomenon.
How to Define "Securities"
The second structural issue arises from the determination of the "securities" nature of the RWA product. This is a common issue for all RWA products: in Hong Kong, based on the principle of "same risk, same regulation," the structured product tokens issued by Guotai Junan International are almost certain to be classified as security tokens and fall under the regulatory framework of securities law.
However, due to the cross-border nature of this product, the real risk does not only come from Hong Kong's clear regulatory expectations but also from the potential "cross-border penetration" determinations by mainland regulators regarding this behavior.
If mainland regulatory authorities apply the "penetration principle" to classify the issuance activity in Hong Kong as an unauthorized illegal securities issuance aimed at the mainland market, then the role of Hong Kong as a "regulatory firewall" may be breached. This risk even possesses contagion potential, and its legal and commercial consequences will not be confined to Hong Kong but will quickly spread to the mainland parent companies of the participants.
For Guotai Junan, the core business, licenses, and market reputation of its mainland parent company may suffer severe impacts as a result. For Ant Group, although it strategically emphasizes its positioning as a technology provider, if its platform is deemed to have supported financial activities prohibited in mainland China, it may trigger a reevaluation and stricter restrictions on all its licensed financial businesses by regulatory authorities. The root of this risk lies in the fact that as long as participants have a significant commercial presence in mainland China, they cannot achieve complete legal and reputational separation from offshore innovative activities.
How to Break Through the "Trilemma" of Data
The deepest structural issue of this model lies in the "trilemma" faced by its data governance solution: it must simultaneously meet the absolute requirements of data sovereignty in mainland China, the legal protection of personal privacy in Hong Kong, and the market expectations of asset transparency from global investors. This constitutes an "impossible triangle."
To satisfy the core red line of the mainland's Data Security Law regarding "important data" not leaving the country, this model must adopt extremely cautious data localization and cross-border flow strategies. This means that global investors are almost impossible to obtain original, complete, and unprocessed data on the underlying assets. The "data usable but not visible" privacy computing technology employed by Ant Chain is designed as a technical compromise to address this dilemma. It attempts to use cryptographic tools to prove certain data's computational results or attributes without transferring ownership of the original data.
However, this technical solution itself poses challenges to the other two objectives. For global investors, "usable but not visible" largely equates to a loss of transparency. The inability to penetrate and independently verify all details of the underlying assets will significantly increase uncertainty in investment decisions and may lead investors to demand higher risk premiums, thereby affecting asset pricing and liquidity. Furthermore, even if privacy protection is technically achieved, whether the solution can fully comply with Hong Kong's strict personal information protection regulations and provide effective judicial evidence in the face of legal disputes remains uncertain.
2. Chain Reactions of Technology and Market
The structural issues exposed at the legal and jurisdictional levels do not merely remain at the abstract level of compliance theory. They inevitably trickle down and manifest in systemic risks of technological dependence and intrinsic contradictions in market positioning, permeating the actual operation of this collaborative model. The challenges of technology and market are not isolated variables but direct reflections and amplifications of fundamental contradictions at the legal level.
Externality Risks of the Underlying Public Chain
The most significant technical vulnerability of this model stems from its external dependence on the Ethereum public blockchain. Choosing to use the "Ant Chain-Ethereum" cross-chain architecture means that the project has outsourced a key link in realizing its value—namely, access to global liquidity and the final settlement of transactions—to a global network whose governance system, protocol evolution, and regulatory future are entirely outside the jurisdiction of China.
This dependency exposes the project to multiple uncontrollable risks. First, there are performance bottlenecks at the technical level; the congestion and high transaction fees of the Ethereum network are well-known. However, the deeper risk lies in its **governance and regulatory *externalities*. Any significant protocol upgrade or potential hard fork in the Ethereum community could unilaterally change the rules of the game, posing a "dimensionality reduction" threat to the RWA asset channels built upon it.
More threatening is the concentration of Ethereum's main nodes and developer community in the United States and Western countries, which inevitably exposes it to regulatory pressure from the U.S. If U.S. regulatory agencies (such as the SEC) define Ethereum's validating nodes as licensed financial intermediaries, or impose restrictions on interactions with certain addresses or protocols due to geopolitical factors, then this "outbound" channel designed for Chinese assets could have its lifeline severed in an instant. The decision to establish critical financial infrastructure on an external platform that cannot exert sovereign influence constitutes the largest technical and geopolitical exposure in the entire risk matrix.
Market Acceptance's "Identity Crisis"
And the Drift of Pricing Power
The externality risks ultimately coalesce at the market level, giving rise to a profound "identity crisis," which in turn triggers a dispute over the ownership of asset pricing power. From its inception, this RWA product has faced a fundamental positioning dilemma: Who is it designed for?
For high-net-worth individuals in mainland China, who are accustomed to traditional financial products, concepts like tokenization and blockchain remain unfamiliar and are accompanied by a high degree of distrust. The stability and regulatory certainty they seek are precisely what this cutting-edge model cannot fully provide. On the other end, global cryptocurrency investors adhere to the principles of decentralization, permissionlessness, and censorship resistance. An RWA product led by licensed financial institutions and subject to strict KYC on a permissioned chain appears to them as the antithesis of the decentralized spirit.
The inherent contradictions among these target demographics mean that the product may face a trust crisis in both worlds, making it difficult to establish a solid market foundation. This rupture in identity directly leads to a chaos in its price discovery mechanism. The pricing of an RWA product should theoretically be anchored by the intrinsic value and stable cash flows of its underlying Chinese assets. However, once its primary source of liquidity comes from overseas cryptocurrency markets, its price will inevitably be influenced by the speculative sentiment, algorithmic trading, and macro liquidity shocks of that market.
This will trigger a game around the pricing power of Chinese assets. Will the power to determine prices rest with the fundamentals of the assets, or will it drift to the externally driven cryptocurrency market? If the latter prevails, then tokenization not only fails to achieve value discovery but may expose a fundamentally stable real-world asset to the severe volatility of the digital world. This would not only disrupt China's own asset valuation system but fundamentally challenge China's strategic goal of securing global pricing dominance for its high-quality assets in the digital economy era.
In summary, these risks of technical dependence and market positioning dilemmas collectively constitute a fatal shortcoming of this collaborative model. They are not tactical issues that can be resolved through operational optimization or enhanced marketing but stem from an inherent structural flaw in attempting to "cross-border arbitrage" between two entirely different sovereign, legal, and trust systems.
Conclusion: A Machine Operating Precisely on a Fault Line
Through a deep dissection of the collaboration between Ant Group and Guotai Junan International, a clear picture emerges: this is not a simple application of technology but a complex machine meticulously calculated and constructed under multiple interests and constraints. It operates with a commercial alliance of "asymmetric interdependence" as its engine and a compromise-laden "Two Chains and One Bridge" as its transmission system, attempting to carve out an unprecedented path between the realities of sovereign regulation and the ideals of global liquidity.
However, the intricate design cannot mask its inherent vulnerabilities. Every key component of this machine—from the internal tensions of the alliance to the centralized specter of cross-chain technology, and the irreconcilable structural contradictions of legal and jurisdictional frameworks—resembles deep cracks. It has successfully started and set sail for the global stage, yet in doing so, it has placed itself on a precarious balance point formed by technology, market, and geopolitics.
Thus, we have answered the questions of "what it is" and "whether it can operate stably." The conclusion is: it is a finely crafted piece of art, but it may be placed in an earthquake-prone area.
However, the assessment of this experiment cannot merely rest on the success or failure of its own structure. Such a significant market action, regardless of its ultimate fate, has already cast a stone into the entire market, creating ripples. These ripples—their impact on industry paradigms, regulatory philosophies, and even geopolitical financial landscapes—are, we believe, perhaps more historically significant than the experiment itself.
We have dissected the internal structure of this machine and seen how its precise gears coexist with structural cracks. Now, we must shift our gaze away from the machine itself to observe how it will change the landscape as it enters the world, crushing old paths and delineating new boundaries for future generations.
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