RWA (Real World Asset Tokenization) is innovatively reshaping traditional asset circulation models, attracting significant market attention. Currently, the issuance of RWA has a positive impact on company stock prices. Although the actual financing amount is not large, it greatly enhances corporate visibility and image. For example, on August 21, the semi-annual report for 2025 released by Longxin Group (300682.SZ), which successfully issued RWA earlier, showed that the company achieved a net profit attributable to the parent company of 13.6385 million yuan, a year-on-year increase of nearly 200%.
However, while the basic principle of RWA, which is to put real assets on the blockchain, seems straightforward, it is not as simple as many might think. Behind the "innovation dividend" lies numerous legal risks. Under a strict regulatory framework, seemingly trivial compliance flaws can cause RWA projects to stall or even lead to significant losses. Today, the Sa Jie team will share four major risk points that companies face during the RWA issuance process, along with the role lawyers can play in helping companies address these issues for your reference.
The underlying assets are the value anchor of RWA and the feasibility basis of the project. The selection of underlying assets is not arbitrary. Given that RWA is still in its infancy, it is best to choose assets that have high profitability, are easy to put on the blockchain, and have visualized returns.
In terms of compliance, risks are concentrated in three main areas: first, unclear ownership, meaning that the asset may have hidden co-owners, historical holding relationships, or may have been established as collateral or pledged, and there may even be undisclosed judicial seizure or freezing records; second, lack of compliance, as different types of underlying assets must meet specific regulatory requirements. For example, real estate must complete ownership registration, financial assets must be managed by corresponding licensed institutions, and some special industry assets must obtain specific administrative licenses. If these standards are not met, the asset itself is in a state of non-compliance and does not have "qualification for blockchain"; third, insufficient stability of rights, as some assets are significantly affected by external risks such as policy adjustments and industry regulatory changes. For instance, high-energy consumption and high-pollution assets may need to be rectified or incur additional operating costs due to tightened policies, which can lead to asset value fluctuations and affect the stability of on-chain asset returns.
Regarding underlying assets, lawyers can first provide advice on how to select suitable underlying assets for companies and represent them in communication with regulatory bodies such as the SFC (Securities and Futures Commission of Hong Kong) and the Hong Kong Monetary Authority to determine whether the relevant underlying assets are issuable.
Secondly, a comprehensive compliance check and risk assessment of the underlying assets can be conducted. By carrying out a thorough legal due diligence investigation, ownership certificates, ownership change records, collateral registration documents, judicial documents, and other materials can be reviewed to clarify whether there are any rights defects in the assets. It is also necessary to examine whether the assets have completed the necessary filing and approval processes, assisting companies in supplementing missing compliance documents. Finally, a special legal opinion on the compliance of the underlying assets can be issued. During the review process, lawyers can design response plans for identified risk points, such as requiring the original rights holder to release collateral or improve ownership proof, ensuring that the underlying assets are clean, compliant, and can be stably put on the blockchain.
Hong Kong's basic stance on RWA token regulation is "categorical regulation." The Hong Kong Securities and Futures Commission clearly categorizes RWA tokens into "security tokens" and "non-security tokens." The U.S. SEC primarily uses the Howey Test to determine whether crypto assets are classified as securities based on four dimensions: investment of money, common enterprise, reliance on the efforts of others, and reasonable expectation of profits, and adopts specific regulatory measures accordingly.
In Hong Kong, if a token is classified as a security token, it must be regulated under the Hong Kong Securities and Futures Ordinance. If the project is not advanced according to this classification, it may be considered an "illegal sale of securities." At the same time, security tokens must be issued and traded by licensed VASPs (Virtual Asset Service Providers) of the Hong Kong Securities and Futures Commission (such as holders of Type 1 and Type 7 licenses). If a company chooses an unqualified platform, the project may be halted.
At this level, lawyers can help companies qualify the legal attributes of the tokens and develop relevant compliance issuance plans based on the legal attributes of the tokens, while also assisting companies in connecting with licensed institutions in Hong Kong. First, based on the Hong Kong Securities and Futures Commission's "Token Classification Test," the legal qualification of RWA tokens can be determined to clarify whether they belong to security tokens. Secondly, if they are security tokens, lawyers can assist companies in connecting with licensed VASPs in Hong Kong and further review the platform's licensing qualifications to ensure that the issuance channel is compliant.
Putting assets on the blockchain is one of the core steps in implementing RWA projects, involving technical integration, rights mapping, and several legal points.
In this process, companies face risks such as insufficient compliance of the blockchain technology, where the chosen blockchain platform does not meet regulatory requirements (e.g., has not passed security assessments, lacks compliance certification, etc.), or necessary security measures (e.g., data encryption, access control) were not taken during the blockchain process, leading to data security risks such as leakage or tampering of on-chain asset information. Another risk is unclear asset rights mapping, where the relationship between the rights of underlying assets and the rights of on-chain tokens is not clearly defined. For example, the implementation methods for asset income distribution and disposal rights on-chain are not clearly defined, which may lead to subsequent disputes with investors. Additionally, there may be a disconnect between on-chain assets and offline assets, where a mechanism for synchronizing changes in offline assets with on-chain information has not been established. For instance, if underlying assets are mortgaged or transferred and the on-chain records are not updated in a timely manner, this could lead to discrepancies between the value of on-chain tokens and the actual asset status, misleading investors and potentially triggering inquiries from regulatory bodies.
At this stage, lawyers should first assist companies in reviewing the compliance of the blockchain technology plan, assessing the qualifications of the blockchain platform (e.g., whether it has regulatory-approved storage and security qualifications, etc.), and then help companies establish security systems such as data encryption, access management, and emergency response to ensure that the technical aspects comply with data security and network security regulations. Secondly, it is necessary to establish asset rights mapping rules, draft agreements that correspond the rights of underlying assets with on-chain tokens, and clarify the on-chain implementation methods for income distribution, asset disposal, and risk bearing to avoid disputes arising from ambiguous rights. Finally, a mechanism for synchronizing on-chain and offline assets should be designed, drafting operational specifications for asset change notifications and on-chain information updates, clarifying the responsibilities of entities such as companies, technology providers, and custodians, ensuring that on-chain asset information is in real-time alignment with the status of offline assets, and preventing the risk of information disconnection.
Information disclosure is a core aspect of RWA projects for protecting investor rights and avoiding regulatory risks. The disclosure obligations of companies are also a key focus of regulatory scrutiny. If a company has issues with insufficient, untruthful, or untimely disclosures, it will face multiple legal risks.
Taking the United States as an example, the disclosure obligations of companies mainly include three parts: first, business disclosure, where companies must explain significant matters that arise in their business, including current stages and future plans; second, risk disclosure, which includes technology and network security risks, business implementation risks, operational risks, securities-related risks, and other applicable legal and regulatory risks; third, other information disclosures, mainly involving disclosures related to the issued crypto assets, management personnel, financial statements, and terms related to holders that are closely linked to the issuance.
During the disclosure of the above information, there may be situations where the disclosed content is incomplete, untruthful, untimely, or non-compliant. For example, failing to fully disclose key content such as underlying asset information, asset blockchain plans, risk factors, and income distribution mechanisms, or making false statements about asset value, project income expectations, and risk levels, concealing important information such as asset defects and regulatory risks, as well as failing to update project progress, asset changes, and risk events according to regulatory requirements or agreed timelines, or not disclosing information through designated channels, or the format and content logic of disclosure documents not meeting regulatory standards. All of these may be deemed "information disclosure violations," and serious cases may face collective lawsuits from investors and regulatory penalties.
Lawyers play an extremely important role in the information disclosure process. First, lawyers will assist companies in clarifying the scope and standards of information disclosure, organizing the core content that needs to be disclosed based on regulatory requirements and project characteristics, ensuring that the disclosure content is complete.
Secondly, they will review the authenticity and accuracy of the disclosed information, verify whether the disclosed content is consistent with due diligence results and the actual situation of the project, remove false statements and exaggerated expressions, and supplement necessary risk disclosures.
At the same time, they will establish information disclosure processes, clarifying disclosure timelines, channels, and format requirements, and assist companies in drafting compliant disclosure documents.
Finally, based on the company's requirements, lawyers can assist in establishing a dynamic management mechanism for information disclosure, tracking project progress, reminding companies to timely disclose significant matters (such as asset changes, regulatory inquiries), and providing legal opinions for related disclosure documents to prevent companies from facing legal liabilities due to information disclosure violations.
For companies, the value of RWA lies in activating the potential of traditional assets through technological innovation, but this potential release must be built on a foundation of compliance. Flaws in underlying assets, deviations in token classification, oversights in the blockchain process, and insufficient information disclosure—any one of these risk points can lead to the loss of the company's initial investment.
The role of lawyers in this process is akin to being a "compliance partner" for companies from project initiation to operation—helping companies find a balance between innovation and regulation by identifying, responding to, and mitigating risks.
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Original Article: “RWA Pitfall Guide: Four Key Legal Risks Every Company Must Handle Cautiously…”
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