After the establishment of the Bitcoin spot ETF, the RWA track enters a new phase of capital competition, with Wall Street financial giants accelerating the on-chain issuance of securities to compete for dominance in the global financial system. Projects like Ondo Finance are trying to promote RWA tokenization within compliance frameworks, while traditional institutions like BlackRock's deep involvement intensifies the competition between decentralized finance and centralized capital.
Article author, source: YBB Capital Researcher Ac-Core
1. Introduction: Will RWA become the next watershed in the market?
With the launch of the Bitcoin spot ETF, the crypto field is facing a new development inflection point. The policy trends during the Trump administration laid the groundwork for this field, and now the entry of traditional financial giants like BlackRock further promotes the development of the RWA (real-world asset) track. An increasing number of financial institutions are exploring how to achieve on-chain trading and management of traditional assets like stocks and bonds through blockchain technology, a trend that is reshaping the landscape of financial markets.
Recent initiatives launched by Ondo Finance, such as Ondo Global Markets and Ondo Chain, signify that the RWA track is progressively moving towards the mainstream. This transformation has also triggered a new round of games on Wall Street, quietly changing the rules of the game in the crypto market and traditional finance.
2. Differentiation and commonality among RWA track projects
2.1 Relying on BlackRock's representative project Ondo Finance
Recently, Ondo Finance has been quite active. On February 5, they launched the Ondo Global Markets platform, primarily providing blockchain integration services for stocks, bonds, and ETFs. Following this, Ondo Finance announced their new Layer 1 public chain, Ondo Chain, aiming to build a more robust financial infrastructure to promote the tokenization of RWA.
Ondo Chain is the infrastructure of Ondo Global Markets (Ondo GM), focusing on the integration of RWA tokenization and blockchain. Ondo Chain allows global investors to access on-chain rights to US-listed securities (such as stocks, bonds, ETFs) through a blockchain platform, breaking geographical restrictions and providing 24/7 uninterrupted trading services.
Ondo Chain has launched a solution to embed institutional-grade compliance into the public chain architecture, attempting to overcome the existing pain points of RWA on-chain through innovative means such as permissioned validation node mechanisms and native cross-chain protocols. By using traditional financial assets as collateral, Ondo Chain ensures network security and achieves interoperability with traditional clearing systems, further connecting on-chain and off-chain liquidity.
2.2 Competitiveness and limitations of Ondo Finance in the same track projects
This aspect is related to its unique architectural design and strong institutional resources, reflecting the power and interest struggles between blockchain and traditional finance.
Competitiveness
By collaborating with top financial institutions like BlackRock, a blockchain financial infrastructure capable of supporting the large-scale tokenization of real-world assets has been built, ensuring a balance between compliance and decentralization.
1. Tokenization of RWA and free transfer: By pairing assets such as stocks, bonds, and ETFs with tokens 1:1, investors can freely transfer these tokenized assets outside the United States and integrate them with DeFi to participate in lending, yield farming, and other financial activities.
2. Combining openness and compliance: Ondo Chain integrates the openness of public blockchains with the compliance of permissioned chains. Validators are subjected to permissioned reviews to ensure compliance, while any developer and user can issue tokens and develop applications on this chain, ensuring innovative vitality.
3. Institutional participation and ecological construction: The design advisory team of Ondo Chain includes financial institutions such as Franklin Templeton, Wellington Management, and WisdomTree, promoting its institutional-level applications in TradFi and DeFi.
4. Oracle mechanisms and data security: Built-in oracle systems can ensure the accuracy and timeliness of on-chain data, reducing the risk of data manipulation. This design enhances the credibility of key data such as asset prices, interest rates, and market indices.
5. Cross-chain functionality and security assurance: Achieving cross-chain asset transfer through Ondo Bridge, providing security assurance for decentralized validation networks (DVN), and supporting institutional asset and liquidity management to accommodate large transactions.
Limitations
Highly dependent on institutions, limiting participation from ordinary users and decentralized communities, with a higher degree of centralization, where primary power remains in the hands of a few institutions.
1. Highly dependent on institutions, lacking community drive
Ondo Finance's architecture heavily relies on the participation of traditional financial institutions, and the credibility and liquidity of its tokenized assets mainly come from the endorsement of these institutions. While this model ensures the quality and compliance of tokenized assets, it also brings a core issue: its ecosystem is mainly designed for institutions, resulting in lower participation from ordinary users. Compared to fully decentralized RWA projects, Ondo resembles an extension of the traditional financial world, where the circulation and trading of tokenized assets occur more among institutions, diminishing the influence of ordinary investors and decentralized communities.
2. Power distribution issues under centralized control
Although Ondo Chain retains some openness, its validators are permissioned, meaning core power is concentrated in a few institutions. This sharply contrasts with some fully decentralized RWA projects, which emphasize that any participant can become a key node in the network. Ondo's design somewhat reflects the power structure of traditional finance, where most control is still held by a few large financial institutions. This concentration of power may lead to conflicts in future governance and resource allocation, especially when conflicts arise between token holders and institutional interests.
3. Innovation speed may be limited by compliance and traditional institutions
Due to Ondo Finance's core pillar being compliance and institutional participation, this may also limit its speed of innovation. Compared to fully decentralized projects, Ondo may need to go through complex compliance processes and institutional approvals when introducing new financial products or technologies. This poses a risk of slow response in the rapidly changing crypto field, especially when competing with more flexible DeFi projects, as its compliance and institution-oriented structure may become a burden.
3. Realistic obstacles faced by RWA projects
Although blockchain technology provides a technical foundation for RWA to go on-chain, current public chains still struggle to meet the needs of traditional finance in aspects such as high-frequency trading and real-time settlement. Meanwhile, the fragmentation and security issues of the cross-chain ecosystem further exacerbate the difficulties for institutions deploying RWA. The application of RWA in decentralized finance (DeFi) faces multiple practical obstacles.
Firstly, the trust and consistency issues between assets and on-chain data have become the core challenges of bringing RWA on-chain. The key to RWA going on-chain is ensuring the consistency between real-world assets and on-chain data. For example, after the tokenization of real estate, ownership, value, and other information recorded on-chain must completely match the legal documents and asset status in reality. However, this involves two key issues: first, the authenticity of on-chain data, i.e., how to ensure that the source of on-chain data is credible and tamper-proof; second, data synchronization updates, i.e., how to ensure that on-chain information can reflect the changes in the status of real assets in real time. Solving these problems often requires the introduction of trusted third parties or authoritative organizations (such as governments or certification bodies), but this conflicts with the decentralized nature of blockchain, making trust issues remain a core challenge that is difficult to avoid for RWA going on-chain.
Insufficient network security is also a significant issue; the security of blockchain networks typically relies on the economic incentive mechanisms of local tokens, but the volatility of RWA is usually lower than that of cryptocurrencies, especially during market downturns, which may lead to a decline in network security. Additionally, the complexity of RWA demands higher security standards, which existing blockchain systems may not fully meet.
The compatibility issue between RWA and DeFi architecture has yet to be resolved. DeFi's original design intention is to serve crypto-native assets rather than traditional securities. RWA on-chain involves complex financial behaviors (e.g., stock splits, dividend distributions), which are difficult to effectively manage through existing DeFi systems. Importantly, oracle systems also exhibit significant shortcomings in handling the real-time and security aspects of large-scale traditional financial data.
Further increased the difficulty of bringing RWA on-chain regarding cross-chain liquidity dispersion and security issues. The cross-chain issuance of RWA leads to liquidity dispersion and increases the complexity of asset management. Although the cross-chain bridging mechanism provides solutions, it also introduces new security risks, such as double-spending attacks and protocol vulnerabilities.
Institutional regulation and compliance issues are the largest non-technical barriers to RWA going on-chain. Many regulated financial institutions cannot trade on public blockchains, primarily due to anonymity, lack of compliance frameworks, and differences in global regulatory standards. Compliance requirements such as KYC and anti-money laundering further complicate RWA going on-chain, which in some ways restricts capital inflow.
Liquidity on the market side and restrictions on institutional participation also constrain the development of RWA. Currently, the overall market value of RWA is mainly concentrated in low-risk assets (such as government bonds and funds), while the on-chain progress of major asset classes like stocks and real estate is slow. The liquidity of RWA still relies on crypto-native protocols, and the overall market remains in its early development stage.
Lastly, the conflict between DeFi and traditional financial trust mechanisms is also a problem that must be resolved for RWA to go on-chain. 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 led traditional financial institutions to approach blockchain technology with caution, particularly in critical areas such as custody and risk control.
Although blockchain technology offers the possibility for RWA to go on-chain, it still faces numerous challenges in practical applications. Issues such as data consistency, network security, compatibility, liquidity, compliance, the matching of technical and economic models, and conflicts in trust mechanisms need to be gradually addressed in development to promote the widespread application of RWA in DeFi.
4. If RWA succeeds, Ondo Chain may become a redistribution of power between the old and new financial systems in the 'Wall Street game'.
This chapter analyzes the core Wall Street interests involved behind Ondo Chain, and I believe it is necessary to break away from the phenomenon of blockchain and real asset tokenization to consider the driving factors behind financial operational logic and interest struggles. As mentioned earlier, the most core challenge at the non-technical level of RWA lies in how to achieve compliance, and the compliance behind it requires recognition from a powerful centralized authority.
BlackRock, the world's largest asset management company, after promoting the Bitcoin ETF, has participated in the investment construction of RWA. Essentially, this is an attempt to seek a redistribution of power between the traditional financial system and new decentralized technologies relying on blockchain. This struggle is not merely a competition of technological transformation or financial innovation but a contest for global financial rule-making authority, capital control, and future wealth distribution mechanisms.
Although blockchain technology brings hopes of decentralization, in the face of highly concentrated capital and power, Wall Street is attempting to bring this technological revolution under its control through new forms of market manipulation and asset securitization, continuing its dominant position in the global financial system.
4.1 Rebalancing of power in the global financial system
Wall Street has historically dominated the global financial system, controlling key nodes of capital flow, asset management, and financial services. Traditional financial institutions achieve control over global capital by monopolizing financial infrastructure (banks, stock exchanges, clearing systems, etc.). However, the rise of blockchain technology has disrupted this situation.
Decentralized finance (DeFi) has weakened the traditional financial infrastructure that Wall Street has long controlled through disintermediation. DeFi allows key functions such as capital flow and asset management to operate on decentralized platforms, enabling users to directly manage assets, lend, and trade on the blockchain without intermediaries like banks and investment banks. However, this poses a significant threat to Wall Street, as this transfer of power means Wall Street may lose its dominance over the global financial system.
4.2 Asset tokenization: Who can control the new financial infrastructure?
The RWA tokenization promoted by platforms like Ondo Chain aims to enhance asset liquidity, but it conceals a struggle for control over new financial infrastructure. Blockchain networks are candidate platforms for the next generation of global financial infrastructure; whoever can dominate this infrastructure will hold a leading position in linking real-world assets with the blockchain in the future.
The interests of Wall Street are reflected in their intentions to control these decentralized networks. They may not directly deny blockchain but rather seek to control these emerging blockchain platforms through investments, mergers, or collaborations, leading to a resurgence of capital centralization. Although blockchain aims for decentralization, large amounts of capital and liquidity can still easily become concentrated in a few large financial institutions or hedge funds. Ultimately, this results in key resources (liquidity, protocol governance rights, etc.) on blockchain platforms returning to a few players, necessitating a massive centralized force to drive the decentralized asset market.
4.3 Regulatory arbitrage and extralegal power
According to a report by Cointelegraph on February 6, JPMorgan's latest electronic trading survey of institutional traders shows that 29% of institutional traders are about to or are currently trading cryptocurrencies this year, an increase of 7 percentage points from last year.
Arbitrage has always been a trading strategy that Wall Street elites excel at utilizing. Faced with the uncertain regulatory environment of blockchain decentralization, Wall Street institutions may exploit regulatory differences among various countries and regions by establishing operational entities in jurisdictions with looser regulations to evade stricter oversight. For example:
In projects like Ondo Chain, the tokenization of certain RWAs may bypass traditional securities regulations or financial market regulations. Manipulating asset flow and capital structure in different regulatory environments further strengthens control over emerging markets. It cannot be ruled out that the operation of this 'gray area' is one of the means by which Wall Street seeks higher returns through blockchain.
4.4 Market liquidity and price manipulation: The struggle for covert dominance.
Liquidity is the core of market manipulation, enabling covert price manipulation in seemingly 'decentralized' markets. Ondo Chain provides new investment opportunities for global investors through the tokenization of RWA, but its liquidity and trading depth still heavily depend on the influx of large capital, and liquidity control will continue to be a core 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: Restructuring the asset securitization game
Historically, Wall Street has achieved significant profits through asset securitization (e.g., subprime mortgage securitization). The tokenization of RWA on the blockchain provides an opportunity for a new generation of asset securitization. For example, Wall Street can issue new financial products by tokenizing a combination of assets to attract global investors. These products can be generated based on RWA, such as real estate investment trust tokens and corporate bond tokens, providing more options for the market.
5. The road to advancement in the crypto world has forced the industry to hit the accelerator.
Taking ETFs, Trump-related events, and the future rise of RWA as examples, they have all accelerated the development of the industry to varying degrees, directly leading to increased difficulty in profitability for the industry. These factors influence the crypto industry through complex market dynamics, regulatory pressures, and the gradual penetration of traditional financial ecology.
5.1 Market maturation brought by the introduction of ETFs
The launch of ETFs marks the gradual acceptance of the crypto industry by mainstream financial institutions and investors, but it does not necessarily benefit the overall growth of the crypto industry, akin to how gold brought a long increase after the introduction of ETFs.
Decline in market liquidity and volatility
The introduction of ETFs means that crypto assets are entering the traditional financial market, attracting more conservative investment styles from the institutions involved, while the introduction of more financial derivatives also leads to a reduction in the volatility of crypto assets. For traders who rely on high volatility (such as retail investors and crypto hedge funds), this means fewer opportunities for arbitrage and high-frequency trading, thereby reducing profit margins.
Concentration of capital flow
ETFs have made the flow of funds in the crypto market more concentrated, mainly focused on a few large assets like Bitcoin. This may lead to liquidity exhaustion and price declines for small and medium-sized crypto assets, affecting the development opportunities of more small projects. The result is a reduction in profit opportunities for more emerging projects and an increase in the overall difficulty of profitability in the industry.
Competitive pressure from traditional finance
The launch of ETFs means that crypto assets are being productized by traditional finance, bringing higher market transparency and competition. This also means that the crypto industry will face more intense competition with traditional financial instruments such as stocks, bonds, and commodities, diverting attention and funds from investors.
5.2 Market uncertainty brought by the Trump effect
Actions by political figures like Trump may influence the crypto market through their policies, regulatory attitudes, and international relations, increasing uncertainty and complexity in the industry.
Increased policy uncertainty
Trump's policy positions and governing style are often filled with uncertainty, especially regarding economic and financial regulation. The regulatory policies he and his administration may implement during their tenure (such as suppressing or relaxing regulations on digital currencies) will directly impact market sentiment and increase instability in the crypto market. This uncertainty exposes the crypto industry to greater policy risks, affecting the stability of long-term profitability.
Strengthened requirements for anti-money laundering and KYC
Due to politicians like Trump potentially implementing stricter anti-money laundering and KYC regulations in the future, exchanges and crypto projects will face higher compliance costs. This will significantly increase operational costs and compress profit margins, especially for crypto companies lacking compliance experience.
The presidential concept coin 'TRUMP' has caused a market 'siphoning effect'.
High volatility is more attractive to speculative capital; 'TRUMP' possesses a natural marketing effect, capable of attracting significant amounts of capital to this single asset. Limited liquidity and capital in the market can easily be 'siphoned' by meme coins, creating a 'capital concentration effect', but as prices fall later, liquidity is also difficult to disperse back to its original state.
5.3 The development of RWA will bring traditional financial penetration
The development of RWA in the crypto field represents a trend of gradual integration of the crypto market with traditional financial assets, but this integration has also led to increased difficulty in profitability.
The cost structure and competition of traditional finance have been introduced.
Once RWA projects go on-chain on a large scale, traditional financial assets such as bonds, stocks, and real estate will compete with crypto assets within the same ecosystem. The maturity, cost efficiency, and low-risk characteristics of traditional financial products will attract a large number of institutional investors, meaning crypto assets will need to compete with these mature financial products.
The contradiction between decentralization and compliance
The on-chain process of RWA involves complex regulatory requirements, especially concerning compliance and legal responsibilities. Compared to current decentralized crypto assets, the introduction of RWA may force more crypto projects to become compliant, resulting in more projects exiting the market due to failure to meet regulatory requirements, thus reducing profit opportunities.
Funds easily flow towards low-risk assets.
The on-chain process of real-world assets, such as government bonds and corporate bonds, will attract a large number of conservative investors into the on-chain market. As more funds flow into low-risk RWA, high-risk, high-return projects (such as DeFi protocols or emerging tokens) in the crypto market may lose some financial support. This phenomenon of funds shifting to low-risk assets will further compress the profit margins of the crypto market.
At the same time, the derivatives market may also be expanded through blockchain. Wall Street can design complex financial derivatives (such as options, futures, swaps) to repackage risk and sell it to global investors. The game of risk transfer and profit acquisition will continue in the era of RWA tokenization.
6. Conclusion: Is RWA a narrative bubble or a market change?
Based on the above personal views, ETFs, the Trump effect, and the future rise of RWA will increase the difficulty of profitability in the crypto industry through different paths and intensities. The market maturation and institutionalization brought by ETFs reduce market volatility and high-profit opportunities; Trump's policies may increase market uncertainty, bringing policy risks to the industry; while the introduction of RWA means that the crypto market will compete with traditional financial markets. In this continuously complex evolutionary process, as crypto assets become more 'conventional', the market will become more 'prone to bottlenecks', posing more severe new challenges for the future crypto market.
Therefore, whether RWA is a 'narrative bubble' or a 'market change' depends on the maturity of its technological foundation, market demand, and realization path. If we look solely at the progress and challenges in the early stages, RWA has certain elements of a 'narrative bubble,' but with the deep involvement of well-known institutions, RWA is expected to become a new catalyst for change in the crypto market.