From a VC perspective, let's discuss recent changes in the RWA sector.
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From a VC perspective, let's discuss recent changes in the RWA sector.
Have you sensed the shifting winds around RWA these past few months?
Navigating Web3 tides with focused insightsAfter discussing Eastern and Western first-principle perspectives on markets in the previous article, today I'll take advantage of YZi Labs' recent announcement of its investment in Plume Network—an RWA platform—to share my observations on recent shifts in the RWA space.
This topic can be broken down into four parts:
1. Does RWA truly have real-world applications, or product-market fit (PMF)?
2. Which RWA assets are suitable for blockchain, and which aren't?
3. What were past solutions, and what new approaches exist now?
4. Have you noticed the recent momentum behind RWA?
Let’s start with point 1: Does RWA really have use cases or PMF? (Here, we’ll exclude the stablecoin segment involving tokenized U.S. Treasuries—projects like Usual and MKR have already achieved PMF.) Take tokenized U.S. stocks as an example—the most hotly debated category on X (formerly Twitter). Many argue that bringing U.S. equities on-chain is redundant. Those who want to trade U.S. stocks already have access through traditional channels. Given that crypto assets are far more volatile than stocks, why would anyone bother trading equities on-chain?
I disagree. Personally, I believe there's genuine value in having U.S. stocks available on-chain.
1. From an accessibility standpoint—while it’s true that most A8/A9-level investors use platforms like Futu or FirstTrade to diversify across crypto, stocks, and gold, I believe the majority of retail participants within the crypto ecosystem don’t have U.S. brokerage accounts. On-chain stock trading could open up frictionless access for them.
From another angle, the market cap of stablecoins like USDT and USDC continues to grow—a parallel expansion route for dollar dominance beyond traditional finance. If crypto, powered by stablecoins + PayFi + smart wallets offering Alipay-like user experiences, ever achieves mass adoption, do you think the U.S. would oppose global participation in its equity markets? Would people worldwide prefer going through days of paperwork at banks and brokers to invest in their own sluggish domestic markets—or simply tap a button to invest in the "Magnificent Seven" of the world’s largest economy as easily as shopping online?
2. In terms of practical application, consider this scenario: You’re a regular crypto trader who just made $100,000 from a meme coin pump. Knowing Tesla’s stock has recently halved, you see a buying opportunity and want to convert your profits into Tesla shares.
Even if you have a brokerage account, you’d need to first OTC-swap your $100k into fiat, wire it via bank transfer to your broker (which may take 3–5 business days), then finally place the buy order. Back in 2017, before I got into Bitcoin, I used FirstTrade in Australia—just the SWIFT transfer took 4–5 days and cost nearly $100 in fees. And if later you wanted to sell Tesla to rebuy BTC or stablecoins? The entire process repeats. Now imagine having Tesla stock directly on-chain: converting your meme coin gains into Tesla instantly. The reduction in friction isn’t incremental—it’s a 10x to 100x improvement in user experience.
Now onto point 2: Which RWA assets are suitable for on-chain representation?
Again, assets like T-Bills—which have already proven viable—are outside this discussion. For other RWAs, suitability largely depends on the target user base.
For retail (To C), equities are clearly the best fit. Most individual investors haven’t interacted with private market investments. Even if you tokenize equity in a pre-IPO company, few retail users would understand it, let alone buy and hold it long-term. Similarly, Centrifuge’s offerings—like bridge loans in real estate or factoring of corporate receivables—are too niche for average consumers. The one financial instrument nearly all retail users understand? Public stocks. The primary To C use case should be enabling access for those previously locked out—creating a path from 0 to 1.
For institutional (To B) users, many more asset types can be tokenized. But unlike the 0-to-1 narrative for retail, To B is more about reducing friction—from 1 to 100. Private equity already circulates among institutions and high-net-worth individuals; bridge loan collateral on Centrifuge could likely secure bank financing off-chain too—but the process is slow and cumbersome. On-chain settlement, much like how PayFi improves upon SWIFT, dramatically enhances liquidity and speed.
This reminds me of a conversation last year with an RWA project whose parent company is a top-tier U.S. asset manager. They planned to issue tokens representing their clients’ private equity stakes (e.g., in Musk’s SpaceX) on their own trading platform. These tokens could freely trade until SpaceX went public, at which point final settlement would occur. For To B, both user scope (limited to institutions) and issuers are constrained. Unless you already manage significant equity in companies like SpaceX, merely being an STO or RWA platform won’t easily attract holders to tokenize their stakes—due to complex coordination, legal overhead, and trust barriers.
There are also hybrid models—applicable to both C and B. Examples include IP tokenization via Story Protocol, royalty streams from novels or films, or revenue-sharing tokens for games. These remain in early experimental stages, requiring trial and error. Influence tokenization: FTX’s FT failed, while Kaito found relative success. Time tokenization: Time.Fun briefly gained attention before fading. Progress here will be gradual.
Point 3: What were past solutions, and what are the current ones?
Using U.S. stocks again as an example—the earlier approach relied heavily on synthetic assets, led by projects like SNX, Terra’s Mirror, and GNS.
This path has largely been invalidated. All three platforms delisted their synthetic stock products. Two main reasons: First, user interest in “fake” assets synthetically backed by stablecoins or native tokens (like SNX) remains low. Compare the scale of BTC vs WBTC vs SNX’s SBTC—you’ll see the preference for trusted, fully-backed assets over synthetics. Honestly, even WBTC-style “mapped” assets feel more trustworthy than synthetics. Second, regulatory pressure from the SEC played a major role. While synthetics are technically not securities, the SEC doesn’t need a strong justification to investigate. So, to avoid trouble, these platforms quietly removed synthetic equities.
With Trump’s return and a new SEC chair, the regulatory environment has noticeably improved compared to the past two years. Two new approaches for tokenizing U.S. stocks are emerging.
The first follows the traditional regulated Broker-Dealer model. When a user buys a tokenized stock on-chain, it triggers a corresponding off-chain trade by a compliant broker—similar to how orders on Robinhood are executed in the market by Citadel. The benefit? You get exposure to “real” stocks—assets fully backed 1:1 by the broker, akin to WBTC for BTC. The downside? Trading hours follow stock market schedules—not 24/7 like crypto. You must also trust the broker or platform. Additionally, selling triggers tax events: U.S. persons may need to file tax forms, and non-U.S. users still require KYC—adding complexity.
The second model comes from Ondo Global Market. Reviewing their documentation, they initially considered the Broker-Dealer route but pivoted toward a stablecoin-like framework. They allow authorized third-party issuers to directly mint tokenized stocks—similar to how Tether issues USDT or Circle issues USDC. Benefits include greater flexibility and potential freedom from U.S. market trading hours, with final settlement handled periodically by the issuer. Downsides: likely restricted to non-U.S. users only. Also, could multiple issuers create incompatible versions of the same stock token (similar to different bridged USDC versions on new chains being non-interoperable)? Details aren’t clear yet—product launch isn’t until next year.
Platforms like Plume function more like a modular framework—integrating KYC/AML, data storage/execution, consensus, ZKTLS verification, etc.—enabling partner institutions to issue various tokenized RWA assets. This circles back to the earlier question of “which assets belong on-chain,” so I won’t repeat that discussion.
Finally, point 4: Have you sensed the recent shift in RWA momentum?
If you’ve been paying attention, the RWA wave over the past two months has been quite strong. Here are some developments I’ve observed:
1. As mentioned, Ondo plans to launch Ondo Global Market by end of year or early next year—an on-chain stock exchange. Ondo has also grown close to Trump’s WLFI, indicating future collaboration;
2. Sui is also aligning itself with WLFI;
3. Frax is actively embracing CeDeFi, recently launching frxUSD in partnership with BlackRock and Superstate;
4. Ethena’s newly launched product Converge emphasizes what they see as one of blockchain’s two most critical functions: storage and settlement for stablecoins and tokenized assets;
5. Aave announced a new token, Horizen, sparking community debate. Stani stepped in personally to clarify: “The Horizen initiative aims to fill Aave’s missing RWA business line, with potential to surpass Aave’s current revenue within five years.”
6. South Korea’s Financial Services Commission released a statement in February 2025 outlining phased approval for corporate entities to engage in virtual asset trading. From sources in Korea, I learned there’s potential for a revival of STO programs—the prior cycle’s term for RWA. Think about it: allowing “corporate trading of virtual assets” isn’t meant for companies to speculate on memes—it’s designed to enable corporates to tokenize real-world financial assets for inter-company circulation.
7. Today, YZi Labs officially announced its investment in Plume Network, a rising RWA platform.
This growing momentum is hard to ignore. My current view on the next big narrative after Circle’s rise is: PayFi + RWA + Web2.5-style consumer apps. As for AI + Crypto, it remains promising—but still in the “watch and learn” phase. After I finish the next piece on “Noteworthy Developments on Ethereum and Solana,” I’ll write a dedicated article on AI + Crypto as the fourth and final part of this series.
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