From South Korea, via Hong Kong, and reaching global markets: How is RWA working in Hong Kong?

Author: Tiger Research

Compiled by: TechFlow

TechFlow Reads: The market size of real-world asset tokenization skyrocketed 26 times in one year, but the real test lies in whether issuance, sales, and redemption can form a closed loop. This article breaks down the complete pathway for a Korean asset to reach overseas professional investors through a Hong Kong conduit. For those focused on compliance structures and cross-border distribution, this is a rare practical breakdown available today.

Key Takeaways

The real-world asset tokenization market is growing rapidly. The real question is: how are tokenized products issued, sold, and redeemed in practice?

In the model broken down here, an offshore entity issues products backed by underlying assets, while a licensed Hong Kong intermediary sells them to overseas professional investors. Investors buy the issuer's product, not the underlying asset itself.

Selling successfully does not guarantee repayment. The issuer must have enforceable rights over the asset cash flows, and funds must arrive on time to cover its obligations to investors.

The real test comes after the first issuance: can the same architecture support another product? A sustainable market requires a stable supply of assets and investors willing to repurchase.

1. The RWA Tokenization Market Has Grown Significantly; What Comes Next Is Critical

According to data from RWA.xyz, the market size for real-world asset tokenization grew from approximately $1.5 billion in August 2023 to around $38.86 billion on September 13, 2026, representing an increase of roughly 26 times. An increasing variety of assets are being tokenized, and governments worldwide are establishing rules for issuance and sales.

Growth is already evident. The pressing question now is: how to transform an asset into a product that investors can actually buy and ultimately get their money back from.

2. Where Should Tokenization Occur?

Each jurisdiction is issuing rules for tokenized assets, but requirements and pacing vary. Therefore, where a product is issued directly impacts how quickly it can reach the market.

Hong Kong has a mature securities regulatory framework, channels to international investors, and experience in issuing tokenized bonds (including government bonds). Its licensing system and investor protection requirements provide issuers and intermediaries with a framework to bring products to market.

Hong Kong has established rules for key aspects of tokenization, ranging from SFC licensing and virtual asset service provider regulation to technical safeguards. This clarity helps institutions plan issuance and gives institutional investors a basis for assessing their level of protection. This is also one reason Hong Kong is gaining attention as a hub for RWA issuance and distribution.

So, how do assets from another country reach overseas investors via Hong Kong? Using Korean assets as an example, we break down the entire process.

3. How the Korea–Hong Kong Architecture Operates

The architecture diagram is divided into left and right sides. The left side represents South Korea, where the underlying assets originate. The right side represents Hong Kong and the British Virgin Islands, where products are issued and sold.

Black arrows denote the product structure.

Korean securities firm: Provides the purchasing channel for underlying assets, such as listed equities, fund shares, and notes.

BVI Special Purpose Company: Purchases and holds these assets through the brokerage account of the Korean securities firm's Hong Kong entity, then issues notes backed by these assets.

Tokenization platform: Creates tokens representing the notes issued by the special purpose company and records issuance and allocation status.

Distributor: Sells the product to overseas professional investors through licensed intermediaries and compliant trading venues.

Orange arrows represent the flow of subscription funds.

Overseas professional investors subscribe using fiat currency or stablecoins. Funds reach the special purpose company through the intermediary. If subscribed with stablecoins, the special purpose company converts them into fiat currency via a centralized exchange. The funds are then transferred through the Hong Kong entity to the Korean securities firm, which completes the purchase of the underlying assets.

Hong Kong fintech company Finloop calls this model the "dual-engine model." One end handles asset supply, while the other manages issuance and distribution. Three points are most critical.

The source of assets is replaceable. Securities firms from other countries and their Hong Kong entities can take the place of Korean institutions. This allows Hong Kong to serve as a distribution channel for assets-backed products from multiple markets.

The special purpose company sits at the center. It receives subscription funds, purchases or holds assets, and issues notes. Investors assert rights against the special purpose company based on product terms, making the SPV's rights over the assets and its ability to pass through returns crucial.

The special purpose company bridges on-chain payments with traditional finance. Investors can subscribe using stablecoins and hold tokenized notes, while underlying assets are purchased and held through brokerages and custodial arrangements.

This architecture only functions when every link holds. It requires suitable underlying assets, a robust issuance structure, and a compliant path to investors.

3.1. How to Select Underlying Assets

Before issuing the product, the special purpose company must have clear legal rights over the funds generated by the underlying assets.

For government bonds or fund shares, the question may be whether the SPV can directly purchase and hold them. For export receivables or music royalties, the situation is more complex. The right to collect future payments may need to be assigned to the SPV, or the asset holder must have a binding obligation to collect payments and remit them to the SPV.

In either case, contracts must clearly specify who is entitled to receive cash, who is responsible for collection, and how funds reach the SPV. Without a clear cash flow path, assets cannot stably support redemption to investors.

3.2. What Exactly Does the Offshore Issuer Create?

In this model, the core of tokenization rests with the special purpose company. Even with Korean underlying assets selected, an independent entity is still needed to issue tokens and distribute returns to overseas investors.

Finloop's dual-engine model entrusts this role to a special purpose company registered in the British Virgin Islands. This company serves as the bridge between Korean asset holders and overseas investors.

The special purpose company issues tokenized notes or securities backed by rights to Korean asset returns. Thus, overseas investors are buying financial products issued by the SPV, not the Korean government bonds or export receivables themselves. In accordance with the product terms, the SPV pays returns to investors and redeems principal at maturity.

To ensure this architecture operates reliably, the timing of cash inflows to the special purpose company must align with its payment obligations to investors. The issuer must first determine the cash collection timeline for each underlying asset: interest and principal for government bonds, dividends and redemption payments for funds, or settlement proceeds for export receivables and royalties.

If investors require repayment before the SPV receives funds, the product may face liquidity shortages or delayed repayments.

Establishing an SPV offshore does not automatically grant it access to cash generated from Korean assets. Contracts must clarify the SPV's legal rights to the underlying assets, who collects the cash, and who is responsible for remitting funds to the SPV. Meanwhile, the tokenization platform transparently records issuance volume, token holdings, and destruction quantities.

The core task during the offshore issuance phase is to ensure that the cash the SPV actually receives is sufficient and arrives promptly to fulfill the payment commitments made to investors.

3.3. How Wide Can Circulation Be After Product Sales in Hong Kong?

Creating a product through an offshore SPV is only the first step. To sell to overseas investors, the issuer also needs a financial institution responsible for distribution. Finloop proposes using a licensed Hong Kong intermediary that can review the product under Hong Kong securities rules, offer it to professional investors, and reach investors beyond Hong Kong.

The intermediary will review the terms and risks of the SPV product and verify that each investor is eligible to purchase. If issuance is restricted to professional investors, token transfers must remain post-issuance. Therefore, product terms restrict transfers to buyers whose eligibility has been verified. This is Finloop's vision for its private placement product structure; this restriction does not apply to every type of tokenized security in Hong Kong.

Finloop also proposes that products initially sold in Hong Kong could be offered through intermediaries and trading venues in other regions. However, initial sales in Hong Kong do not automatically permit sales or trading elsewhere. Rules for each market require separate evaluation. Investors hoping to sell before maturity need willing buyers and methods for price determination. Using the product as collateral would require institutions willing to accept it.

In this structure, Hong Kong provides a channel for initial sales and investor eligibility verification. Sales, trading, and use as collateral in other regions require separate arrangements.

4. Three Key Risks That Could Disrupt Payments from Korean Assets to Investors

A tokenized product may sell successfully in Hong Kong yet still fail to pay investors as promised. Cash generated from underlying assets must flow through the offshore issuance vehicle (SPV) to reach investors. The following three major risks could disrupt this cash flow.

Unclear rights and collection arrangements: For assets like export receivables, contracts must specify where the buyer makes payment and who is entitled to collect it. Unless collection obligations and settlement processes are legally binding, proceeds from the assets may never reach the SPV.

Timing mismatch between cash collection and repayment: If investors require repayment before the underlying assets settle, the SPV may face liquidity shortages and delay payments. When KRW-denominated assets back USD-denominated products, exchange rate fluctuations and conversion costs can also erode returns.

Cross-border transfer and tax bottlenecks: Authorization for a Hong Kong intermediary to sell the product does not resolve how funds are transferred from Korean asset holders to the offshore SPV, nor how payments are made to overseas investors. These transfer and tax procedures must be practically feasible.

This model ultimately hinges on whether cash generated from Korean assets can reach overseas investors in full and on time through the SPV, as contractually committed.

5. The Second Issuance Matters More Than the First

Selling a product backed by Korean assets once in Hong Kong is merely the starting point. The first issuance takes considerable time: all parties need to review assets, finalize contracts, and decide on sales methodology.

If launching each new product requires repeating this work from scratch, scaling the business will be difficult. Starting with the second issuance, they need to be able to reuse the structure established for the first transaction.

USD-settled export receivables offer a way to test whether the model works. Issuers and intermediaries can apply the debtor assessment standards and product disclosure methodologies established for the first transaction to subsequent receivables, thereby reducing the design workload for each product. However, using the same standards does not mean every receivable carries the same risk.

To determine whether this model can sustain a continuous market, progress should be tracked in three areas:

Does the time required for asset reviews decrease with each issuance?

Do existing investors return to purchase new products?

Do asset holders have reasons to continuously supply assets?

As experience with export receivables grows, the model can expand to other Korean assets. Its success depends not on a single completed issuance. Asset holders must continuously supply appropriate assets, investors must be willing to reinvest, and intermediaries must see the value in bringing new products to market.