Isn't USDC what we encounter most in the crypto world every day? Various trading pairs on Binance are pegged to USDC. Do you know the process of issuing USDC on-chain?

1. 'Cash RWA' - USDC

Through the simple diagram above, we can understand the issuance process of USDC:

  1. Users (usually institutions) deposit dollars into Circle's designated trust bank account.

  2. Circle verifies whether the dollars come from compliant users (KYC/AML). Once approved, Circle accounts for these dollars as reserves (stored in the custodial bank account).

  3. Circle calls the ERC-20 USDC smart contract, executing the mint() function using the issuer's authority address to generate an equivalent amount of USDC on Ethereum or other compatible chains. This step is public on-chain and can be seen on the Ethereum block explorer.

  4. USDC is distributed to users, with Circle transferring the newly minted USDC to the wallet address provided by the user. At this point, the user owns USDC equivalent to their dollars, which can be used for any on-chain purpose.

  5. Reversible process: Redemption of USDC to dollars: Users return USDC to Circle's wallet, and Circle burns these USDC, transferring an equivalent amount of dollars from reserves to the user's bank account.

We briefly mentioned the process above. Did you notice that this method of issuance is actually bringing real off-chain assets onto the blockchain? How does Circle comply and legally complete this?

1. Off-chain asset compliance

I believe this is the most important point: off-chain assets must be compliant.

Circle is a legally regulated financial company in the United States, holding licenses in multiple states and collaborating with regulated banks. Legally, USDC only belongs to the trust assets, meaning even if Circle encounters issues later, the assets still belong to the users.


2. On-chain issuance transparency

Using open-source smart contracts on the blockchain, on-chain mint/burn is verifiable. Each mint or burn is executed by calling the ERC20 contract through a designated Circle wallet, allowing users to see relevant information on Etherscan or other block explorers. Circle commissions Grant Thornton (a global accounting firm) monthly to audit and publish its reserve status, such as the distribution of reserve assets (cash + short-term government bonds) and whether it is 1:1 pegged to the current total supply of USDC.

3. Bank trust + audit disclosure + brand endorsement to gain user trust

Circle's dollar reserves are held at multiple Tier 1 banks (such as BNY Mellon, Silvergate), rather than keeping cash in its own accounts. Users need not 'trust Circle' but rather trust the audit results, jointly endorsed by Coinbase and Circle.


USDC has solved these three major challenges, gaining more trust from users and currently being the most successful RWA.

2. What is RWA?

From the previous issuance method of USDC, can we derive the definition of RWA?

RWA, short for Real World Assets, refers to 'real-world assets'. Simply put, RWA digitizes real-world assets—such as government bonds, gold, real estate, and corporate receivables—into a form that can be mapped onto the blockchain, typically as ERC-20 standard Tokens, allowing for storage, transfer, pledge, and combined use on-chain.

3. The operational logic of RWA

The core of RWA is a dual-layer structure of 'off-chain assets + on-chain mapped assets':

Real assets (held in banks or regulatory platforms)

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Trust/ SPV structure holds assets

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Issuing RWA Tokens on-chain (such as OUSG, STBT)

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Token holders enjoy actual returns (usually returned by the asset custody institution)

4. Major challenges facing RWA


1. Off-chain risks are opaque

Most RWA Tokens derive actual returns from off-chain custodial assets. If the assets default, freeze, or face legal disputes, on-chain users may end up with nothing. This is the core contradiction of 'on-chain contracts are controllable, off-chain laws are uncontrollable'.

2. Insufficient liquidity

RWA assets do not trade 24/7 like native crypto assets and are subject to regulatory and market opening time restrictions, with many projects facing issues of difficult exit and opaque pricing.

3. High compliance threshold

RWA involves multiple regulatory areas such as securities, funds, and trusts. Without compliance filing, Tokens may be deemed illegal securities, facing enforcement risks.

5. Overview of mainstream RWA projects

Currently, RWA is not a specific track but a foundational mechanism that connects blockchain with the real economy. From stable returns to compliant finance and the reconstruction of on-chain trust, RWA is quietly becoming a real anchor point in the Web3 world. We are witnessing the formation of a new financial paradigm at a historical juncture.