1. Introduction: Can RWA Become the Next Market Milestone?

With the launch of the Bitcoin spot ETF, the crypto sector is entering a new turning point. The policy direction during the Trump administration laid the foundation for this field, and now, traditional financial giants like BlackRock are further driving the development of the RWA (Real World Assets) sector. More and more financial institutions are exploring how to use blockchain technology to enable on-chain trading and management of traditional assets like stocks and bonds, and this trend is reshaping the financial market landscape.

Recent initiatives such as Ondo Finance’s Ondo Global Markets and Ondo Chain mark the steady mainstreaming of the RWA sector. This transformation is also sparking a new round of competition on Wall Street, quietly changing the rules of the game between the crypto market and traditional finance.

2. Differentiation and Commonality Among RWA Track Projects

Image source: Ondo official website

2.1 Ondo Finance — A Representative Project Supported by BlackRock

Ondo Finance has been very active recently. On February 5th, they launched the Ondo Global Markets platform, mainly providing blockchain integration services for stocks, bonds, and ETFs. Shortly after, Ondo Finance announced their new project, a Layer 1 public chain called Ondo Chain, which aims to build a more robust financial infrastructure and promote the tokenization of RWA.

Ondo Chain serves as the infrastructure for Ondo Global Markets (Ondo GM), focusing on the combination of RWA tokenization and blockchain technology. Ondo Chain enables global investors to access US-listed securities (such as stocks, bonds, ETFs) via blockchain, breaking geographic restrictions and offering 24/7 uninterrupted trading services.

Ondo Chain has launched a solution that integrates institutional-grade compliance into the public chain architecture, using innovative methods such as permissioned validator nodes and native cross-chain protocols to address the current pain points of RWA on-chain. By using traditional financial assets as collateral, Ondo Chain ensures network security and interoperates with traditional clearing systems, further bridging on-chain and off-chain liquidity.

2.2 Ondo Finance’s Competitiveness and Limitations in the Same Track

This competitiveness is related to its unique architectural design and powerful institutional resources, but also reflects the power and interest struggles between blockchain and traditional finance.

Competitiveness

By collaborating with top financial institutions like BlackRock, they have built a blockchain financial infrastructure capable of supporting the large-scale tokenization of real-world assets, ensuring a balance between compliance and decentralization.

• Tokenization and Free Transfer of RWA: By pairing assets like stocks, bonds, and ETFs with tokens 1:1, investors can freely transfer these tokenized assets outside the U.S. and integrate with DeFi, engaging in lending, yield farming, and other financial activities.
• Combination of Openness and Compliance: Ondo Chain blends the openness of public blockchains with the compliance of permissioned chains. Validators are reviewed for compliance, while any developer or user can issue tokens and develop applications on the chain, ensuring innovation and activity.
• Institutional Participation and Ecosystem Building: Ondo Chain’s advisory team includes financial institutions such as Franklin Templeton, Wellington Management, and WisdomTree, which promotes institutional-grade applications in both TradFi and DeFi sectors.
• Oracle Mechanism and Data Security: The built-in oracle system ensures the accuracy and timeliness of on-chain data, reducing the risk of data manipulation. This design enhances the credibility of key data like asset prices, interest rates, and market indices.
• Cross-Chain Functionality and Security: Through Ondo Bridge, asset transfers between chains are made possible, ensuring security for decentralized verification networks (DVN) and supporting institutional asset and liquidity management for large-scale transactions.

Limitations

Ondo’s heavy reliance on institutions limits the participation of retail users and decentralized communities, with centralized elements still playing a major role, and most of the power remaining in the hands of a few institutions.

• Heavy Dependence on Institutions, Lack of Community Drive: Ondo Finance’s architecture heavily relies on the participation of traditional financial institutions, with the credibility and liquidity of tokenized assets primarily backed by these institutions. While this ensures asset quality and compliance, it also brings a core issue: its ecosystem is primarily designed for institutions, with limited involvement from retail users. Compared to fully decentralized RWA projects, Ondo feels more like an extension of the traditional financial world, with tokenized asset circulation and transactions predominantly occurring between institutions, diminishing the influence of individual investors and decentralized communities.
• Centralized Power Distribution under Institutional Control: Despite Ondo Chain retaining some openness, its validators are permissioned, meaning core power is concentrated in the hands of a few institutions. This contrasts sharply with fully decentralized RWA projects, where any participant can become a key node in the network. Ondo’s design, to some extent, reflects the power structure of traditional finance, where most control remains in the hands of a few large financial institutions. This centralized control may lead to conflicts in future governance and resource distribution, particularly when token holders’ interests clash with those of institutional players.
• Innovation Speed May Be Limited by Compliance and Traditional Institutions: Since Ondo Finance’s core pillars are compliance and institutional involvement, this could limit its pace of innovation. Compared to fully decentralized projects, Ondo may face complex compliance processes and institutional approvals when introducing new financial products or technologies. This could make it slower to react in the rapidly evolving crypto space, especially when competing with more agile DeFi projects, where the compliance and institutional-oriented structure may become a burden.

3. Real-World Obstacles Faced by RWA Projects

Although blockchain technology provides the technical foundation for tokenizing real-world assets (RWA), current public blockchains still struggle to meet the demands of traditional finance in areas like high-frequency trading and real-time settlement. At the same time, fragmentation of the cross-chain ecosystem and security issues have further complicated the deployment of RWAs by institutions. The application of RWAs in decentralized finance (DeFi) faces several real-world obstacles:

First, the trust and consistency of assets and on-chain data is a core challenge for tokenizing RWAs. The key to successful tokenization of RWAs lies in ensuring the consistency between real-world assets and on-chain data. For example, once real estate is tokenized, the ownership and value recorded on-chain must match exactly with the legal documents and asset status in the real world. However, this involves two critical issues: the authenticity of on-chain data, i.e., how to ensure that the on-chain data is trustworthy and tamper-proof; and the real-time synchronization of data, i.e., how to ensure that on-chain information can reflect changes in the real-world asset’s status. Solving these problems often requires the introduction of trusted third parties or authoritative bodies (such as governments or certification agencies), but this conflicts with the decentralized nature of blockchain, and trust issues remain a core challenge for RWA tokenization.

Network security is also a major concern. The security of a blockchain network typically relies on the economic incentives of native tokens, but the volatility of RWAs is generally lower than that of cryptocurrencies, especially during market downturns, which may lead to a decrease in network security. Additionally, the complexity of RWAs demands higher security standards, which existing blockchain systems may not fully meet.

Compatibility issues between RWAs and the DeFi architecture are also unresolved. DeFi was originally designed to serve crypto-native assets rather than traditional securities. Tokenizing RWAs involves complex financial behaviors (such as stock splits and dividend distribution) that are difficult to manage effectively within the current DeFi system. Of particular concern is the oracle system, which struggles with the real-time and security requirements needed for handling large-scale traditional financial data.

The challenges related to cross-chain liquidity fragmentation and security further complicate RWA tokenization. Cross-chain issuance of RWAs leads to fragmented liquidity, increasing the complexity of asset management. While cross-chain bridge mechanisms offer solutions, they also introduce new security risks, such as double-spending attacks and protocol vulnerabilities.

Institutional regulation and compliance are the largest non-technical barriers to RWA tokenization. Many regulated financial institutions cannot engage in transactions on public blockchains due to reasons such as anonymity, lack of a compliance framework, and differences in global regulatory standards. Compliance requirements like KYC (Know Your Customer) and anti-money laundering further complicate the process of tokenizing RWAs, and in some cases, even restrict the flow of capital.

Market liquidity and institutional participation limitations also restrict the development of RWAs. Currently, the overall market value of RWAs is mainly concentrated in low-risk assets (such as government bonds and funds), while tokenization of larger asset classes like stocks and real estate is progressing slowly. The liquidity of RWAs still depends on crypto-native protocols, and the overall market remains in its early development stages.

Finally, the conflict between the trust mechanisms of DeFi and traditional finance is another issue that must be addressed for the tokenization of RWAs. DeFi relies on code and cryptography to build trust, while traditional finance relies on legal contracts and centralized institutions. This difference in trust mechanisms has made traditional financial institutions cautious about blockchain technology, especially regarding custody, risk control, and other critical aspects.

While blockchain technology provides the possibility for RWA tokenization, several challenges remain in its practical application. From data consistency, network security, and compatibility to liquidity, compliance, and the alignment of technical and economic models, as well as the conflict in trust mechanisms, these issues must be gradually resolved in the course of development to enable the widespread adoption of RWAs in DeFi.

4. If RWA Succeeds, Ondo Chain May Become the Redistribution of Power Between the New and Old Financial Systems of “Wall Street’s Game”

Image Source: Occupy Wall Street

This chapter analyzes the core Wall Street interests behind Ondo Chain, and I believe it is necessary to look beyond blockchain and real-world asset tokenization phenomena. The focus should be on the logic of financial operations and the driving forces behind the competition for interests. As mentioned earlier, the most significant non-technical challenge for RWAs is achieving compliance, and behind compliance lies the need for strong centralized authority organizations’ recognition.

BlackRock, the world’s largest asset management firm, has participated in the investment and construction of RWA after pushing forward Bitcoin ETFs. Essentially, this is a first-mover attempt to secure a redistribution of power between the traditional financial system and the emerging decentralized technologies based on blockchain. This struggle is not just a competition of technological revolution or financial innovation, but a contest for the global financial rule-making power, capital control, and the future wealth distribution mechanism.

Although blockchain technology brings the hope of decentralization, in the face of highly concentrated capital and power, Wall Street is trying to bring this technological revolution under its control by using new forms of market manipulation and asset securitization, thereby maintaining its dominant position in the global financial system.

4.1 Global Financial System Power Rebalancing

Wall Street has long dominated the global financial system, controlling key nodes in the movement of capital, asset management, and financial services. Traditional financial institutions have achieved control over global capital by monopolizing financial infrastructure (such as banks, stock exchanges, and clearing systems). However, the rise of blockchain technology has disrupted this situation:

Decentralized Finance (DeFi) weakens the long-standing control Wall Street has held over traditional financial infrastructure by decentralizing intermediary roles. DeFi allows key functions such as capital flow and asset management to operate on decentralized platforms, enabling users to manage assets, lend, trade, etc., directly on the blockchain without intermediaries like banks or investment banks. But this represents a massive threat to Wall Street, as this shift of power means that Wall Street could lose its dominant role in the global financial system.

4.2 Asset Tokenization: Who Can Control the New Financial Infrastructure?

The tokenization of RWAs promoted by platforms like Ondo Chain, while aiming to enhance asset liquidity, hides a deeper struggle over control of the new financial infrastructure. Blockchain networks are emerging as the next-generation candidates for global financial infrastructure. Whoever can dominate this infrastructure will have a dominant position in linking real-world assets to the blockchain in the future.

Wall Street’s interests are reflected in its intent to control these decentralized networks. Instead of directly rejecting blockchain, they may invest in, acquire, or cooperate with these emerging blockchain platforms, bringing about a re-concentration of capital. Although blockchain is designed to be decentralized, substantial capital and liquidity are still likely to be concentrated in the hands of a few large financial institutions or hedge funds. This will eventually lead to key resources (such as liquidity and protocol governance) on blockchain platforms being controlled by a few players, causing the decentralized asset market to rely on large centralized powers to drive it.

4.3 Regulatory Arbitrage and Extrajudicial Power

According to a report by Cointelegraph on February 6, JPMorgan’s latest institutional trader survey shows that 29% of institutional traders are already trading or plan to trade cryptocurrencies this year, an increase of 7 percentage points compared to last year.

Arbitrage has long been a trading strategy expertly utilized by Wall Street elites. Facing the uncertain regulatory environment surrounding the decentralized nature of blockchain, Wall Street institutions may take advantage of the regulatory differences between countries and regions by establishing operational entities in jurisdictions with looser regulations, thus avoiding stricter oversight. For example:

In projects like Ondo Chain, some RWAs’ tokenization may bypass traditional securities regulations or financial market laws. By manipulating asset flow and capital structure in different regulatory environments, Wall Street can further reinforce its control over emerging markets. It is possible that such “gray area” operations are one of Wall Street’s strategies to gain higher returns through blockchain.

4.4 Market Liquidity and Price Manipulation: The Hidden Struggle for Dominance

Liquidity is at the core of market manipulation, allowing for subtle price manipulation even in seemingly “decentralized” markets. Ondo Chain’s tokenization of RWAs offers new investment opportunities for global investors, but its liquidity and trading depth are still highly dependent on large capital inflows. Liquidity control will continue to be a central weapon for Wall Street players. Even in a decentralized blockchain environment, institutions with more capital, trading technology, and market insight can still dominate market trends.

4.5 RWA Hedge Funds: Reshaping the Asset Securitization Game

Historically, Wall Street has achieved massive profits through asset securitization (such as subprime mortgage-backed securities). The tokenization of RWAs on blockchain provides a new opportunity for the next generation of asset securitization. For example, Wall Street can issue new financial products by tokenizing asset portfolios, attracting global investors. These products can be based on RWAs, such as real estate investment trust (REIT) tokens or corporate bond tokens, offering more options to the market.

At the same time, the derivatives market could also be expanded through blockchain. Wall Street could design complex financial derivatives (such as options, futures, and swaps), once again repackaging risks and selling them to global investors. The game of risk transfer and profit generation will continue to unfold in the era of RWA tokenization.

5. The Path to Advancement in the Crypto World: The Industry Is Forced to Hit the Accelerator Button

We analyze three factors — Bitcoin-led crypto asset ETFs, events related to Donald Trump, and the future of RWA — that are accelerating the development of the industry in different ways. The direct impact of these factors is an increase in the difficulty of industry profitability. These factors influence the crypto industry through complex market dynamics, regulatory pressures, and the gradual infiltration of the traditional financial ecosystem.

5.1 The Maturation of the Market Due to the Introduction of ETFs

The launch of ETFs marks the gradual acceptance of the crypto industry by mainstream financial institutions and investors. However, this may not necessarily be beneficial for the overall growth of the crypto industry, similar to how gold’s introduction through ETFs resulted in a prolonged period of price growth.

• Reduced Market Liquidity and Volatility:
  The introduction of ETFs means that crypto assets are entering the traditional financial markets, attracting institutional investors whose investment styles are more conservative. At the same time, the increase in financial derivatives also leads to reduced volatility in crypto assets. This reduction in volatility means fewer opportunities for high-frequency trading and arbitrage, which are crucial for retail traders and crypto hedge funds, thus decreasing the profit potential.

• Concentration of Capital Flow:
  ETFs cause crypto market capital to flow more concentrically, primarily into large assets like Bitcoin. This could lead to liquidity depletion and price declines for smaller crypto assets, diminishing development opportunities for smaller projects. As a result, the profit opportunities for emerging projects decrease, and the industry’s overall profitability becomes harder to achieve.

• Increased Competition from Traditional Finance:
  The introduction of ETFs means that crypto assets are being institutionalized as traditional financial products, bringing about greater market transparency and competition. This intensifies competition between the crypto industry and traditional financial instruments such as stocks, bonds, and commodities, diverting funds and investor attention.

5.2 The Market Uncertainty Caused by the Trump Effect

Actions by political figures like Trump can influence the crypto market through their policies, regulatory stances, and international relations, increasing the uncertainty and complexity of the industry:

• Increased Policy Uncertainty:
  Trump’s policy stance and leadership style are often filled with uncertainty, particularly when it comes to economic and financial regulations. During his administration, any regulatory policies (such as cracking down on or relaxing regulations for digital currencies) could directly impact market sentiment and increase instability in the crypto market. This uncertainty creates greater policy risk for the crypto industry, affecting the stability of long-term profitability.

• Stricter Anti-Money Laundering and KYC Requirements:
  As politicians like Trump may implement stricter anti-money laundering (AML) and know-your-customer (KYC) regulations, exchanges and crypto projects will face higher compliance costs. This will significantly raise operational costs and compress profit margins, especially for crypto businesses lacking compliance experience.

• The “TRUMP” Meme Coin Creating a “Siphon Effect” in the Market:
  High volatility tends to attract speculative capital, and “TRUMP” has a natural marketing effect that can draw a large amount of money into this single asset. In a market with limited liquidity and capital, this concentration effect can lead to a “siphon effect” where funds flood into this meme coin. However, as the price falls later, liquidity may be hard to redistribute, potentially hurting the overall market balance.

5.3 The Penetration of Traditional Finance with the Development of RWA

The rise of RWA (Real-World Asset) tokenization in the crypto space represents the gradual integration of crypto markets with traditional financial assets, but this integration also increases the difficulty of achieving profitability:

• Introduction of Traditional Finance’s Cost Structures and Competition:
  Once RWA projects are fully tokenized and scaled on the blockchain, traditional financial assets like bonds, stocks, and real estate will compete within the same ecosystem as crypto assets. The maturity, cost efficiency, and low-risk characteristics of traditional financial products will attract institutional investors, meaning that crypto assets must compete with these well-established financial products.

• Conflict Between Decentralization and Compliance:
  The tokenization of RWAs involves complex regulatory requirements, particularly in terms of compliance and legal responsibilities. Compared to the current decentralized crypto assets, the introduction of RWAs may push many crypto projects towards compliance, causing some projects that fail to meet regulatory standards to exit the market, thereby reducing profit opportunities.

• Capital Flowing Toward Low-Risk Assets:
  The tokenization of real-world assets like government bonds and corporate bonds will attract conservative investors into the blockchain market. As more funds flow into low-risk RWAs, high-risk, high-return projects in the crypto market (such as DeFi protocols or emerging tokens) may lose some of their financial backing. This shift of capital toward lower-risk assets will further compress the profit margins of the crypto market.

6. Conclusion: Is RWA a Narrative Bubble or a Market Gamechanger?

Based on the points discussed above, my personal opinion is that the rise of ETFs, the Trump effect, and the advent of RWA will each increase the difficulty of profitability in the crypto industry through different channels and at different intensities. The market maturation and institutionalization brought by ETFs reduce market volatility and profit opportunities. Trump’s policies could increase market uncertainty and bring additional policy risks. Meanwhile, the introduction of RWAs means that the crypto market will face more competition from traditional finance. As the crypto market becomes more “conventional,” it faces more bottlenecks, and the challenges ahead will be greater.

Thus, whether RWA is a “narrative bubble” or a “market gamechanger” depends on its technological foundation, market demand, and the maturity of its implementation path. Looking at its early-stage developments and challenges, RWA has some characteristics of a “narrative bubble,” but with the involvement of well-known institutions, it has the potential to become a new catalyst for change in the crypto market.

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